_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-27031 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 840-2734
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
1600 Perdido Street, Building 505
New Orleans, Louisiana 70112
Telephone (504) 670-3674
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_____________________________________________________________________
Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrants were required to file
such reports), and (2) have been subject to such filing requirements
for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at October 31, 2002
Entergy Corporation ($0.01 par value) 222,013,494
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf
States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc.,
Entergy New Orleans, Inc., and System Energy Resources, Inc.
separately file this combined Quarterly Report on Form 10-Q.
Information contained herein relating to any individual company is
filed by such company on its own behalf. Each company reports herein
only as to itself and makes no other representations whatsoever as to
any other company. This combined Quarterly Report on Form 10-Q
supplements and updates the Annual Report on Form 10-K for the
calendar year ended December 31, 2001, and the Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002,
filed by the individual registrants with the SEC, and should be read
in conjunction therewith.
Forward-Looking Information
The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: Investors are
cautioned that forward-looking statements contained herein with
respect to the revenues, earnings, performance, strategies, prospects
and other aspects of the business of Entergy Corporation, Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System
Energy Resources, Inc. and their affiliated companies may involve
risks and uncertainties. A number of factors could cause actual
results or outcomes to differ materially from those indicated by such
forward-looking statements. These factors include, but are not
limited to, risks and uncertainties relating to: the effects of
weather, the performance of generating units and transmission
systems, the possession of nuclear materials, fuel and purchased
power prices and availability, the effects of regulatory decisions
and changes in law, litigation, capital spending requirements and the
availability of capital, the onset of competition, the ability to
recover net regulatory assets and other potential stranded costs, the
effects of the California electricity market on the utility industry
nationally, advances in technology, changes in accounting standards,
corporate restructuring and changes in capital structure, the success
of new business ventures, changes in the markets for electricity and
other energy-related commodities, including the use of financial and
derivative instruments and volatility of changes in market prices,
changes in the number of participants and the risk profile of such
participants in the energy marketing and trading business, changes in
interest rates and in financial and foreign currency markets
generally, the economic climate and growth in Entergy's service
territories, changes in corporate strategies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2002
Definitions
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Retained Earnings,
Comprehensive Income, and Paid-In Capital
Selected Operating Results
Entergy Arkansas, Inc.:
Results of Operations
Income Statements
Statements of Cash Flows
Balance Sheets
Selected Operating Results
Entergy Gulf States, Inc.:
Results of Operations
Income Statements
Statements of Cash Flows
Balance Sheets
Statements of Retained Earnings and Comprehensive
Income
Selected Operating Results
Entergy Louisiana, Inc.:
Results of Operations
Income Statements
Statements of Cash Flows
Balance Sheets
Statements of Retained Earnings and Comprehensive
Income
Selected Operating Results
Entergy Mississippi, Inc.:
Results of Operations
Income Statements
Statements of Cash Flows
Balance Sheets
Selected Operating Results
Entergy New Orleans, Inc.:
Results of Operations
Statements of Operations
Statements of Cash Flows
Balance Sheets
Statements of Retained Earnings and Comprehensive
Income (Loss)
Selected Operating Results
System Energy Resources, Inc.:
Results of Operations
Income Statements
Statements of Cash Flows
Balance Sheets
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2002
Notes to Financial Statements for Entergy Corporation and
Subsidiaries
Item 4. Controls and Procedures
Part II:
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Certifications
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
ADEQ Arkansas Department of Environmental Quality
AFUDC Allowance for Funds Used During Construction
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam
Electric Generating Station (nuclear)
APSC Arkansas Public Service Commission
BCF/D One billion cubic feet of natural gas per
day
Board Board of Directors of Entergy Corporation
Cajun Cajun Electric Power Cooperative, Inc.
capacity factor Actual plant output divided by maximum
potential plant output for the period
CitiPower CitiPower Pty., an electric distribution
company serving Melbourne, Australia and
surrounding suburbs, which was sold by
Entergy effective December 31, 1998
City Council Council of the City of New Orleans,
Louisiana
Damhead Creek 800 MW (gas) combined cycle electric
generating facility that entered commercial
operations in the first quarter of 2001,
located in the United Kingdom, and wholly-
owned by an indirect subsidiary of EPDC
DOE United States Department of Energy
domestic utility companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
EITF Emerging Issues Task Force
electricity marketed Total physical GWH volumes marketed in the
U.S. during the period
electricity volatility Measure of price fluctuation over time using
standard deviation of daily price
differences for into-Entergy and into-
Cinergy power prices for the upcoming month
EPA United States Environmental Protection
Agency
EPDC Entergy Power Development Corporation, a
wholly-owned subsidiary of Entergy
Corporation
EWO Entergy Wholesale Operations, which consists
primarily of Entergy's power development
business
Entergy Entergy Corporation and its direct and
indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc.
Entergy Gulf States Entergy Gulf States, Inc., including its
wholly owned subsidiaries - Varibus
Corporation, GSG&T, Inc., Prudential Oil &
Gas, Inc., and Southern Gulf Railway Company
Entergy-Koch Entergy-Koch, L.P., a joint venture equally
owned by Entergy and Koch Industries, Inc.
Entergy London Entergy London Investments plc, formerly
Entergy Power UK plc (including its wholly
owned subsidiary, London Electricity plc),
which was sold by Entergy effective December
4, 1998
Entergy Louisiana Entergy Louisiana, Inc.
Entergy Mississippi Entergy Mississippi, Inc.
Entergy New Orleans Entergy New Orleans, Inc.
Entergy Power Entergy Power, Inc.
FERC Federal Energy Regulatory Commission
Fitzpatrick James A. Fitzpatrick nuclear power plant,
825 MW facility located near Oswego, New
York, purchased in November 2000 from NYPA
by Entergy's domestic non-utility nuclear
business
DEFINITIONS (Continued)
Abbreviation or Acronym Term
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 2001 of Entergy,
Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy
gain/loss days Ratio of the number of days when Entergy-
Koch recognized a net gain from commodity
trading activities to the number of days
when Entergy-Koch recognized a net loss from
commodity trading activities
gas marketed Total volume of physical gas purchased plus
volume of physical gas sold by Entergy-Koch
in the U.S. denominated in billions of cubic
feet per day
gas volatility Measure of price fluctuation over time using
standard deviation of daily price
differences for Henry Hub natural gas prices
for the upcoming month
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear
Generating Station
GGART Grand Gulf Accelerated Recovery Tariff
GWH Gigawatt hour(s), which equals one million
kilowatt-hours
Indian Point 2 Indian Point Energy Center Unit 2 - nuclear
power plant, 970 MW facility located in
Westchester County, New York, purchased in
September 2001 from Consolidated Edison by
Entergy's domestic non-utility nuclear
business
Indian Point 3 Indian Point Energy Center Unit 3 - nuclear
power plant, 980 MW facility located in
Westchester County, New York, purchased in
November 2000 from NYPA by Entergy's
domestic non-utility nuclear business
KWH kilowatt-hour(s)
LDEQ Louisiana Department of Environmental
Quality
LPSC Louisiana Public Service Commission
miles of pipeline Total miles of transmission and gathering
pipeline
MMBTU One million British Thermal Units
MPSC Mississippi Public Service Commission
MW Megawatt(s), which equals one thousand
kilowatt(s)
Net MW in operation Installed capacity owned or operated
Net revenue Operating revenue net of fuel, fuel-related,
and purchased power expenses; other
regulatory credits; and amortization of rate
deferrals
NRC Nuclear Regulatory Commission
NYPA New York Power Authority
production cost Cost in $/MMBTU associated with delivering
gas, excluding the cost of the gas
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935,
as amended
RTO Regional transmission organization
River Bend River Bend Steam Electric Generating Station
(nuclear)
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
spark spread The dollar difference between electricity
prices per unit and natural gas prices after
assuming a conversion ratio for the number
of natural gas units necessary to generate
one unit of electricity
storage capacity Working gas storage capacity
DEFINITIONS (Concluded)
Abbreviation or Acronym Term
System Agreement Agreement, effective January 1, 1983, as
modified, among the domestic utility
companies relating to the sharing of
generating capacity and other power
resources
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
throughput Gas in BCF/D transported through a pipeline
during the period
Unit Power Sales Agreement Agreement, dated as of June 10, 1982,
as amended and approved by FERC, among
Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy, relating to the sale of capacity and
energy from System Energy's share of Grand
Gulf 1
Vermont Yankee Vermont Yankee nuclear power plant, 510 MW
facility located in Vernon, Vermont,
purchased in July 2002 from Vermont Yankee
Nuclear Power Corporation by Entergy's
domestic non-utility nuclear business
Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam
Electric Generating Station, 100% owned or
leased by Entergy Louisiana
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for
discussions of Entergy's three business segments -- the domestic
utility, domestic non-utility nuclear, and energy commodity services;
its critical accounting policies; the status of the transition to
retail competition in the domestic utility segment and the continued
application of SFAS 71 to that business; state, local, and federal
regulatory proceedings that could affect the domestic utility
segment; the market risks that each of Entergy's business segments
are exposed to; and other significant issues affecting Entergy. Set
forth below are updates to the significant factors and known trends
discussed in the Form 10-K.
Entergy Wholesale Operations
In the first nine months of 2002, Entergy recorded net charges
of $391.6 million to operating expenses ($254.2 million net of tax)
in the energy commodity services segment, including income of $28.0
million ($17.3 million net of tax) in the third quarter, to reflect
the effect of Entergy's decision to discontinue additional EWO
greenfield power plant development and to reflect asset impairments
resulting from the deteriorating economics of wholesale power markets
in principally the United States and the United Kingdom. The net
charges consist of the following:
o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
- LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire 36
turbines from General Electric. Entergy's rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. $178.0 million of
the charges is a provision for the net costs resulting from
cancellation or sale of the turbines subject to purchase commitments
with the special-purpose entity;
o $167.5 million of the charges results from the write-off of
EPDC's equity investment in the Damhead Creek project and the
impairment of the values of its Warren Power power plant and its
Crete and RS Cogen projects. This portion of the charges reflects
Entergy's estimate of the effects of reduced spark spreads in the
United States and the United Kingdom;
o $39.1 million of the charges relates to the restructuring of
EWO, which is comprised of $22.5 million of impairments of EWO
administrative fixed assets, $10.7 million of estimated sublease
losses, and $5.9 million of employee-related costs. Management
expects the restructuring of EWO to be substantially complete by the
end of 2002;
o $32.7 million of the charges results from the write-off of
capitalized project development costs for projects that will not be
completed; and
o a gain of $25.7 million ($15.9 million net of tax) realized on
the sale in August 2002 of EWO's interest in projects under
development in Spain.
Entergy does not expect further adjustments to these charges in the
future, other than those that could result from changes in asset
values due to dispositions or changes in market conditions, and
benefits from the potential sale of three turbines currently under
option to a third party.
Also, in the first quarter of 2002, EWO sold its interests in
projects in Argentina, Chile, and Peru for net proceeds of $135.5
million. After impairment provisions recorded for these Latin
American interests in 2001, the net loss realized on the sale in 2002
is insignificant. The proceeds included notes receivable totaling
$86 million, which were recorded on a discounted basis due to
collectibility concerns. The notes were collected in full later in
2002 and the $6 million discount was reversed in the third quarter
2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
After the decision to discontinue additional greenfield power
plant development and the sale of the Latin American investments, EWO
continues to operate or construct the following power plants:
Investment Capacity (MW) Percent Ownership Status
United Kingdom - Damhead Creek 800 100% Operational
(see Note*)
U.S. (AR)- Ritchie Unit 2 544 100% operational
U.S. (AR)- Independence Unit 2 842 14% operational
U.S. (MS)- Warren Power 300 100% operational
U.S. (IA)- Top of Iowa Wind Farm 80 99% operational
U.S. (IL)- Crete 320 50% operational
U.S. (LA)- RS Cogen 425 50% under construction
U.S. (TX)- Harrison County 550 70% under construction
Note*- As discussed above, EPDC has written off its equity investment
in Damhead Creek. The credit facility financing Damhead Creek is non-
recourse to Entergy, and there is no requirement for Entergy or EPDC
to make additional capital contributions or provide credit support to
Damhead Creek. After the effect of the equity write-off, Entergy
does not expect Damhead Creek's operations to materially effect
Entergy's earnings in the future, although Damhead Creek's revenues
and expenses continue to be included in the accompanying results of
operations. Entergy also continues to perform periodic impairment
tests to determine whether additional asset write-downs are required
prior to disposition of Damhead Creek. Commodity price risk
disclosures in this section have been revised to eliminate Damhead
Creek amounts on a forward-looking basis because management expects
some form of disposition of Damhead Creek by the end of 2002.
Domestic Utility Transition to Competition
Texas
As discussed in the Form 10-K, a PUCT-approved settlement
delayed the implementation of retail open access in Entergy Gulf
States' Texas service territory. Given the various approvals
required, management now estimates that it is unlikely that the
SeTrans RTO can become operational prior to the first quarter of
2004. Therefore, retail open access in Entergy Gulf States' Texas
service territory within the context of a functional FERC-approved
RTO is not likely to begin before the first quarter of 2004. Given
the extended regulatory delay in retail open access in its Texas
service territory, Entergy Gulf States is unable to predict what, if
any, additional changes to previously approved plans may be required
by the PUCT or the LPSC.
Federal legislation
Federal legislation mandating or facilitating competition in the
electric power industry has been seriously considered by the last two
United States Congresses, in both the House of Representatives and
the Senate. As electricity markets have evolved, the focus of this
legislation has shifted from creating retail markets to facilitating
wholesale competition. In 2001, the House passed their version of
comprehensive energy legislation, but it did not include electricity-
restructuring provisions. The Senate legislation, passed earlier in
2002, does contain electricity provisions that would repeal PUHCA and
PURPA, enact a mechanism for establishing enforceable reliability
standards, provide FERC with new authority over utility mergers and
acquisitions, and codify FERC's authority over market based rates.
The legislation is now before a conference committee for resolution.
As the House and Senate conferees have held discussions, several
critical issues are still the subject of controversy, including the
extent of Federal jurisdiction over transmission facilities, the
extent of FERC authority over utility mergers and asset transfers,
and whether there should be a federally imposed "renewable portfolio
standard."
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
State and Local Rate Regulation
Entergy New Orleans
In May 2002, Entergy New Orleans filed a cost of service study
and revenue requirement filing with the City Council. Using 2001 as
the test year, the filing indicated that a revenue deficiency exists
and that a $28.9 million electric rate increase and a $15.3 million
gas rate increase are appropriate. Additionally, Entergy New Orleans
has proposed a $6.0 million public benefit fund. The City Council
has adopted a procedural schedule and hearings are scheduled to begin
in April 2003. As discussed in the Form 10-K, and as shown in Item 5
of this Form 10-Q, Entergy New Orleans' earnings for the twelve
months ended December 31, 2001 and September 30, 2002 were not
adequate to cover its fixed charges and preferred dividends. Under
its mortgage covenants, Entergy New Orleans does not currently have
the capacity to issue new incremental mortgage-backed debt. Since
the settlement of Entergy New Orleans' last rate proceeding, which
was approved by the City Council in 1998, its fixed charge coverage
has declined and its debt ratio has increased. While Entergy New
Orleans has made investments (some of which were required by
agreement with the City Council) and incurred expenses necessary to
improve customer service since the last rate proceeding, its base
revenues have not increased. In an October 2002 report, Moody's
Investors Service states that its rating outlook for Entergy New
Orleans is negative due to the declining credit measures and the
uncertainty of the pending rate case. Moody's currently rates
Entergy New Orleans senior secured debt at Baa2. Absent constructive
rate-making in the pending proceeding, it is likely that the cost of
and access to the capital necessary to finance Entergy New Orleans'
current level of service will be adversely affected.
Entergy Arkansas
In May 2002, the APSC approved the March 2002 settlement
agreement that was discussed in Note 2 to the financial statements in
the Form 10-K. The APSC also approved in June 2002 a contribution by
Entergy Arkansas of $5.9 million to the transition cost account (TCA)
as a result of the 2001 earnings evaluation report filing. The
settlement agreement allowed Entergy Arkansas to offset ice storm
recovery costs with the balance in the TCA on a rate class basis.
Entergy Arkansas recorded a regulatory asset, which will be amortized
over a 30-year period, of $15.8 million for a portion of the amount
of ice storm costs that exceeded the available TCA funds.
Entergy Gulf States
In May 2001, Entergy Gulf States filed its eighth required post-
merger earnings review with the LPSC. This filing is subject to
review by the LPSC and may result in a change in rates. In April
2002, the LPSC staff filed testimony recommending a $16.5 million
rate refund relating to a prior period and a $40.1 million
prospective rate reduction. The prospective reduction includes a
recommended reduction in the rate of return on common equity (ROE) to
10.1% that would not take effect until the later of June 2003 or the
date of an LPSC order changing the ROE from the current 11.1%.
Hearings were held in April 2002 and in August 2002. Entergy Gulf
States is awaiting an ALJ recommendation.
In May 2002, Entergy Gulf States filed its ninth and last
required post-merger earnings analysis with the LPSC. The filing
included an earnings review filing for the 2001 test year that
resulted in a rate decrease of $11.5 million, which was implemented
effective June 2002. The filing also contained a prospective revenue
requirement study based on the 2001 test year seeking a prospective
rate increase of approximately $21.7 million. Both components of the
filing are subject to review by the LPSC and may result in changes in
rates other than those sought in the filing. A procedural schedule
has been adopted and hearings are scheduled for June 2003.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Negotiations with the LPSC staff and advisors for a statewide
formula rate plan in Louisiana are ongoing.
Entergy Louisiana
In July 2002, the LPSC approved a settlement between Entergy
Louisiana and the LPSC Staff that resolves all remaining issues in
the 2000 and 2001 formula rate plan proceedings. Entergy Louisiana
agreed to a $5 million rate reduction effective August 2001. The
prospective rate reduction was implemented beginning in August 2002
and the refund for the retroactive period occurred in September 2002.
As part of the settlement, Entergy Louisiana's rates, including its
previously authorized ROE of 10.5%, will remain in effect until
changed pursuant to a new formula rate plan or a revenue requirement
analysis to be filed by June 30, 2003.
Negotiations with the LPSC staff and advisors for a statewide
formula rate plan in Louisiana are ongoing.
Entergy Mississippi
In August 2002, Entergy Mississippi filed a rate case with the
MPSC requesting a $68.8 million rate increase effective January 2003.
Entergy Mississippi requested this increase as a result of capital
investments and operation and maintenance expenditures necessary to
replace and maintain aging electric facilities and to improve
reliability and customer service. In October 2002, Entergy
Mississippi and the Mississippi Public Utilities Staff entered into a
joint stipulation which would result in a $48.2 million rate increase
and an ROE of 11.75%. The stipulation endorsed the new power
management rider schedule designed to more efficiently collect
capacity portions of purchased power costs. Also, the stipulation
provides for improvements in the return on equity formula and more
robust performance measures for Entergy Mississippi's formula rate
plan. Entergy Mississippi will make its next formula rate plan filing
during March 2004. A hearing before the MPSC is scheduled for
December 2002. Under the Mississippi Public Utilities Act, the MPSC
is required to issue its final order in this general rate proceeding
by December 16, 2002.
Environmental Matters
As discussed in the Form 10-K, the United States Congress is
currently considering several bills that take a multi-pollutant
approach to reauthorization of the Clean Air Act, primarily
addressing sulfur dioxide, nitrogen oxides, and hazardous air
pollutant emissions (primarily mercury). In addition to stringent
reductions proposed for these three types of emissions, two bills,
one filed by Senator James Jeffords and one filed by Senator Thomas
Carper, would also require control and reduction of carbon dioxide
emissions. While these two bills will lapse at the conclusion of the
107th Congress, management expects that they will be re-introduced
upon the convening of the 108th Congress in 2003. Entergy's high
percentage of nuclear and natural gas capacity with its below-average
emission rates positions Entergy well compared to the costs other
utilities without a comparable generation mix could face from
potential environmental requirements.
Nuclear Matters
As discussed more fully in the Form 10-K, concerns have been
expressed in public forums about safety issues associated with
nuclear generation units and nuclear fuel. In September 2002, the
Westchester County Board of Legislators passed a resolution asking
for an orderly closure and decommissioning of the Indian Point
nuclear plants to begin at the earliest possible time, after certain
conditions outlined in the resolution are satisfied. The Westchester
County Board of Legislators does not have legal authority to close
the plants. The NRC has not taken action in response to the
resolution.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Market Risks Disclosure
Following are sections from the "Market Risks Disclosure" in the
Form 10-K that have significant updates as of September 30, 2002.
Commodity Price Risk
Power Generation
As discussed in the Form 10-K, energy commodity services enters
into forward power sale agreements to hedge its exposure to market
price fluctuations. The following represents the percentage of
planned electricity output sold forward under physical or financial
contracts for energy commodity services' generation facilities
updated as of September 30, 2002 (as noted above, Damhead Creek
generation has been excluded from this table):
2002 2003
% sold % sold
Planned GWH forward Planned GWH forward
562 38% 3,124 25%
Marketing and Trading
As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and
Entergy use value-at-risk (VAR) models as one measure of a potential
loss in fair value for EKT's natural gas and power trading portfolio
and energy commodity services' mark-to-market portfolio. EKT's
measures, which it calls Daily Earnings at Risk (DEAR), for its
trading portfolio were as follows (using a test with a 97.5%
confidence interval):
September 30, June 30, March 30,
2002 2002 2002
DEAR at end of quarter $10.7 million $13.6 million $9.5 million
Average DEAR for the quarter $11.4 million $10.0 million $7.7 million
Approximately 81% of EKT's counterparty credit exposure is associated
with companies that have investment grade credit ratings.
The VAR for energy commodity services' mark-to-market derivative
instruments not held by Entergy-Koch was as follows (using a test
with a 97.5% confidence interval):
September 30, June 30, March 30,
2002 2002 2002
Daily VAR at end of quarter $0.6 million $0.8 million $4.5 million
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Mark-to-market Accounting
As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to-
market commodity instruments held by them for trading and risk
management purposes that are considered derivatives under SFAS 133 or
energy trading contracts under EITF 98-10. Following are the net
mark-to-market assets (liabilities) and the period within which the
instruments would be realized or (paid) in cash if they are held to
maturity and market prices do not change:
Net mark-to-
market asset
(liability) at
September 30, Cumulative cash realization (paid) period
2002 2002 2003 2004-2005
Entergy consolidated subsidiaries ($6) million 26% 55% 100%
Entergy-Koch $119 million (8)% 81% 100%
Entergy's net income that has come from businesses that apply mark-to-
market accounting is $65.5 million for the nine months ended
September 30, 2002 and $25 million for the three months ended
September 30, 2002.
EITF Issue 02-3 - new consensus reached affecting EITF Issue No. 98-
10
At its October 25, 2002 meeting, the EITF reached a consensus to
rescind Issue No. 98-10, "Accounting for Contracts Involved in Energy
Trading and Risk Management Activities." Rescinding Issue 98-10 will
result in some energy-related contracts being accounted for on an
accrual basis that were previously accounted for on a mark-to-market
basis. Contracts that meet the provisions of SFAS 133 to qualify as
derivatives will be accounted for in accordance with the guidance in
SFAS 133 for derivative contracts. Contracts such as capacity,
transportation, storage, tolling and full requirements contracts that
are based on physical assets and do not meet the provisions of SFAS
133 to qualify as derivatives will be accounted for using accrual
accounting.
Adoption of this consensus is required by January 1, 2003,
although Entergy is currently considering early adoption. Adoption
will require the reporting of a cumulative effect of a change in
accounting principle. Entergy-Koch is currently evaluating its EITF
Issue 98-10 contracts to determine the cumulative effect. Management
expects that the cumulative effect resulting from adoption will not
have a material effect on Entergy-Koch's total capitalization or
partner equity accounts in relation to Entergy-Koch's
creditworthiness. Management expects that adoption will not
materially affect future earnings due to the short-term nature of
Entergy-Koch's contracts.
Entergy-Koch's adoption of this consensus will affect Entergy
through its share of Entergy-Koch's earnings. Other than the
potential effect from Entergy-Koch, the adoption of the consensus
will have minimal effect on Entergy because the remainder of
Entergy's businesses hold few energy-trading contracts that are
currently marked-to-market.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Foreign Currency Exchange Rate Risk
As discussed in the Form 10-K, Entergy Gulf States, System
Fuels, and Entergy's domestic non-utility nuclear business enter into
foreign currency forward contracts to hedge the Euro-denominated
payments due under certain purchase contracts. As of September 30,
2002, the total notional amount of the foreign currency forward
contracts is 249.5 million Euro and the forward currency rates range
from .8624 to .9664 (the weighted average of the rates is .8809).
The maturities of these forward contracts depend on the purchase
contract payment dates and range in time from January 2003 to January
2007. The mark-to-market valuation of the forward contracts at
September 30, 2002 was a net asset of $22.9 million. The
counterparty banks obligated on 233.0 million Euro of the notional
amount of these agreements are rated by Standard and Poor's Rating
Services at AA on their senior debt obligations as of September 30,
2002. The counterparty bank obligated on 16.5 million Euro of the
notional amount of these agreements, which are Entergy Gulf States
contracts, is rated by Standard and Poor's Rating Services at A+ on
its senior debt obligations as of September 30, 2002.
For the Entergy Gulf States contracts, the total notional amount
of the foreign currency forward contracts are 33.7 million Euro and
the forward currency rates range from .8742 to .8802 (the weighted
average of the rates is .8771). The maturities of the Entergy Gulf
States forward contracts depend on the purchase contract payment
dates and range in time from January 2003 to July 2004. The mark-to-
market valuation of the forward contracts at September 30, 2002 was a
net asset of $3.3 million.
SFAS 143 - Accounting for Retirement of Long-lived Assets
SFAS 143, which Entergy will implement effective January 1,
2003, requires the recording of liabilities for all legal obligations
associated with the retirement of long-lived assets that result from
the normal operation of those assets. These liabilities will be
recorded at their fair values (which are likely to be the present
values of the estimated future cash outflows) in the period in which
they are incurred, with accompanying asset retirement costs recorded
as costs of the applicable long-lived assets. Changes resulting from
revisions to the timing or the amount of the original estimate of
undiscounted cash flows are recognized as either an increase or
decrease in the liabilities and the related asset retirement costs
that were capitalized. The asset retirement obligations will be
accreted each year through charges to expense, to reflect the time
value of money for these present value obligations. The recorded
costs of the long-lived assets will be depreciated over the useful
lives of the assets. Upon adoption, the net effects of implementing
this standard, to the extent that they are not recorded as regulatory
assets or liabilities, will be recognized as cumulative effects of an
accounting change in Entergy's statement of income. Although Entergy
has not yet completed its implementation of this standard,
implementation is currently expected to have the following effects on
Entergy's financial statements:
o The net effects of implementing this standard for the rate-
regulated business of the domestic utility companies and System
Energy will be recorded as regulatory assets or liabilities, with no
resulting impact on Entergy's net income. Entergy expects that
assets and liabilities will increase for the domestic utility
companies and System Energy as a result of recording the
asset retirement obligations at their fair values as determined
under SFAS 143 and recording the related regulatory assets
and liabilities.
o For Entergy's competitive businesses and for the deregulated
portion of Entergy Gulf States, the implementation of SFAS 143 is
expected to result in a decrease in liabilities as a result of the
discounting methodology required by SFAS 143. Management's study of
the effects of implementation of the standard continues and Entergy
currently does not have an estimate of the amount of the effect on
earnings.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Operations
Net cash flow provided by (used in) operating activities for
Entergy, the domestic utility companies, and System Energy for the
nine months ended September 30, 2002 and 2001 was as follows:
Company 2002 2001
(In Millions)
Entergy $1,670.3 $1,228.8
Entergy Arkansas $318.4 $186.5
Entergy Gulf States $425.7 $248.9
Entergy Louisiana $395.0 $312.3
Entergy Mississippi $137.3 $63.1
Entergy New Orleans ($1.9) $17.2
System Energy $194.3 $322.1
Entergy's consolidated net cash flow provided by operating
activities increased for the nine months ended September 30, 2002
compared to the nine months ended September 30, 2001 primarily due
to:
o a $206 million increase in operating cash flow provided by
domestic utility primarily resulting from a decrease in payments on
fuel-related accounts payable in 2002, partially offset by lower
collections of deferred fuel and receivables in 2002; and
o a $162 million increase in operating cash flow provided by
domestic non-utility nuclear, primarily due to nuclear refueling
outages at Pilgrim and Indian Point 3 in 2001 combined with increased
net income in 2002 primarily resulting from the operation of Indian
Point 2.
Money pool activity also affected the operating cash flows of
the domestic utility companies and System Energy. The money pool is
an inter-company funding arrangement designed to reduce the domestic
utility companies' and System Energy's dependence on external short-
term borrowings. The money pool provides a means by which, on a
daily basis, the excess funds of Entergy Corporation, the domestic
utility companies, and System Energy may be used by the domestic
utility companies or System Energy to fulfill short-term cash
requirements. The following table shows the domestic utility
companies and System Energy's receivables from and (payables) to the
money pool as of the indicated date. An increase in a company's
(payable) to the money pool increases the operating cash flow of that
company. An increase in a company's receivable from the money pool
decreases the operating cash flow of that company.
September 30, December 31, September 30, December 31,
Company 2002 2001 2001 2000
(In Millions)
Entergy Arkansas $34.1 $23.8 ($78.9) ($30.7)
Entergy Gulf States $24.2 $27.7 $72.7 $23.4
Entergy Louisiana ($139.7) $3.8 $8.8 $22.9
Entergy Mississippi ($27.3) $11.5 ($46.8) ($33.3)
Entergy New Orleans ($2.7) $9.2 ($19.0) ($5.7)
System Energy $92.1 $13.9 $147.0 $155.3
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND
CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the
Form 10-K for a discussion of the limitations on these borrowings.
Entergy Louisiana Tax Accounting Election
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY
AND CAPITAL RESOURCES" in the Form 10-K for discussion of a change in
a method of accounting for tax purposes made by Entergy Louisiana in
2001 related to the contract to purchase power from the Vidalia
project (the contract is discussed in Note 9 to the financial
statements in the Form 10-K). The new tax accounting method is now
expected to provide a cumulative cash flow benefit of approximately
$700 million - $800 million through 2004, which is expected to
reverse in the years 2005 through 2031. The timing of the reversal
of this benefit depends on several variables, including the price of
power. Approximately half of the consolidated cash flow benefit for
Entergy Corporation occurred in 2001 and most of the remainder will
occur in 2002. In accordance with Entergy's intercompany tax
allocation agreement, most of the cash flow benefit for Entergy
Louisiana will occur in the fourth quarter of 2002. While Entergy
Louisiana (supported by outside tax counsel's opinion) believes the
change in its method of accounting for tax purposes is appropriate,
Entergy recognizes that the issue is new and may be subject to
extended Internal Revenue Service review.
In a September 2002 settlement of an LPSC proceeding that
concerned the Vidalia contract, the LPSC approved Entergy Louisiana's
proposed treatment of the regulatory impact of the tax accounting
election. In general, the settlement permits Entergy Louisiana to
keep a portion of the tax benefit in exchange for bearing the risk
associated with sustaining the tax treatment. The LPSC settlement
divided the term of the Vidalia contract into two segments: 2002-12
and 2013-31. During the first eight years of the 2002-12 segment,
Entergy Louisiana agreed to credit rates by flowing through its fuel
adjustment calculation $11 million each year, beginning monthly in
October 2002. Entergy Louisiana must credit rates in this way and by
this amount even if Entergy Louisiana is unable to sustain the tax
deduction. Entergy Louisiana also must credit rates by $11 million
each year for an additional two years unless either the tax
accounting method elected is retroactively repealed or the Internal
Revenue Service denies the entire deduction related to the tax
accounting method. Entergy Louisiana agreed to credit ratepayers
additional amounts if the tax accounting election is sustained.
During 2013-2031, Entergy Louisiana and its ratepayers would share
the remaining benefits of this tax accounting election.
Management expects that the reduction in Entergy Louisiana's
revenue caused by the ratepayer credits will be offset by the
reduction in interest expense or the increase in interest income, or
both, made possible by the cash flow benefit of the election.
Management expects to reduce Entergy Louisiana's indebtedness and
preferred stock with a portion of the cash. In accordance with the
terms of the settlement, Entergy Louisiana has requested SEC approval
to return up to $350 million of common equity capital to Entergy
Corporation in order to maintain Entergy Louisiana's current capital
structure.
Investing Activities
Net cash used in investing activities decreased for the nine
months ended September 30, 2002 compared to the nine months ended
September 30, 2001 primarily due to:
o approximately $600 million paid to acquire Indian Point 2 in
September 2001;
o cash contributions of approximately $414 million made in 2001 in
the formation of Entergy-Koch;
o cash of $272 million invested in 2001 to provide collateral for
the NYPA line of credit in conjunction with the acquisition of the
FitzPatrick and Indian Point 3 nuclear power plants; and
o the maturity in 2002 of $150 million of other temporary
investments combined with additional temporary investments of $250
million made in 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Partially offsetting the decrease in net cash used in investing
activities were the following:
o receipt of approximately $810 million in proceeds from the sale
of the Saltend plant in August 2001;
o approximately $180 million paid to acquire Vermont Yankee in
July 2002; and
o an increase of $113 million in construction expenditures for the
nine months ended September 30, 2002 compared to the same period in
2001 primarily related to turbine purchases for EWO's Harrison County
project, as discussed below.
Financing Activities
Financing activities used cash for the nine months ended
September 30, 2002 compared to providing a small amount of cash in
2001 primarily due to:
o net retirements of long-term debt by the domestic utility
segment of $461 million in 2002, compared to net issuances of long-
term debt of $189 million in 2001;
o the retirement of $268 million of long-term debt by EWO in April
2002 related to the purchase of the rights to the turbines discussed
below; and
o decreased borrowings under short-term credit facilities by
Entergy Corporation in 2002.
Tropical Storm Isidore and Hurricane Lili
In late September and early October 2002, Tropical Storm Isidore
and Hurricane Lili hit the Gulf Coast and left a total of
approximately 340,000 of Entergy's domestic utility customers in
Louisiana and Mississippi without electric power. The strong winds
and heavy rains caused widespread damage to transmission and
distribution lines, equipment, poles, and facilities. Storm-related
costs are estimated to be approximately $54 million for Entergy Gulf
States, $44 million for Entergy Louisiana, $14 million for Entergy
Mississippi, and $4 million for Entergy New Orleans. Historically,
Entergy has been allowed to recover the costs associated with the
restoration of service from storms and other natural disasters.
Capital Resources
See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND
CAPITAL RESOURCES - Capital Resources" in the Form 10-K for a
discussion of Entergy's uses and sources of capital. The following
are updates to the Form 10-K.
Uses of Capital
Capital Expenditures
See "ANO Matters" in Part I of the Form 10-K for discussion of
the ANO 1 steam generator and reactor vessel closure head. On July
25, 2002, the Board authorized Entergy Arkansas and Entergy
Operations to replace the ANO 1 steam generator and reactor vessel
closure head. Entergy management estimates the cost of the
fabrication and replacement to be approximately $235 million, of
which approximately $135 million will be
incurred through 2004. Management expects a contractor for the
installation of the replacement steam generator and reactor vessel
closure head to be selected by December 2002. Management expects
that the replacement will occur during a planned refueling outage in
2005.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy's current capital investment plan for 2002 through 2004
includes $2.8 billion in spending by the domestic utility for
maintenance capital; $0.4 billion in spending by energy commodity
services for previous investment commitments; and $0.7 billion in
spending by the domestic non-utility nuclear business comprised of
$0.4 billion for maintenance capital, $0.2 billion for the purchase
of Vermont Yankee (discussed below), and $0.1 billion for power
uprate projects. These amounts reflect the approval by the Board of
the ANO 1 steam generator replacement project and the decision
announced during 2002 to end new greenfield development by EWO. In
addition to these amounts, Entergy estimates that an additional
$2.9 billion will be available for other investments that have not
yet been identified. This amount is based upon Entergy's current
estimate of operating cash flows and dividends over the period from
2002 through 2004, and includes approximately $1.4 billion of
additional debt which Entergy believes it can issue and still
maintain its targeted 50% net debt to net capital ratio.
Entergy Wholesale Operations
As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire 36
turbines from General Electric Company. The rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. In conjunction with
Entergy's obligations related to this sale, Entergy retained certain
rights to reacquire turbines or to cancel the construction of the
turbines. In April 2002, Entergy paid a total of $351 million to
reacquire the rights to the turbines. $83 million of the payments
were for the turbines to be placed in the Harrison County project,
which is in construction and scheduled to be completed in 2003.
Entergy subsequently received a reimbursement from General Electric
of $28 million of prior payments. With the reacquisition of the
rights to the turbines, EWO's obligations to the special-purpose
entity and Entergy Corporation's guarantee of up to $309 million in
support of those obligations were terminated.
EWO placed 17 of the original 36 turbines at sites that are
either operating, under construction, or sold. Of the remaining 19
turbines, four were sold to a third party, three are currently
subject to an option to purchase held by a third party, and 12 were
cancelled. As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS," Entergy recorded a $178.0
million provision in the first nine months of 2002 for the net costs
resulting from cancellation or sale of the turbines that were subject
to purchase commitments with the special-purpose entity.
Share Repurchases
In accordance with its stock option plans, Entergy periodically
grants stock options to its employees, which may be exercised to
obtain shares of Entergy common stock. In order to reduce the
increase in outstanding common shares caused by option exercises,
Entergy plans to purchase up to 10 million shares of its common stock
through mid-2004 on a discretionary basis through open market
purchases or privately negotiated transactions. As of October 31,
2002, Entergy has repurchased 2,885,000 shares of common stock
pursuant to this plan for a total purchase price of $118.5 million.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Vermont Yankee
In July 2002, Entergy's domestic non-utility nuclear business
purchased the 510 MW Vermont Yankee nuclear power plant located in
Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation for
$180 million. Entergy received the plant, nuclear fuel, inventories,
and related real estate. The liability to decommission the plant, as
well as related decommissioning trust funds of approximately $310
million, were also transferred to Entergy. The acquisition included
a 10-year power purchase agreement (PPA) under which the former
owners will buy the power produced by the plant, which is through the
expiration of the current operating license for the plant. The PPA
includes an adjustment clause where the prices specified in the PPA
will be adjusted downward annually, beginning in 2006, if power
market prices drop below the PPA prices.
Damhead Creek Credit Facility
As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, the Damhead Creek
credit facility requires that the annual debt service coverage ratio
be at least 1.05 to 1 for the previous 12 months at semi-annual dates
commencing with June 30, 2002. Given the low electricity prices
affecting the UK market, Damhead Creek would not have met the annual
debt service coverage ratio test in respect of the 12 months ended
June 30, 2002, but the lenders amended the facility so that the
coverage ratio calculations would not commence until December 31,
2002. In addition, some of the Damhead Creek affiliates are
technically insolvent since October 31, 2002, which has caused a
default under the credit agreement. Damhead Creek has requested a
waiver of this default from the lenders. Damhead Creek is currently
in negotiations with the lenders to develop a debt restructuring for
the project. If a debt restructuring agreement cannot be reached
prior to December 31, 2002, EPDC may (1) sell its shares in the
project to a third party, (2) transfer ownership of the project to
the Damhead Creek bank syndicate or (3) ask the bank syndicate to
appoint a receiver to the project. There is no requirement for
Entergy or EPDC to make additional capital contributions or provide
credit support to Damhead Creek, even if there is an occurrence of an
event of default. Neither Entergy nor EDPC will make additional
capital contributions or provide additional credit support to Damhead
Creek.
Sources of Capital
Entergy Corporation renewed its 364-day credit facility on May
16, 2002 and increased the available capacity from $1.325 billion to
$1.425 billion. On July 15, 2002, the available capacity was
increased to $1.450 billion. Although the credit line expires in May
2003, Entergy Corporation has the option to extend the period to
repay the amount then outstanding for an additional 364-day term.
Because of this option, the debt outstanding under the credit line is
reflected in long-term debt. The credit line is reflected as notes
payable at December 31, 2001. Entergy Arkansas and Entergy
Mississippi each renewed their respective 364-day credit facilities
on May 31, 2002. Amounts drawn on short-term credit facilities are
as follows:
Expiration Amount of Amount Drawn as of
Company Date Facility September 30, 2002
Entergy Corporation May 2003 $1.450 billion $715 million
Entergy Arkansas May 2003 $63 million -
Entergy Louisiana January 2003 $15 million $15 million
Entergy Mississippi May 2003 $25 million -
Entergy Corporation has used borrowings from its credit facility for
general corporate purposes and to make additional investments in
competitive businesses.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Long-term debt maturities as of September 30, 2002 for the
domestic utility companies and System Energy for the remainder of
2002 through 2004 are as follows:
Company 2002-2003 2004
Entergy Arkansas $255 million -
Entergy Gulf States $339 million $654 million
Entergy Louisiana $198 million $15 million
Energy Mississippi $255 million $150 million
Entergy New Orleans $25 million $30 million
System Energy $11 million $6 million
It is expected that the majority of these amounts will be refinanced
prior to or at maturity, with the exception of Entergy Louisiana,
which expects to have sufficient cash on hand to retire its
maturities. Entergy Gulf States, Entergy Mississippi, and Entergy
New Orleans each issued First Mortgage Bonds subsequent to September
30, 2002, the proceeds of which will be used to retire a portion of
the maturities listed above. See Note 4 to the financial statements
for further discussion of these issuances.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's consolidated earnings applicable to common stock were
$360.9 million and $523.6 million for the three and nine months ended
September 30, 2002, respectively, compared to $312.5 million and
$705.5 million for the three and nine months ended September 30,
2001, respectively. The changes in earnings (loss) applicable to
common stock by operating segments for the three and nine months
ended September 30, 2002 compared to the three and nine months ended
September 30, 2001 were as follows:
Three Months Ended Nine Months Ended
Operating Segments Increase/(Decrease) Increase/(Decrease)
(In Thousands)
Domestic Utility $20,148 $35,102
Domestic Non-Utility Nuclear 38,461 67,727
Energy Commodity Services (18,958) (284,848)
Other, including parent company 8,741 80
------- ---------
Total $48,392 ($181,939)
======= =========
Entergy's income before taxes is discussed below according to
the operating segments listed above. See Note 6 to the financial
statements for further discussion of Entergy's operating segments and
their financial results for the three and nine months ended September
30, 2002 and 2001.
Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND
SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC.,
ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW
ORLEANS, INC." which follow each company's financial statements in
this report for further information with respect to operating
statistics.
Domestic Utility
The increase in earnings for domestic utility for the three
months ended September 30, 2002 compared with the same period in 2001
was primarily due to increased electricity usage in the service
territories, an increase in the price applied to unbilled revenue,
decreased operation and maintenance expenses, and decreased interest
expense. The increase in earnings was partially offset by increased
depreciation and amortization expenses, increased decommissioning
expenses, and decreased other income.
The increase in earnings for domestic utility for the nine
months ended September 30, 2002 compared with the same period in 2001
was primarily due to increased electricity usage in the service
territories, an increase in the price applied to unbilled revenue,
and decreased interest expense. The increase in earnings was
partially offset by increased other operation and maintenance
expenses, increased depreciation and amortization expenses, increased
decommissioning expenses, and decreased other income.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues
The changes in electric operating revenues for domestic utility
for the three and nine months ended September 30, 2002 compared to
the three and nine months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($14.8) ($22.8)
Rate riders (3.5) (30.1)
Fuel cost recovery (101.5) (916.2)
Sales volume/weather 30.9 32.5
Unbilled revenue 37.1 141.1
Other revenue 105.0 135.3
Sales for resale (1.6) (63.8)
----- -------
Total $51.6 ($724.0)
===== =======
Base rate differences
Base rate differences decreased revenues for the three and nine
months ended September 30, 2002 primarily due to an $11.5 million
base rate decrease at Entergy Gulf States effective June 2002 and
additional formula rate plan reductions at Entergy Louisiana which
became effective in both August 2001 and August 2002. Also
contributing to the decreased revenues were decreased rates for
special-rate industrial customers at Entergy Gulf States for the
three months ended September 30, 2002 and at Entergy Louisiana for
the three and nine months ended September 30, 2002 as a result of
increased KWH usage.
Rate riders
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Rate rider revenues decreased for the nine months ended
September 30, 2002 primarily due to a decrease in the Grand Gulf rate
rider at Entergy Arkansas effective January 2002 as compared to the
average rate rider in effect for the nine months ended September 30,
2001 and a decrease in the Grand Gulf rate rider at Entergy
Mississippi effective October 2001.
Fuel cost recovery
The domestic utility companies are allowed to recover certain
fuel and purchased power costs through fuel mechanisms included in
electric rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy's financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the three and nine
months ended September 30, 2002 due to lower fuel factors resulting
from decreases in the market prices of natural gas and purchased
power. Also contributing to the decreases was a lower fuel recovery
surcharge in 2002 in the Texas jurisdiction of Entergy Gulf States.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Corresponding to the decreases in fuel cost recovery revenues,
fuel and purchased power expenses related to electric sales decreased
by $90.1 million and $911.6 million for the three and nine months
ended September 30, 2002, respectively, primarily due to decreases in
the market prices of natural gas and purchased power in 2002.
Sales volume/weather
Higher electric sales volume increased revenues for the three
and nine months ended September 30, 2002 due to increased usage of
437 GWH and 947 GWH, respectively, in the residential and commercial
sectors, after adjusting for the weather effect. Partially
offsetting this increase for the nine months ended September 30, 2002
was a decrease in usage of 708 GWH in the industrial sector primarily
from contractual modifications that reclassified the sales associated
with certain Entergy Gulf States customers from retail to wholesale.
The number of retail customers in the domestic utility companies'
service territories increased only slightly during these periods.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended
September 30, 2002 and 2001 includes the reversal of the estimates
for June 2002 and June 2001, respectively. The increase in unbilled
revenue for the three months ended September 30, 2002 compared to the
three months ended September 30, 2001 is due to the effect on the
unbilled calculation for the 2001 period of higher unbilled revenue
in June 2001 caused by higher fuel rates as well as increased volume
in September 2002 compared to September 2001.
Unbilled revenue for the nine months ended September 30, 2002
and 2001 includes the reversal of the estimates for December 2001 and
December 2000, respectively. The increase in unbilled revenue for
the nine months ended September 30, 2002 compared to the nine months
ended September 30, 2001 is due to increased volume in September 2002
compared to September 2001 and the effect on the unbilled calculation
for the 2001 period of higher unbilled revenue in December 2000
caused by higher fuel rates and volume/weather.
Other revenue
Other revenue increased for the three and nine months ended
September 30, 2002 primarily due to the provisions for rate refunds
recorded in 2001 related to System Energy's 1995 rate proceeding.
See further discussion of the final resolution of the rate proceeding
in Note 2 to the financial statements in the Form 10-K.
Sales for resale
Sales for resale decreased for the nine months ended September
30, 2002 primarily due to a decrease in the average price of energy
sold to wholesale customers coupled with a decrease in sales volume
to municipal and co-operative customers. The decrease is partially
offset by the contractual modifications that resulted in the
reclassified Entergy Gulf States sales noted above in sales
volume/weather.
Gas operating revenues
Natural gas revenues decreased $68.8 million for the nine months
ended September 30, 2002 primarily due to a decrease in the market
price of natural gas. Corresponding to the decrease in natural gas
revenues, fuel and purchased power expenses related to gas sales
decreased by $61.9 million for the nine months ended September 30,
2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other effects on results of operations
Results for the three months ended September 30, 2002 for
domestic utility were also affected by the following:
o a decrease in other operation and maintenance expenses of $23.5
million, which is explained below;
o an increase in decommissioning expenses of $30.8 million
primarily due to the effects in 2001 of the final FERC order
addressing System Energy's rate proceeding;
o an increase in depreciation and amortization expenses of $82.7
million primarily due to the effects in 2001 of the final FERC order
addressing System Energy's rate proceeding;
o an increase in other regulatory charges of $38.3 million
primarily due to the deferral in 2001 of capacity charges associated
with power purchases for the summers of 2000 and 2001 and the
amortization of these capacity charges in 2002 at Entergy Gulf States
and Entergy Louisiana. Refer to Note 2 to the financial statements
for further discussion of deferred capacity charges;
o a decrease in interest and dividend income of $24.5 million,
which is explained below;
o an increase in "miscellaneous - net" in other income of $11.8
million due to settlement of liability insurance coverage at Entergy
Gulf States and the cessation of amortization of goodwill in January
2002 upon implementation of SFAS 142. Refer to Note 7 to the
financial statements for further discussion of the implementation of
SFAS 142; and
o a decrease in interest expense of $53.4 million primarily due to
interest recorded on System Energy's reserve for rate refund in 2001.
The refund was made in December 2001.
The decrease in other operation and maintenance expenses for the
three months ended September 30, 2002 is primarily due to the
following:
o a decrease in other operation and maintenance expenses at
Entergy Arkansas primarily due to $16 million of turbine
refurbishment costs expensed in 2001 at a plant after its lease
expired; and
o a decrease of $13.9 million due to decreased incentive
compensation accruals.
This decrease was partially offset by an increase in expense of
$10.9 million to reflect the current estimate of the liability for
the future disposal of low-level radioactive waste materials.
The decrease in interest and dividend income for the three
months ended September 30, 2002 is primarily due to the following:
o a decrease of $12.7 million in interest and dividend income at
System Energy primarily due to interest recognized in 2001 on
decommissioning funds resulting from the final FERC order addressing
System Energy's rate proceeding; and
o a decrease of $6.5 million in interest and dividend income at
Entergy Mississippi due to interest recorded in 2001 on the deferred
System Energy costs that were not being recovered through rates.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Results for the nine months ended September 30, 2002 for
domestic utility were also affected by the following:
o an increase in other operation and maintenance expenses of
$216.0 million primarily due to increased expenses at Entergy
Arkansas. Entergy Arkansas had increased expenses of $159.9 million
for the nine months ended due to the March 2002 Settlement Agreement
and 2001 earnings review that became final in the second quarter of
2002, allowing Entergy Arkansas to recover a large majority of 2000
and 2001 ice storm repair expenses through previously-collected TCA
amounts. Entergy Arkansas also had increased expenses of $24.5
million due to the reversal in 2001 of ice storm costs previously
charged to expense in December 2000, partially offset by the $16
million of turbine refurbishment costs mentioned above. These
increases are partially offset by the increased other regulatory
credits discussed below;
o an increase in other regulatory credits of $143.4 million
primarily due to the March 2002 Settlement Agreement allowing Entergy
Arkansas to recover a large majority of 2000 and 2001 ice storm
repair expenses through the previously-collected TCA amounts;
o an increase in depreciation and amortization expenses of $100.9
million primarily due to the effects in 2001 of the final FERC order
addressing System Energy's rate proceeding; and
o a decrease in interest income of $48.4 million primarily due to
lower interest earned on declining deferred fuel balances; and
o an increase in "miscellaneous - net" in other income of $18.2
million due to settlement of liability insurance coverage at Entergy
Gulf States and the cessation of amortization of goodwill in January
2002 upon implementation of SFAS 142; and
o a decrease in interest expense of $101.5 million, which is
explained below.
The March 2002 Settlement Agreement is discussed further in Note 2 to
the financial statements.
The decrease in interest expense for the nine months ended
September 30, 2002 is primarily due to the following:
o a decrease of $31.4 million in interest on long-term debt
primarily due to the retirement of long-term debt in late 2001 and
early 2002; and
o a decrease of $67.3 million in other interest expense primarily
due to interest recorded on System Energy's reserve for rate refund
in 2001. The refund was made in December 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Domestic Non-Utility Nuclear
The increases in earnings for the three and nine months ended
September 30, 2002 compared to the same periods in 2001 for domestic
non-utility nuclear were primarily due to the operation of Indian
Point 2 and Vermont Yankee, which were purchased in September 2001
and July 2002, respectively. Following are key performance measures
for domestic non-utility nuclear during the three and nine months
ended September 30, 2002 and 2001:
Three Months Nine Months
Ended Ended
2002 2001 2002 2001
Net MW in operation at September 30 3,955 3,445 3,955 3,445
Generation in GWH for the period 8,152 5,887 23,110 15,354
Capacity factor for the period 96.8% 97.5% 98.5% 91.5%
The following fluctuations in the results of operations for
domestic non-utility nuclear for the three months ended September 30,
2002 were primarily caused by the acquisitions of Indian Point 2 and
Vermont Yankee:
o operating revenues increased $143.4 million to $347.2 million;
o fuel expenses increased $9.2 million to $29.3 million;
o nuclear refueling outage expenses increased $1.0 million to $9.9
million;
o other operation and maintenance expenses increased $54.5 million
to $152.4 million; and
o depreciation and amortization expenses increased $8.0 million to
$12.1 million.
The following fluctuations in the results of operations for
domestic non-utility nuclear for the nine months ended September 30,
2002 were primarily caused by the acquisitions of Indian Point 2 and
Vermont Yankee:
o operating revenues increased $390.0 million to $923.2 million;
o fuel expenses increased $32.7 million to $82.9 million;
o nuclear refueling outage expenses increased $15.4 million to
$29.4 million;
o other operation and maintenance expenses increased $184.7
million to $436.5 million;
o taxes other than income taxes increased $9.1 million to $33.0
million; and
o depreciation and amortization expenses increased $20.0 million
to $29.1 million.
Energy Commodity Services
The decrease in earnings for energy commodity services for the
three months ended September 30, 2002 compared to the same period in
2001 was primarily due to the gain on the sale of the Saltend plant
in August 2001 combined with slightly lower earnings from Entergy's
interest in Entergy-Koch. This decrease was partially offset by the
gain on the sale of projects under development in Spain discussed
below.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The decrease in earnings for energy commodity services for the
nine months ended September 30, 2002 compared to the same period in
2001 was primarily due to the charges, discussed in "MANAGEMENT'S
DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS -
Entergy Wholesale Operations," to reflect the impairment of certain
assets, including impairments related to EWO's turbine acquisition
plans, and to reflect the change in EWO's development plans. $419.5
million ($271.5 million net of tax) was recorded in the first and
second quarters of 2002, including an offsetting net of tax benefit
of $18.5 million related to the sale of four turbines to a third
party. The pre-tax charges are reflected in operation and
maintenance expenses in the Consolidated Statements of Income. In
the third quarter of 2002, EWO realized a gain of $28.0 million
($17.3 million net of tax) primarily resulting from the sale of
projects under development in Spain.
Revenues decreased for energy commodity services by $306.8
million and $909.2 million for the three and nine months ended
September 30, 2002, respectively, primarily due to decreases of
$127.4 million and $495.3 million for the three and nine months ended
September 30, 2002, respectively, resulting from the sale of EWO's
interest in Highland Energy in the fourth quarter of 2001 combined
with decreases of $23.4 million and $161.7 million for the three and
nine months ended September 30, 2002, respectively, resulting from
the sale of EWO's interest in the Saltend plant in August 2001.
Also contributing to the decreases in revenues for energy
commodity services was the contribution of substantially all of
Entergy's power marketing and trading business to Entergy-Koch in
February 2001. Earnings from Entergy-Koch are reported as equity in
earnings of unconsolidated equity affiliates in the financial
statements. As a result, for the nine months ended September 30,
2002, revenues from this activity were lower by $135.2 million
compared to the same period in 2001 and purchased power expenses were
lower by $131.2 million. The net income effect of the lower revenue
for the nine months ended September 30, 2002 was offset by the equity
in earnings from Entergy's interest in Entergy-Koch. The equity in
earnings from Entergy's interest in Entergy-Koch was $9.7 million and
$16.8 million lower for the three and nine months ended September 30,
2002 compared to the three and nine months ended September 30, 2001
primarily due to lower earnings from the pipeline business. Gulf
South Pipeline had lower trading earnings due to lower throughput and
higher production costs. Following are key performance measures for
Entergy-Koch's operations for the quarter and year-to-date periods
ended September 30, 2002 and 2001:
Third Quarter Year-To-Date
2002 2001 2002 2001
Entergy-Koch Trading
Gas volatility 58% 69% 64% 69%
Electricity volatility 57% 75% 50% 88%
Gas marketed (BCF/D) 1.6 1.3 1.8 1.5
Electricity marketed (GWH) 29,982 24,873 96,643 82,268
Gain/loss days 2.0 3.3 1.9 3.0
Gulf South Pipeline
Throughput (BCF/D) 2.27 2.56 2.40 2.43
Production cost ($/MMBTU) $0.096 $0.088 $0.088 $0.091
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
As discussed in the Form 10-K, the partnership agreement currently
allocates profits on a disproportionate basis. Substantially all of
Entergy-Koch's profits were allocated to Entergy for the three and
nine months ended September 30, 2002.
Also partially offsetting the decrease in earnings for energy
commodity services for the nine months ended September 30, 2002 was a
net increase in earnings of $7.3 million ($5.0 million net of tax)
related to the mark-to-market of the Damhead Creek power and gas
contracts in the first quarter of 2002.
Other, including parent company
Earnings for Other, including the parent company, increased for
the three months ended September 30, 2002 compared to the same period
in 2001 primarily due to an increase of $5.0 million in interest
income combined with a decrease of $2.6 million in interest expense.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 38.4% and 36.9%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 39.4% and 38.8%, respectively.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $2,037,957 $1,986,338 $5,125,722 $5,849,720
Natural gas 18,953 18,212 90,313 159,144
Competitive businesses 411,965 572,339 1,210,254 1,726,727
---------- ---------- ---------- ----------
TOTAL 2,468,875 2,576,889 6,426,289 7,735,591
---------- ---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 672,217 925,452 1,612,490 3,076,932
Purchased power 222,472 279,060 625,476 888,835
Nuclear refueling outage expenses 24,183 24,284 74,057 64,567
Provision for turbine commitments, asset impairments
and restructuring charges (27,985) - 391,557 -
Other operation and maintenance 564,762 550,339 1,816,131 1,456,908
Decommissioning 8,198 (22,553) 24,589 (4,749)
Taxes other than income taxes 107,189 103,593 291,753 295,717
Depreciation and amortization 214,408 127,650 625,407 514,099
Other regulatory charges (credits) - net 19,742 (18,592) (149,340) (5,894)
---------- ---------- ---------- ----------
TOTAL 1,805,186 1,969,233 5,312,120 6,286,415
---------- ---------- ---------- ----------
OPERATING INCOME 663,689 607,656 1,114,169 1,449,176
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 8,726 7,672 23,730 19,259
Gain on sale of assets - net 705 913 2,379 2,261
Interest and dividend income 20,688 43,223 71,924 124,294
Equity in earnings of unconsolidated equity affiliates 50,159 58,414 142,964 153,957
Miscellaneous - net 7,837 (5,580) (3,346) 3,068
---------- ---------- ---------- ----------
TOTAL 88,115 104,642 237,651 302,839
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 131,905 126,670 376,825 386,373
Other interest - net 26,260 84,452 86,630 183,752
Distributions on preferred securities of subsidiary 4,709 4,709 14,128 14,128
Allowance for borrowed funds used during construction (6,548) (6,287) (18,478) (15,718)
---------- ---------- ---------- ----------
TOTAL 156,326 209,544 459,105 568,535
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 595,478 502,754 892,715 1,183,480
Income taxes 228,678 185,300 351,314 459,573
---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME 366,800 317,454 541,401 723,907
Preferred dividend requirements and other 5,924 4,970 17,796 18,363
---------- ---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $360,876 $312,484 $523,605 $705,544
========== ========== ========== ==========
Earnings per average common share:
Basic $1.61 $1.41 $2.34 $3.19
Diluted $1.59 $1.39 $2.30 $3.14
Dividends declared per common share $0.33 $0.32 $0.99 $0.95
Average number of common shares outstanding:
Basic 223,714,449 221,675,578 223,336,005 220,908,546
Diluted 227,054,321 224,830,056 227,402,737 224,780,449
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $541,401 $723,907
Noncash items included in net income:
Reserve for regulatory adjustments 10,767 (357,880)
Other regulatory credits - net (149,340) (5,894)
Depreciation, amortization, and decommissioning 649,996 509,350
Deferred income taxes and investment tax credits (169,905) (53,037)
Allowance for equity funds used during construction (23,730) (19,259)
Gain on sale of assets - net (2,379) (2,261)
Equity in undistributed earnings of unconsolidated equity affiliates (140,964) (145,312)
Provision for turbine commitments, asset impairments
and restructuring charges 391,557 -
Changes in working capital:
Receivables (233,194) 33,355
Fuel inventory (193) (24,898)
Accounts payable 68,004 (467,749)
Taxes accrued 496,789 457,995
Interest accrued 5,158 10,289
Deferred fuel 85,998 367,105
Other working capital accounts (83,990) (11,291)
Provision for estimated losses and reserves 198 (10,706)
Changes in other regulatory assets 206,504 61,583
Other 17,600 163,459
---------- ----------
Net cash flow provided by operating activities 1,670,277 1,228,756
---------- ----------
INVESTING ACTIVITIES
Construction/capital expenditures (1,053,000) (939,662)
Allowance for equity funds used during construction 23,730 19,259
Nuclear fuel purchases (217,398) (119,277)
Proceeds from sale/leaseback of nuclear fuel 160,062 60,679
Proceeds from sale of businesses 244,578 805,945
Investment in other non-regulated/non-utility properties (200,119) (565,333)
Decrease (increase) in other investments 38,964 (632,548)
Changes in other temporary investments - net 150,000 (250,600)
Decommissioning trust contributions and realized change in trust assets (49,458) (79,047)
Other regulatory investments (45,262) (36,461)
Other 116,654 (12,200)
---------- ----------
Net cash flow used in investing activities (831,249) (1,749,245)
---------- ----------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 368,589 489,295
Common stock 115,569 62,335
Retirement of long-term debt (1,166,412) (877,088)
Repurchase of common stock (103,579) (36,895)
Redemption of preferred stock (1,858) (39,574)
Changes in credit line borrowings - net 379,333 662,997
Dividends paid:
Common stock (221,215) (202,112)
Preferred stock (17,796) (20,281)
---------- ----------
Net cash flow provided by (used in) financing activities (647,369) 38,677
---------- ----------
Effect of exchange rates on cash and cash equivalents 5,614 664
---------- ----------
Net increase (decrease) in cash and cash equivalents 197,273 (481,148)
Cash and cash equivalents at beginning of period 751,573 1,382,424
---------- ----------
Cash and cash equivalents at end of period $948,846 $901,276
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $454,489 $570,846
Income taxes $37,770 $6,872
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($78,156) ($38,718)
Net assets contributed to Entergy-Koch - $80,145
Decommissioning trust funds acquired in nuclear plant acquisitions $310,000 $430,000
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $205,184 $129,866
Temporary cash investments - at cost,
which approximates market 743,344 618,327
Special deposits 318 3,380
----------- -----------
Total cash and cash equivalents 948,846 751,573
----------- -----------
Other temporary investments - 150,000
Notes receivable 2,077 2,137
Accounts receivable:
Customer 439,856 294,799
Allowance for doubtful accounts (22,036) (19,255)
Other 286,052 286,671
Accrued unbilled revenues 365,157 268,680
----------- -----------
Total receivables 1,069,029 830,895
----------- -----------
Deferred fuel costs 131,708 172,444
Accumulated deferred income taxes 22,936 6,488
Fuel inventory - at average cost 97,690 97,497
Materials and supplies - at average cost 514,688 460,644
Deferred nuclear refueling outage costs 68,732 79,755
Prepayments and other 94,724 129,251
----------- -----------
TOTAL 2,950,430 2,680,684
----------- -----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 756,682 766,103
Decommissioning trust funds 2,032,368 1,775,950
Non-utility property - at cost (less accumulated depreciation) 293,773 295,616
Other 295,765 495,542
----------- -----------
TOTAL 3,378,588 3,333,211
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Electric 26,951,520 26,359,376
Property under capital lease 745,063 753,310
Natural gas 209,808 201,841
Construction work in progress 1,275,323 882,829
Nuclear fuel under capital lease 291,720 265,464
Nuclear fuel 258,224 232,387
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 29,731,658 28,695,207
Less - accumulated depreciation and amortization 12,275,323 11,805,578
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 17,456,335 16,889,629
----------- -----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 920,352 946,126
Unamortized loss on reacquired debt 157,578 166,546
Other regulatory assets 526,709 707,439
Long-term receivables 25,588 28,083
Goodwill 377,172 377,472
Other 984,241 781,121
----------- -----------
TOTAL 2,991,640 3,006,787
----------- -----------
TOTAL ASSETS $26,776,993 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $966,744 $682,771
Notes payable 15,351 351,018
Accounts payable 662,261 592,529
Customer deposits 196,583 188,230
Taxes accrued 797,321 550,133
Nuclear refueling outage costs 11,199 2,080
Interest accrued 197,690 192,420
Obligations under capital leases 150,731 149,352
Other 183,974 345,387
----------- -----------
TOTAL 3,181,854 3,053,920
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,410,943 3,574,664
Accumulated deferred investment tax credits 453,712 471,090
Taxes accrued 650,000 400,000
Obligations under capital leases 196,572 181,085
Other regulatory liabilities 172,203 135,878
Decommissioning 1,544,090 1,194,333
Transition to competition 79,098 231,512
Regulatory reserves 48,357 37,591
Accumulated provisions 418,959 425,399
Other 988,403 852,269
----------- -----------
TOTAL 7,962,337 7,503,821
----------- -----------
Long-term debt 7,239,139 7,321,028
Preferred stock with sinking fund 24,327 26,185
Preferred stock without sinking fund 334,337 334,337
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, authorized 500,000,000
shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482
Paid-in capital 4,666,953 4,662,704
Retained earnings 3,941,240 3,638,448
Accumulated other comprehensive loss (45,156) (88,794)
Less - treasury stock, at cost (25,910,490 shares in 2002 and
27,441,384 shares in 2001) 745,520 758,820
----------- -----------
TOTAL 7,819,999 7,456,020
----------- -----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,776,993 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME,
AND PAID-IN CAPITAL
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,653,841 $3,445,141
Add - Earnings applicable to common stock 360,876 $360,876 312,484 $312,484
Deduct:
Dividends declared on common stock 73,933 69,841
Capital stock and other expenses (456) (840)
---------- ----------
Total 73,477 69,001
---------- ----------
Retained Earnings - End of period $3,941,240 $3,688,624
========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes ($3,628) ($21,868)
Other accumulated comprehensive (loss) items (13,613) (78,565)
---------- ----------
Total (17,241) (100,433)
---------- ----------
Net derivative instrument fair value changes
arising during the period (17,108) (17,108) (1,475) (1,475)
Foreign currency translation adjustments 255 255 7,848 7,848
Net unrealized investment (losses) (11,062) (11,062) (2,853) (2,853)
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (20,736) (23,343)
Other accumulated comprehensive (loss) items (24,420) (73,570)
---------- ----------
Total ($45,156) ($96,913)
========== -------- ========== --------
Comprehensive Income $332,961 $316,004
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,666,754 $4,661,334
Add: Common stock issuances related to stock plans 199 1,428
---------- ----------
Paid-in Capital - End of period $4,666,953 $4,662,762
========== ==========
Nine Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,638,448 $3,190,639
Add - Earnings applicable to common stock 523,605 $523,605 705,544 $705,544
Deduct:
Dividends declared on common stock 221,288 208,766
Capital stock and other expenses (475) (1,207)
---------- ----------
Total 220,813 207,559
---------- ----------
Retained Earnings - End of period $3,941,240 $3,688,624
========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes ($17,973) -
Other accumulated comprehensive (loss) items (70,821) ($75,033)
---------- ----------
Total (88,794) (75,033)
---------- ----------
Cumulative effect to January 1, 2001 of accounting
change regarding fair value of derivative instruments - - (18,021) -
Net derivative instrument fair value changes
arising during the period (2,763) (2,763) (5,322) (5,322)
Foreign currency translation adjustments 68,312 1,978 4,213 4,213
Net unrealized investment (losses) (21,911) (21,911) (2,750) (2,750)
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (20,736) (23,343)
Other accumulated comprehensive (loss) items (24,420) (73,570)
---------- ----------
Total ($45,156) ($96,913)
========== -------- ========== --------
Comprehensive Income $500,909 $701,685
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,662,704 $4,660,483
Add: Common stock issuances related to stock plans 4,249 2,279
---------- ----------
Paid-in Capital - End of period $4,666,953 $4,662,762
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 847.6 $ 874.8 ($27.2) (3)
Commercial 501.8 529.9 (28.1) (5)
Industrial 523.3 532.2 (8.9) (2)
Governmental 50.5 55.5 (5.0) (9)
--------- --------- ------
Total retail 1,923.2 1,992.4 (69.2) (3)
Sales for resale 107.3 108.9 (1.6) (1)
Other 7.4 (115.0) 122.4 106
--------- --------- ------
Total $ 2,037.9 $ 1,986.3 $ 51.6 3
========= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 10,827 10,502 325 3
Commercial 7,509 7,351 158 2
Industrial 10,839 10,457 382 4
Governmental 731 722 9 1
--------- --------- ------
Total retail 29,906 29,032 874 3
Sales for resale 2,823 2,373 450 19
--------- --------- ------
Total 32,729 31,405 1,324 4
========= ========= ======
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Domestic Electric
Operating Revenues:
Residential $ 1,898.8 $ 2,127.0 ($228.2) (11)
Commercial 1,264.3 1,462.8 (198.5) (14)
Industrial 1,385.0 1,838.7 (453.7) (25)
Governmental 132.3 162.7 (30.4) (19)
--------- --------- ------
Total retail 4,680.4 5,591.2 (910.8) (16)
Sales for resale 262.0 325.8 (63.8) (20)
Other 183.3 (67.3) 250.6 372
--------- --------- ------
Total $ 5,125.7 $ 5,849.7 ($724.0) (12)
========= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 25,303 24,771 532 2
Commercial 19,219 18,834 385 2
Industrial 30,770 31,478 (708) (2)
Governmental 2,002 1,967 35 2
--------- --------- ------
Total retail 77,294 77,050 244 -
Sales for resale 7,480 7,004 476 7
--------- --------- ------
Total 84,774 84,054 720 1
========= ========= ======
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30,
2002 compared to the three months ended September 30, 2001 primarily
due to the refund from System Energy ordered by FERC that became
final in July 2001. The accounting entries necessary to record the
effects of the FERC order reduced purchased power expenses by $61.5
million in 2001, which resulted in a $37.4 million increase in net
income in 2001. The refund is discussed further in Note 2 to the
financial statements in the Form 10-K. Absent the effect of the
refund entry on 2001 results, net income would have increased in 2002
due to a decrease in other operation and maintenance expenses and
other regulatory charges and an increase in the sales volume of
unbilled revenue, partially offset by decreased sales for resale.
Net income decreased for the nine months ended September 30,
2002 compared to the nine months ended September 30, 2001 primarily
due to the aforementioned System Energy refund and the effect of the
March 2002 Settlement Agreement and the 2001 earnings review that
were approved by the APSC in the second quarter of 2002. The
settlement agreement allowed Entergy Arkansas to recover 2000 and
2001 ice storm repair expenses through previously-collected TCA
amounts. The effect of this settlement agreement increased other
operation and maintenance expenses, other regulatory credits, and
provisions for rate refunds. The net impact of the settlement
agreement and the 2001 earnings review is a $2.2 million decrease in
net income. The March 2002 Settlement Agreement is discussed further
in Note 2 to the financial statements. The overall decrease was
partially offset by an increase in the sales volume of unbilled
revenue.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 2002 compared with the three and nine
months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($0.2) $4.4
Rate riders 1.7 (13.4)
Fuel cost recovery (39.6) (52.9)
Sales volume/weather 1.8 (6.8)
Unbilled revenue 7.8 14.3
Provisions for rate refunds - (18.1)
Other revenue (0.3) 0.9
Sales for resale (37.9) (96.3)
------ -------
Total ($66.7) ($167.9)
====== =======
Rate riders
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Rate rider revenues decreased for the nine months ended
September 30, 2002 primarily due to a decrease in the Grand Gulf rate
rider effective January 2002 compared to the average rate rider in
effect during the nine months ended September 30, 2001. The Grand
Gulf rate rider allows Entergy Arkansas to recover its retail share
of operating costs for Grand Gulf 1.
Fuel cost recovery
Entergy Arkansas is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Arkansas'
financial statements such that these costs generally have no net
effect on earnings.
Fuel cost recovery revenues decreased for the three and nine
months ended September 30, 2002 primarily due to a decrease in the
energy cost recovery rider that became effective in April 2002. The
rider utilizes prior year energy costs and projected energy sales for
the twelve-month period commencing on April 1 of each year to develop
an energy cost rate, which is redetermined annually and includes a
true-up adjustment reflecting the over-recovery or under-recovery,
including carrying charges, of the energy cost for the prior calendar
year. In September 2002, Entergy Arkansas filed and the APSC
approved an interim revision to the energy cost rate effective
October 2002 through March 2003. The rider is discussed further in
Note 2 to the financial statements in the Form 10-K.
Sales volume/weather
Electric sales volume decreased revenues for the nine months
ended September 30, 2002 due to decreased usage of 53 GWH in the
industrial sector. The effect of less favorable weather through
September 30, 2002 compared to the same period in 2001 also decreased
electric sales volume by 173 GWH in the residential and commercial
sectors. The decreased usage resulted in higher effective rates in
each sector, which is reflected in base rate differences.
Unbilled revenue
The increase for the three and nine months ended September 30,
2002 compared to the three and nine months ended September 30, 2001
is due to the effect on the unbilled calculation for the 2002 period
of higher unbilled revenue in September 2002 caused by
volume/weather.
Provisions for rate refunds
Revenues decreased for the nine months ended September 30, 2002
due to the provisions for rate refunds to large general service
customers pursuant to the March 2002 Settlement Agreement. The
refunds were distributed in August 2002. The March 2002 Settlement
Agreement is discussed further in Note 2 to the financial statements.
Sales for resale
Sales for resale decreased for the three and nine months ended
September 30, 2002 due to a decrease in the average price of energy
sold to wholesale customers coupled with a decrease in sales volume
to municipalities and co-operatives, partially due to the expiration
of a municipal wholesale customer contract on June 30, 2002. Entergy
Arkansas is aggressively pursuing other wholesale power sales
opportunities to offset the revenue loss resulting from the loss of
this contract.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three months
ended September 30, 2002 primarily due to:
o decreased coal transportation costs due to new contracts;
o decreased coal commodity costs due to increased purchases in the
spot market; and
o decreased average market price of purchased power.
The decrease was partially offset by the reduction of $61.5 million
in purchased power expenses in September 2001 as a result of the FERC-
ordered refund from System Energy.
Fuel and purchased power expenses decreased for the nine months
ended September 30, 2002 primarily due to decreased market prices of
natural gas and purchased power as well as decreased expenses for
coal as mentioned above. The decrease was partially offset by the
FERC-ordered refund from System Energy mentioned above.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
months ended September 30, 2002 primarily due to $16 million of
turbine refurbishment costs expensed in 2001 at a plant, the lease of
which expired after the summer of 1999.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2002 primarily due to:
o increased expenses consisting of $159.9 million due primarily to
the March 2002 Settlement Agreement (discussed further in Note 2 to
the financial statements) and 2001 earnings review allowing Entergy
Arkansas to recover a large majority of 2000 and 2001 ice storm
repair expenses through the previously-collected TCA amounts and
$24.5 million due to the reversal in 2001 of ice storm costs
previously charged to expense in December 2000;
o an increase in expense of $6.6 million to reflect the current
estimate of the liability for the future disposal of low-level
radioactive waste materials; and
o lower nuclear insurance refunds of $3.1 million.
These were partially offset by the $16 million of turbine
refurbishment costs discussed above.
Depreciation, amortization, and decommissioning
Depreciation and amortization expenses increased for the nine
months ended September 30, 2002 primarily due to revisions made to
the useful lives of certain intangible plant assets to more
appropriately reflect their actual lives, which lowered expense in
2001 in accordance with regulatory treatment.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory charges (credits) - net
Other regulatory charges decreased for the three months ended
September 30, 2002 primarily due to an adjustment to the transition
cost account made in the third quarter of 2001 as a result of the
2000 excess earnings review. The March 2002 Settlement Agreement
provided that the process for contributing excess earnings to the
transition cost account end with the 2001 earnings review.
Other regulatory credits increased for the nine months ended
September 30, 2002 primarily due to the March 2002 Settlement
Agreement allowing Entergy Arkansas to recover 2000 and 2001 ice
storm repair expenses through the previously-collected TCA amounts.
The increase in other regulatory credits is offset by an increase in
other operation and maintenance expenses discussed above. The March
2002 Settlement Agreement is discussed further in Note 2 to the
financial statements.
Other
Other income
Other income decreased for the nine months ended September 30,
2002 primarily due to:
o a decrease in interest income recorded on the deferred fuel
balance because the balance has been lower during 2002; and
o reversal of the first quarter 2002 recording of 2000 ice storm
expenses in other operation and maintenance of $2.7 million, as
originally recommended by the APSC staff, in accordance with the
March 2002 Settlement Agreement. The March 2002 Settlement Agreement
is discussed further in Note 2 to the financial statements.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 36.6% and 40.9%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 38.7% and 41.1%, respectively. The decrease in
the effective tax rate for the three months ended September 30, 2002
was primarily due to the effect of a flow-through book and tax timing
difference. The decrease in the effective tax rate for the nine
months ended September 30, 2002 was primarily due to a research and
experimental tax deduction.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $474,873 $541,556 $1,220,622 $1,388,463
-------- -------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 76,005 120,003 249,468 298,165
Purchased power 102,485 76,528 262,440 321,038
Nuclear refueling outage expenses 5,877 7,079 18,935 21,616
Other operation and maintenance 94,501 113,089 430,616 249,913
Taxes other than income taxes 9,481 8,259 30,054 25,687
Depreciation, amortization, and decommissioning 47,229 45,263 140,410 131,283
Other regulatory charges (credits) - net 408 7,797 (175,314) 1,458
-------- -------- ---------- ----------
TOTAL 335,986 378,018 956,609 1,049,160
-------- -------- ---------- ----------
OPERATING INCOME 138,887 163,538 264,013 339,303
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 2,243 1,858 5,543 4,497
Interest and dividend income 498 1,324 2,063 8,036
Miscellaneous - net (593) (867) (5,121) (2,796)
-------- -------- ---------- ----------
TOTAL 2,148 2,315 2,485 9,737
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 22,189 23,171 63,574 67,475
Other interest - net 1,174 3,239 12,222 11,744
Distributions on preferred securities of subsidiary 1,275 1,275 3,825 3,825
Allowance for borrowed funds used during construction (1,413) (1,187) (3,598) (2,902)
-------- -------- ---------- ----------
TOTAL 23,225 26,498 76,023 80,142
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 117,810 139,355 190,475 268,898
Income taxes 43,146 56,954 73,725 110,481
-------- -------- ---------- ----------
NET INCOME 74,664 82,401 116,750 158,417
Preferred dividend requirements and other 1,944 1,912 5,832 5,800
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $72,720 $80,489 $110,918 $152,617
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $116,750 $158,417
Noncash items included in net income:
Other regulatory charges (credits) - net (175,314) 1,458
Depreciation, amortization, and decommissioning 140,410 131,283
Deferred income taxes and investment tax credits (46,672) (50,323)
Allowance for equity funds used during construction (5,543) (4,497)
Changes in working capital:
Receivables (16,899) (218,974)
Fuel inventory (6,146) (8,605)
Accounts payable 15,750 (111,262)
Taxes accrued 101,761 151,757
Interest accrued (4,001) (11,228)
Deferred fuel costs 66,838 66,973
Other working capital accounts (3,079) 62,753
Provision for estimated losses and reserves (4,300) (4,536)
Changes in other regulatory assets 150,309 (57,723)
Changes in other deferred credits (22,192) 36,937
Other 10,697 44,042
-------- --------
Net cash flow provided by operating activities 318,369 186,472
-------- --------
INVESTING ACTIVITIES
Construction expenditures (194,349) (189,883)
Allowance for equity funds used during construction 5,543 4,497
Nuclear fuel purchases (60,075) (19,103)
Proceeds from sale/leaseback of nuclear fuel 60,075 19,103
Decommissioning trust contributions and realized
change in trust assets (16,255) (6,569)
Changes in other temporary investments - net 38,397 -
Other regulatory investments - (13,834)
-------- --------
Net cash flow used in investing activities (166,664) (205,789)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 94,405 98,919
Retirement of long-term debt (170,000) -
Changes in short-term borrowings (667) -
Dividends paid:
Common stock (94,800) (59,100)
Preferred stock (5,832) (5,832)
-------- --------
Net cash flow provided by (used in) financing activities (176,894) 33,987
-------- --------
Net increase (decrease) in cash and cash equivalents (25,189) 14,670
Cash and cash equivalents at beginning of period 103,466 7,838
-------- --------
Cash and cash equivalents at end of period $78,277 $22,508
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $79,856 $90,297
Income taxes $9,356 ($3)
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($37,298) ($17,087)
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $32,889 $18,331
Temporary cash investments - at cost,
which approximates market 45,388 85,135
---------- ----------
Total cash and cash equivalents 78,277 103,466
---------- ----------
Other temporary investments - 38,397
Accounts receivable:
Customer 108,435 80,719
Allowance for doubtful accounts (1,667) (1,667)
Associated companies 43,355 65,102
Other 19,311 20,889
Accrued unbilled revenues 74,815 62,307
---------- ----------
Total accounts receivable 244,249 227,350
---------- ----------
Deferred fuel costs - 17,246
Accumulated deferred income taxes 39,443 22,698
Fuel inventory - at average cost 10,518 4,372
Materials and supplies - at average cost 80,943 75,499
Deferred nuclear refueling outage costs 12,541 14,508
Prepayments and other 7,205 53,386
---------- ----------
TOTAL 473,176 556,922
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 11,217 11,217
Decommissioning trust funds 330,071 351,114
Non-utility property - at cost (less accumulated depreciation) 1,462 1,465
Other 2,976 2,976
---------- ----------
TOTAL 345,726 366,772
---------- ----------
UTILITY PLANT
Electric 5,493,816 5,399,294
Property under capital lease 33,729 35,604
Construction work in progress 222,254 157,994
Nuclear fuel under capital lease 98,040 65,556
Nuclear fuel 9,394 8,156
---------- ----------
TOTAL UTILITY PLANT 5,857,233 5,666,604
Less - accumulated depreciation and amortization 2,695,234 2,615,013
---------- ----------
UTILITY PLANT - NET 3,161,999 3,051,591
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 181,928 164,146
Unamortized loss on reacquired debt 39,902 40,817
Other regulatory assets 92,444 260,535
Other 18,919 10,797
---------- ----------
TOTAL 333,193 476,295
---------- ----------
TOTAL ASSETS $4,314,094 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $100,000 $85,000
Notes payable - 667
Accounts payable:
Associated companies 36,499 32,868
Other 99,155 87,036
Customer deposits 34,467 32,589
Taxes accrued 206,042 104,281
Interest accrued 26,543 30,544
Deferred fuel costs 49,592 -
Obligations under capital leases 52,312 51,973
System Energy refund 3,958 53,732
Other 19,334 17,221
---------- ----------
TOTAL 627,902 495,911
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 805,447 809,742
Accumulated deferred investment tax credits 79,483 83,239
Obligations under capital leases 79,457 49,187
Transition to competition - 152,414
Accumulated provisions 37,115 41,415
Other 85,232 107,424
---------- ----------
TOTAL 1,086,734 1,243,421
---------- ----------
Long-term debt 1,179,207 1,308,075
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 116,350 116,350
Common stock, $0.01 par value, authorized 325,000,000
shares; issued and outstanding 46,980,196 shares in 2002
and 2001 470 470
Paid-in capital 591,127 591,127
Retained earnings 652,304 636,226
---------- ----------
TOTAL 1,360,251 1,344,173
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,314,094 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 193.3 $ 207.4 ($14.1) (7)
Commercial 93.7 103.8 (10.1) (10)
Industrial 97.6 109.2 (11.6) (11)
Governmental 4.1 4.7 (0.6) (13)
---------------------------------
Total retail 388.7 425.1 (36.4) (9)
Sales for resale
Associated companies 33.0 63.3 (30.3) (48)
Non-associated companies 49.5 57.1 (7.6) (13)
Other 3.7 (3.9) 7.6 195
---------------------------------
Total $ 474.9 $ 541.6 ($66.7) (12)
=================================
Billed Electric Energy
Sales (GWH):
Residential 2,354 2,332 22 1
Commercial 1,617 1,608 9 1
Industrial 1,937 1,923 14 1
Governmental 70 71 (1) (1)
---------------------------------
Total retail 5,978 5,934 44 1
Sales for resale
Associated companies 1,436 1,673 (237) (14)
Non-associated companies 1,521 1,320 201 15
---------------------------------
Total 8,935 8,927 8 -
=================================
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 442.8 $ 471.7 ($28.9) (6)
Commercial 237.0 253.2 (16.2) (6)
Industrial 256.1 279.2 (23.1) (8)
Governmental 11.9 12.4 (0.5) (4)
-----------------------------------
Total retail 947.8 1,016.5 (68.7) (7)
Sales for resale
Associated companies 126.1 183.1 (57.0) (31)
Non-associated companies 125.4 164.7 (39.3) (24)
Other 21.3 24.2 (2.9) (12)
-----------------------------------
Total $ 1,220.6 $ 1,388.5 ($167.9) (12)
===================================
Billed Electric Energy
Sales (GWH):
Residential 5,476 5,568 (92) (2)
Commercial 3,967 3,971 (4) -
Industrial 5,217 5,270 (53) (1)
Governmental 194 188 6 3
-----------------------------------
Total retail 14,854 14,997 (143) (1)
Sales for resale
Associated companies 5,322 4,753 569 12
Non-associated companies 3,757 3,947 (190) (5)
-----------------------------------
Total 23,933 23,697 236 1
===================================
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30,
2002 compared to the three months ended September 30, 2001 primarily
due to increases in the sales volume and price applied to unbilled
revenue, increased other income, decreased interest expense, and
decreased operation and maintenance expenses, partially offset by
decreased other regulatory credits.
Net income decreased for the nine months ended September 30,
2002 compared to the nine months ended September 30, 2001 primarily
due to decreased sales for resale, increased depreciation and
amortization expenses, and decreased other regulatory credits,
significantly offset by increases in the sales volume and price
applied to unbilled revenue and decreased interest expense.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 2002 compared with the three and nine
months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($5.2) ($7.6)
Fuel cost recovery (77.6) (456.6)
Sales volume/weather 6.6 (0.9)
Unbilled revenue 25.4 42.4
Other revenue 1.9 5.0
Sales for resale (17.1) (62.0)
------ -------
Total ($66.0) ($479.7)
====== =======
Base rate differences
Base rate differences decreased revenues for the three and nine
months ended September 30, 2002 due to an $11.5 million base rate
decrease effective June 2002. The decrease for the three months
ended September 30, 2002 was also due to decreased rates for special-
rate industrial customers as a result of increased KWH usage.
Fuel cost recovery
Entergy Gulf States is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Gulf
States' financial statements such that these costs generally have no
net effect on earnings.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues decreased for the three and nine
months ended September 30, 2002 in both operational jurisdictions of
Entergy Gulf States. In the Louisiana jurisdiction, fuel cost
recovery revenues decreased $22.6 million and $286.7 million for the
three and nine months ended September 30, 2002, respectively, due to
lower fuel factors resulting from decreases in fuel and purchased
power expenses. In the Louisiana jurisdiction, these fuel costs are
recovered on a two-month lag. In the Texas jurisdiction, fuel cost
recovery revenues decreased $55.0 million and $169.9 million for the
three and nine months ended September 30, 2002, respectively, due to
a decrease in the fixed fuel factor in March 2002 and a lower fuel
recovery surcharge in 2002.
Sales volume/weather
Higher electric sales volume increased revenues for the three
months ended September 30, 2002 due to increased usage of 92 GWH in
the residential and commercial sectors, after adjusting for the
weather effect, and increased usage of 209 GWH in the industrial
sector. The increased usage resulted in lower effective rates for
the industrial sector, which is reflected in base rate differences.
Lower electric sales volume reduced revenues for the nine months
ended September 30, 2002 primarily due to decreased usage in the
industrial sector as a result of contractual modifications that
reclassified the sales associated with certain customers from retail
to wholesale. Under the terms of the former contract with these
customers, Entergy Gulf States was also required to purchase the
electricity produced by the customers' generating units. As a result
of the cessation of the purchased power obligation, the
reclassification of these sales will not have a negative impact on
Entergy Gulf States' earnings.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended
September 30, 2002 and 2001 includes the reversal of the estimates
for June 2002 and June 2001, respectively. The increase for the
three months ended September 30, 2002 compared to the three months
ended September 30, 2001 is due to the effect on the unbilled
calculation for the 2001 period of higher unbilled revenue in June
2001 caused by volume/weather and higher fuel rates.
Unbilled revenue for the nine months ended September 30, 2002
and 2001 includes the reversal of the estimates for December 2001 and
December 2000, respectively. The increase in unbilled revenue for
the nine months ended September 30, 2002 compared to the nine months
ended September 30, 2001 is due to the effect on the unbilled
calculation for the 2001 period of higher unbilled revenue in
December 2000 caused by volume/weather and higher fuel rates.
Sales for resale
Sales for resale decreased for the three and nine months ended
September 30, 2002 primarily due to decreased sales volume to
affiliated customers coupled with a decrease in the average price of
energy supplied for affiliated sales. The decrease is partially
offset by contractual modifications that reclassified the sales
associated with certain customers from retail to wholesale.
Gas operating revenues
Gas operating revenues decreased for the nine months ended
September 30, 2002 primarily due to the decreased market price of
natural gas.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three
months ended September 30, 2002 primarily due to a decrease in the
market price of purchased power.
Fuel and purchased power expenses decreased for the nine months
ended September 30, 2002 primarily due to decreases in the market
prices of natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses decreased for the
three months ended September 30, 2002 due to decreases in:
o general and administrative salaries expense of $3.9 million;
o uncollectible receivable write-offs of $2.5 million;
o nuclear operation and maintenance expenses of $2.2 million; and
o transmission expenses of $1.0 million.
The decrease in other operation and maintenance expenses was somewhat
offset by increases in:
o employee pension and benefits expense of $2.6 million; and
o expenses of $2.5 million to reflect the current estimate of the
liability for the future disposal of low-level radioactive waste
materials.
Taxes other than income taxes
Taxes other than income taxes increased for the nine months
ended September 30, 2002 primarily due to lower sales and use tax
audit assessments in 2001.
Depreciation and amortization
Depreciation and amortization expenses increased for the nine
months ended September 30, 2002 primarily due to revisions made to
the useful lives of certain intangible plant assets to more
appropriately reflect their actual lives, which lowered expense in
2001 in accordance with regulatory treatment. The increase was also
due to net capital additions to plant in service.
Other regulatory charges (credits) - net
Other regulatory credits decreased for the three and nine months
ended September 30, 2002 primarily due to the deferral in 2001 of
capacity charges included in power purchases for the summers of 2000
and 2001 and the amortization of these capacity charges in 2002. The
amortization of the summer 2000 capacity charges ended in May 2002.
The amortization of the capacity charges for the summer 2001 began in
June 2002 and will occur through May 2003. Refer to Note 2 to the
financial statements for further discussion of deferred capacity
charges. The decrease for the nine months ended September 30, 2002
was somewhat offset by the recognition in income of the Louisiana
portion of the unamortized deferred gain on the 1988 sale of Nelson
Units 1 and 2. The deferred gain was recognized in income because
the LPSC no longer requires that amortization of the gain reduce
Entergy Gulf States' recoverable fuel.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other income
Other income increased for the three months ended September 30,
2002 as a result of settlement of liability insurance coverage,
somewhat offset by decreased interest income recorded on the deferred
fuel balance due to partial recovery of the balance.
Other income decreased for the nine months ended September 30,
2002 primarily due to decreased interest income recorded on the
deferred fuel balance due to partial recovery of the balance. The
decrease was somewhat offset by settlement of liability insurance
coverage.
Interest and other charges
Interest on long-term debt decreased for the three and nine
months ended September 30, 2002 primarily due to lower interest
expense on variable-rate First Mortgage Bonds and the retirement of
$148 million of First Mortgage Bonds in January 2002.
Other interest expense decreased for the three and nine months
ended September 30, 2002 primarily due to a 2001 adjustment to the
liability for deferred compensation for certain former Entergy Gulf
States employees in accordance with an actuarial study.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 38.0% and 36.2%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 38.4% and 36.1%, respectively. The increase in
the effective tax rate for the three and nine months ended was
primarily due to the effect of flow-through book and tax timing
differences.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $642,940 $708,951 $1,649,729 $2,129,424
Natural gas 5,909 5,537 30,587 50,434
-------- -------- ---------- ----------
TOTAL 648,849 714,488 1,680,316 2,179,858
-------- -------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 233,976 281,276 518,875 881,440
Purchased power 96,037 136,703 270,215 404,558
Nuclear refueling outage expenses 3,056 2,680 9,135 8,792
Other operation and maintenance 103,454 107,991 308,405 309,404
Decommissioning 1,579 1,562 4,731 4,685
Taxes other than income taxes 32,823 32,028 94,134 90,587
Depreciation and amortization 51,154 48,683 151,847 143,634
Other regulatory charges (credits) - net 1,227 (14,636) (10,796) (19,188)
-------- -------- ---------- ----------
TOTAL 523,306 596,287 1,346,546 1,823,912
-------- -------- ---------- ----------
OPERATING INCOME 125,543 118,201 333,770 355,946
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 2,988 2,650 7,971 6,817
Gain on sale of assets 707 623 2,379 1,811
Interest and dividend income 2,756 5,666 7,687 19,893
Miscellaneous - net 6,215 (709) 4,768 (3,284)
-------- -------- ---------- ----------
TOTAL 12,666 8,230 22,805 25,237
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 32,694 37,359 97,191 115,511
Other interest - net 2,260 7,844 5,002 12,038
Distributions on preferred securities of subsidiary 1,859 1,859 5,578 5,578
Allowance for borrowed funds used during construction (2,540) (2,704) (7,153) (6,858)
-------- -------- ---------- ----------
TOTAL 34,273 44,358 100,618 126,269
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 103,936 82,073 255,957 254,914
Income taxes 39,447 29,720 98,194 92,133
-------- -------- ---------- ----------
NET INCOME 64,489 52,353 157,763 162,781
Preferred dividend requirements and other 1,218 1,201 3,678 3,782
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $63,271 $51,152 $154,085 $158,999
======= ======== ========== ==========
See Notes to Financial Statements.
(Page left blank intentionally)
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $157,763 $162,781
Noncash items included in net income:
Reserve for regulatory adjustments 7,566 (22,880)
Other regulatory credits - net (10,796) (19,188)
Depreciation, amortization, and decommissioning 156,578 148,319
Deferred income taxes and investment tax credits (38,938) (17,478)
Allowance for equity funds used during construction (7,971) (6,817)
Gain on sale of assets (2,379) (1,811)
Changes in working capital:
Receivables (37,577) (69,940)
Fuel inventory 1,687 (17,057)
Accounts payable (12,319) (163,428)
Taxes accrued 131,065 120,593
Interest accrued 1,675 5,776
Deferred fuel costs 43,035 118,427
Other working capital accounts 3,967 15,914
Provision for estimated losses and reserves (822) (4,539)
Changes in other regulatory assets 10,029 (31,610)
Other 23,175 31,876
-------- --------
Net cash flow provided by operating activities 425,738 248,938
-------- --------
INVESTING ACTIVITIES
Construction expenditures (228,050) (224,101)
Allowance for equity funds used during construction 7,971 6,817
Nuclear fuel purchases (21,820) (3,937)
Proceeds from sale/leaseback of nuclear fuel 21,923 3,937
Decommissioning trust contributions and realized
change in trust assets (9,213) (9,245)
Changes in other temporary investments - net 44,643 (75,777)
Other regulatory investments (45,262) (22,628)
-------- --------
Net cash flow used in investing activities (229,808) (324,934)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 300,000
Retirement of long-term debt (148,000) (122,750)
Redemption of preferred stock (1,858) (4,574)
Dividends paid:
Common stock (75,200) (78,500)
Preferred stock (3,678) (3,830)
-------- --------
Net cash flow provided by (used in) financing activities (228,736) 90,346
-------- --------
Net increase (decrease) in cash and cash equivalents (32,806) 14,350
Cash and cash equivalents at beginning of period 123,728 68,279
-------- --------
Cash and cash equivalents at end of period $90,922 $82,629
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $102,066 $117,903
Income taxes $18,900 $920
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($17,780) ($10,172)
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $52,002 $19,503
Temporary cash investments - at cost,
which approximates market 38,920 104,225
---------- ----------
Total cash and cash equivalents 90,922 123,728
---------- ----------
Other temporary investments - 44,643
Accounts receivable:
Customer 108,672 81,136
Allowance for doubtful accounts (2,131) (2,131)
Associated companies 34,414 34,032
Other 36,232 53,249
Accrued unbilled revenues 111,420 84,744
---------- ----------
Total accounts receivable 288,607 251,030
---------- ----------
Deferred fuel costs 128,957 126,730
Fuel inventory - at average cost 52,324 54,011
Materials and supplies - at average cost 97,337 95,674
Prepayments and other 22,285 22,373
---------- ----------
TOTAL 680,432 718,189
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 236,815 245,382
Non-utility property - at cost (less accumulated depreciation) 192,357 194,830
Other 17,711 15,970
---------- ----------
TOTAL 446,883 456,182
---------- ----------
UTILITY PLANT
Electric 7,798,874 7,694,226
Property under capital lease 21,741 28,087
Natural gas 62,168 59,100
Construction work in progress 303,369 221,730
Nuclear fuel under capital lease 48,260 67,688
---------- ----------
TOTAL UTILITY PLANT 8,234,412 8,070,831
Less - accumulated depreciation and amortization 3,859,398 3,750,770
---------- ----------
UTILITY PLANT - NET 4,375,014 4,320,061
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 424,164 426,623
Unamortized loss on reacquired debt 31,898 34,321
Other regulatory assets 193,759 201,329
Long-term receivables 24,077 26,576
Other 25,695 26,460
---------- ----------
TOTAL 699,593 715,309
---------- ----------
TOTAL ASSETS $6,201,922 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $339,000 $147,921
Accounts payable:
Associated companies 29,356 38,728
Other 132,076 135,023
Customer deposits 47,403 45,876
Taxes accrued 221,669 90,604
Accumulated deferred income taxes 11,371 21,412
Nuclear refueling outage costs 11,199 2,080
Interest accrued 45,089 43,414
Obligations under capital leases 37,707 36,668
Other 15,891 20,995
---------- ----------
TOTAL 890,761 582,721
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,209,748 1,227,084
Accumulated deferred investment tax credits 158,242 163,766
Obligations under capital leases 32,207 60,163
Decommissioning 147,757 144,926
Transition to competition 79,098 79,098
Regulatory reserves 41,157 33,591
Accumulated provisions 62,989 63,811
Other 76,867 93,719
---------- ----------
TOTAL 1,808,065 1,866,158
---------- ----------
Long-term debt 1,620,072 1,958,897
Preferred stock with sinking fund 24,327 26,185
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 85,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 47,327 47,327
Common stock, no par value, authorized 200,000,000
shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055
Paid-in capital 1,157,459 1,157,459
Retained earnings 450,824 371,939
Accumulated other comprehensive income: 4,032 -
---------- ----------
TOTAL 1,773,697 1,690,780
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,201,922 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $431,295 $358,916
Add - Earnings applicable to common stock 63,271 $63,271 51,152 $51,152
Deduct:
Dividends declared on common stock 43,800 44,500
Capital stock and other expenses (58) -
-------- --------
Total 43,742 44,500
-------- --------
Retained Earnings - End of period $450,824 $365,568
======== ========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $2,078 $ -
Net derivative instrument fair value changes
arising during the period 1,954 1,954 - -
-------- ------- -------- -------
Balance at end of period:
Accumulated derivative instrument fair value changes $4,032 $ -
======== ------- ======== -------
Comprehensive Income $65,225 $51,152
======= =======
Nine Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $371,939 $285,128
Add - Earnings applicable to common stock 154,085 $154,085 158,999 $158,999
Deduct:
Dividends declared on common stock 75,200 78,500
Capital stock and other expenses - 59
-------- --------
Total 75,200 78,559
-------- --------
Retained Earnings - End of period $450,824 $365,568
======== ========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $ - $ -
Net derivative instrument fair value changes
arising during the period 4,032 4,032 - -
-------- -------- -------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes $4,032 $ -
======== -------- ======== --------
Comprehensive Income $158,117 $158,999
======== ========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 234.4 $ 256.8 ($22.4) (9)
Commercial 146.5 159.9 (13.4) (8)
Industrial 193.6 208.6 (15.0) (7)
Governmental 9.1 9.6 (0.5) (5)
----------------------------------
Total retail 583.6 634.9 (51.3) (8)
Sales for resale
Associated companies 11.1 40.0 (28.9) (72)
Non-associated companies 48.0 36.2 11.8 33
Other 0.3 (2.1) 2.4 114
----------------------------------
Total $ 643.0 $ 709.0 ($66.0) (9)
==================================
Billed Electric Energy
Sales (GWH):
Residential 3,095 3,045 50 2
Commercial 2,260 2,238 22 1
Industrial 4,157 3,948 209 5
Governmental 127 121 6 5
----------------------------------
Total retail 9,639 9,352 287 3
Sales for resale
Associated companies 357 557 (200) (36)
Non-associated companies 1,214 801 413 52
----------------------------------
Total 11,210 10,710 500 5
==================================
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 543.3 $ 639.6 ($96.3) (15)
Commercial 378.6 461.9 (83.3) (18)
Industrial 519.7 774.4 (254.7) (33)
Governmental 25.1 29.9 (4.8) (16)
----------------------------------
Total retail 1,466.7 1,905.8 (439.1) (23)
Sales for resale
Associated companies 16.6 69.3 (52.7) (76)
Non-associated companies 111.5 120.8 (9.3) (8)
Other 54.9 33.5 21.4 64
----------------------------------
Total $1,649.7 $ 2,129.4 ($479.7) (23)
==================================
Billed Electric Energy
Sales (GWH):
Residential 7,387 7,188 199 3
Commercial 5,978 5,819 159 3
Industrial 11,877 12,784 (907) (7)
Governmental 355 342 13 4
----------------------------------
Total retail 25,597 26,133 (536) (2)
Sales for resale
Associated companies 486 1,005 (519) (52)
Non-associated companies 3,426 2,496 930 37
----------------------------------
Total 29,509 29,634 (125) -
==================================
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30,
2002 compared with the three months ended September 30, 2001
primarily due to the receipt of the final FERC order in July 2001 in
the System Energy rate proceeding. The accounting entries necessary
to record the effects of the order reduced purchased power expenses
by $67.5 million in 2001, which resulted in a $41.5 million increase
in net income in 2001. The decrease was also due to increased
regulatory charges, and was partially offset by increased electricity
usage in the service territory.
Net income increased for the nine months ended September 30,
2002 compared with the nine months ended September 30, 2001 primarily
due to an increase in the price applied to unbilled revenue,
increased electricity usage in the service territory, and decreases
in taxes other than income taxes and interest charges. The increase
was partially offset by the effect of the final FERC order in the
System Energy rate proceeding in 2001, and increases in other
regulatory charges, other operation and maintenance expenses, and
depreciation and amortization expenses.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 2002 compared with the three and nine
months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($6.9) ($17.3)
Fuel cost recovery 69.0 (253.9)
Sales volume/weather 15.8 31.5
Unbilled revenue (2.4) 75.8
Other revenue (0.4) 3.5
Sales for resale (20.4) (28.2)
----- -------
Total $54.7 ($188.6)
===== =======
Base rate differences
Base rate differences decreased revenues for the three and nine
months ended September 30, 2002 primarily due to decreased rates for
special-rate industrial customers as a result of increased KWH usage
and additional formula rate plan reductions that became effective in
both August 2001 and August 2002.
Fuel cost recovery
Entergy Louisiana is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Louisiana's
financial statements such that these costs generally have no net
effect on earnings.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the three months ended
September 30, 2002 due to higher fuel factors resulting from recent
increases in fuel and purchased power expenses. Entergy Louisiana
recovers fuel costs on a two-month lag.
Fuel cost recovery revenues decreased for the nine months ended
September 30, 2002 due to lower fuel factors resulting from decreases
in the market price of natural gas and purchased power.
Sales volume/weather
Higher electric sales volume increased revenues for the three
and nine months ended September 30, 2002 due to increased usage of
177 GWH and 413 GWH, respectively, in the residential and commercial
sectors, after adjusting for the weather effect, and increased usage
of 178 GWH and 391 GWH for the three and nine months ended,
respectively, in the industrial sector. The increased usage resulted
in lower effective rates for the industrial sector, which is
reflected in base rate differences.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the nine months ended
September 30, 2002 and 2001 includes the reversal of the estimates
for December 2001 and December 2000, respectively. The increase in
unbilled revenue for the nine months ended September 30, 2002
compared to the nine months ended September 30, 2001 is due to the
effect on the unbilled calculation for the 2001 period of higher
unbilled revenue in December 2000 caused by higher fuel rates and
volume/weather.
Sales for resale
Sales for resale decreased for the three and nine months ended
September 30, 2002 primarily due to a decrease in volume to adjoining
utility systems and affiliated customers.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three
months ended September 30, 2002 primarily due to:
o the reduction of $67.5 million in purchased power expenses in
September 2001 as a result of the FERC-ordered refund from System
Energy;
o an increase in demand; and
o a slight increase in the market price of natural gas.
Fuel and purchased power expenses decreased for the nine months
ended September 30, 2002 primarily due to a decrease in the market
prices of natural gas and purchased power, partially offset by the
effects of the FERC-ordered refund from System Energy in September
2001.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance
Other operation and maintenance expenses increased for the nine
months ended September 30, 2002 primarily due to:
o an increase in maintenance expense at certain fossil plants of
$5.9 million;
o an increase in employee pension and benefits expense of $5.3
million;
o an increase in outside contract services of $1.6 million;
o an increase in corrective maintenance of overhead lines of $1.5
million;
o an increase in transmission expenses of $1.4 million; and
o lower nuclear insurance refunds of $1.3 million.
Taxes other than income taxes
Taxes other than income taxes decreased for the nine months
ended September 30, 2002 primarily due to franchise tax adjustments.
As a result of a favorable court decision, Entergy Louisiana expects
to receive a refund for certain franchise taxes previously expensed
and paid under protest.
Depreciation and amortization
Depreciation and amortization expenses increased for the three
and nine months ended September 30, 2002 primarily due to revisions
made to the useful lives of certain intangible plant assets to more
appropriately reflect their actual lives, which lowered expense in
2001 in accordance with regulatory treatment.
Other regulatory charges (credits) - net
Other regulatory charges increased for the three and nine
months ended September 30, 2002 primarily due to the deferral in
2001 of capacity charges associated with power purchases for the
summers of 2000 and 2001 and the amortization of these capacity
charges in 2002. The amortization of the summer 2000 capacity
charges ended in July 2002. The amortization of the capacity
charges for the summer 2001 began in August 2002 and will occur
through July 2003. Refer to Note 2 to the financial statements for
further discussion of deferred capacity charges.
Other
Other income
Interest income increased for the nine months ended September
30, 2002 primarily due to the interest component of the expected
franchise tax refund discussed above.
Interest and other charges
Interest on long-term debt decreased for the nine months ended
September 30, 2002 due to the refinancing and net redemption of First
Mortgage Bonds in the amounts of $18.7 million in 2001 and $119.4
million in 2002.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other interest decreased for the three and nine months ended
September 30, 2002 primarily due to:
o interest accrued in 2001 on reserves provided for fuel-related
refunds that were made in the summer of 2001;
o adjustments to interest expense previously recorded on franchise
tax accruals; and
o interest accrued in 2001 on the deferred fuel balance.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 40.5% and 39.3%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 39.0% and 40.1%, respectively.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $528,052 $473,342 $1,381,404 $1,570,040
-------- -------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 125,878 93,989 274,568 518,458
Purchased power 138,548 69,841 340,210 337,831
Nuclear refueling outage expenses 2,745 3,050 8,757 9,574
Other operation and maintenance 77,651 76,131 237,309 217,214
Decommissioning 2,606 2,606 7,817 7,818
Taxes other than income taxes 20,650 20,314 44,629 57,031
Depreciation and amortization 46,268 44,016 137,410 129,460
Other regulatory charges (credits) - net 4,869 (29,133) 11,499 (28,053)
-------- -------- ---------- ----------
TOTAL 419,215 280,814 1,062,199 1,249,333
-------- -------- ---------- ----------
OPERATING INCOME 108,837 192,528 319,205 320,707
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 1,327 1,301 3,760 3,462
Gain on sale of assets - - - 152
Interest and dividend income 308 1,277 7,126 5,411
Miscellaneous - net (491) (613) (2,111) (2,067)
-------- -------- ---------- ----------
TOTAL 1,144 1,965 8,775 6,958
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 24,948 24,176 70,203 73,366
Other interest - net 338 2,368 1,017 9,455
Distributions on preferred securities of subsidiary 1,575 1,575 4,725 4,725
Allowance for borrowed funds used during construction (967) (987) (2,834) (2,619)
-------- -------- ---------- ----------
TOTAL 25,894 27,132 73,111 84,927
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 84,087 167,361 254,869 242,738
Income taxes 34,024 65,846 99,466 97,329
-------- -------- ---------- ----------
NET INCOME 50,063 101,515 155,403 145,409
Preferred dividend requirements and other 1,678 1,061 5,035 5,818
-------- -------- ---------- ----------
EARNINGS APPLICAPLE TO
COMMON STOCK $48,385 $100,454 $150,368 $139,591
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $155,403 $145,409
Noncash items included in net income:
Reserve for regulatory adjustments - (11,456)
Other regulatory charges (credits) - net 11,499 (28,053)
Depreciation, amortization, and decommissioning 145,227 137,278
Deferred income taxes and investment tax credits 36,097 (55,380)
Allowance for equity funds used during construction (3,760) (3,462)
Gain on sale of assets - (152)
Changes in working capital:
Receivables (74,583) (21,389)
Accounts payable 148,727 (97,696)
Taxes accrued 100,529 180,533
Interest accrued (6,175) (8,139)
Deferred fuel costs (88,819) 127,247
Other working capital accounts (20,319) (68,284)
Provision for estimated losses and reserves 1,203 1,499
Changes in other regulatory assets 12,078 (31,841)
Other (22,061) 46,173
-------- --------
Net cash flow provided by operating activities 395,046 312,287
-------- --------
INVESTING ACTIVITIES
Construction expenditures (142,060) (146,418)
Allowance for equity funds used during construction 3,760 3,462
Nuclear fuel purchases (50,473) -
Proceeds from sale/leaseback of nuclear fuel 50,473 -
Decommissioning trust contributions and realized
change in trust assets (12,545) (12,638)
Changes in other temporary investments - net 6,152 (9,214)
-------- --------
Net cash flow used in investing activities (144,693) (164,808)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 144,679 -
Retirement of long-term debt (285,358) (35,088)
Redemption of preferred stock - (35,000)
Changes in short-term borrowings 15,000 -
Dividends paid:
Common stock (129,300) (85,500)
Preferred stock (5,035) (7,369)
-------- --------
Net cash flow used in financing activities (260,014) (162,957)
-------- --------
Net decrease in cash and cash equivalents (9,661) (15,478)
Cash and cash equivalents at beginning of period 42,408 43,959
-------- --------
Cash and cash equivalents at end of period $32,747 $28,481
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $78,238 $91,077
Income taxes ($9,983) $550
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($9,270) ($4,792)
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $32,747 $28,768
Temporary cash investments - at cost,
which approximates market - 13,640
---------- ----------
Total cash and cash equivalents 32,747 42,408
---------- ----------
Other temporary investments - 6,152
Accounts receivable:
Customer 106,234 48,640
Allowance for doubtful accounts (1,771) (1,771)
Associated companies 15,251 9,090
Other 11,693 47,965
Accrued unbilled revenues 118,300 71,200
---------- ----------
Total accounts receivable 249,707 175,124
---------- ----------
Deferred fuel costs 21,326 -
Accumulated deferred income taxes - 42,566
Materials and supplies - at average cost 75,888 77,523
Deferred nuclear refueling outage costs 12,379 4,096
Prepayments and other 19,190 9,008
---------- ----------
TOTAL 411,237 356,877
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 14,230 14,230
Decommissioning trust funds 122,938 119,663
Non-utility property - at cost (less accumulated depreciation) 21,534 21,671
---------- ----------
TOTAL 158,702 155,564
---------- ----------
UTILITY PLANT
Electric 5,535,866 5,456,093
Property under capital lease 239,395 239,395
Construction work in progress 147,843 110,792
Nuclear fuel under capital lease 59,415 70,316
---------- ----------
TOTAL UTILITY PLANT 5,982,519 5,876,596
Less - accumulated depreciation and amortization 2,647,095 2,538,964
---------- ----------
UTILITY PLANT - NET 3,335,424 3,337,632
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 169,367 179,368
Unamortized loss on reacquired debt 26,323 28,341
Other regulatory assets 71,677 73,754
Long-term receivables 1,511 1,515
Other 19,315 16,650
---------- ----------
TOTAL 288,193 299,628
---------- ----------
TOTAL ASSETS $4,193,556 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $198,475 $185,627
Notes payable 15,000 -
Accounts payable:
Associated companies 213,475 73,208
Other 101,920 93,460
Customer deposits 62,942 61,359
Taxes accrued 120,939 20,410
Accumulated deferred income taxes 1,691 -
Interest accrued 28,349 34,524
Deferred fuel costs - 67,493
Obligations under capital leases 34,171 34,171
Other 9,047 14,119
---------- ----------
TOTAL 786,009 584,371
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 768,240 776,610
Accumulated deferred investment tax credits 107,890 111,942
Obligations under capital leases 25,243 36,144
Accumulated provisions 69,725 68,522
Other 71,771 82,780
---------- ----------
TOTAL 1,042,869 1,075,998
---------- ----------
Long-term debt 943,297 1,091,329
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized 250,000,000
shares; issued and outstanding 165,173,180 shares in 2002
and 2001 1,088,900 1,088,900
Capital stock expense and other (1,718) (1,718)
Retained earnings 161,389 140,321
Accumulated other comprehensive income 2,310 -
---------- ----------
TOTAL 1,351,381 1,328,003
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,193,556 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $193,655 $176,156
Add - Earnings applicable to common stock 48,385 $48,385 100,454 $100,454
Deduct:
Dividends declared on common stock 80,700 72,200
Capital stock and other expenses (49) -
-------- --------
Total 80,651 72,200
-------- --------
Retained Earnings - End of period $161,389 $204,410
======== ========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $ - $ -
Net derivative instrument fair value changes
arising during the period 2,310 2,310 - -
-------- ------- -------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes $2,310 $ -
======== ------- ======== --------
Comprehensive Income $50,695 $100,454
======= ========
Nine Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $140,321 $150,319
Add - Earnings applicable to common stock 150,368 $150,368 139,591 $139,591
Deduct - Dividends declared on common stock 129,300 85,500
-------- --------
Retained Earnings - End of period $161,389 $204,410
======== ========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $ - $ -
Net derivative instrument fair value changes
arising during the period 2,310 2,310 - -
-------- -------- -------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes $2,310 $ -
======== -------- ======== --------
Comprehensive Income $152,678 $139,591
======== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 220.9 $ 192.8 $ 28.1 15
Commercial 119.7 106.0 13.7 13
Industrial 179.7 149.7 30.0 20
Governmental 9.6 8.7 0.9 10
---------------------------------
Total retail 529.9 457.2 72.7 16
Sales for resale
Associated companies (7.2) 9.2 (16.4) (179)
Non-associated companies 3.8 7.8 (4.0) (51)
Other 1.6 (0.8) 2.4 300
---------------------------------
Total $ 528.1 $ 473.4 $ 54.7 12
=================================
Billed Electric Energy
Sales (GWH):
Residential 2,868 2,749 119 4
Commercial 1,622 1,572 50 3
Industrial 3,853 3,675 178 5
Governmental 130 132 (2) (2)
---------------------------------
Total retail 8,473 8,128 345 4
Sales for resale
Associated companies (125) 108 (233) (216)
Non-associated companies 16 114 (98) (86)
---------------------------------
Total 8,364 8,350 14 -
=================================
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 490.9 $ 541.1 ($50.2) (9)
Commercial 301.1 342.0 (40.9) (12)
Industrial 469.4 613.1 (143.7) (23)
Governmental 26.4 31.5 (5.1) (16)
---------------------------------
Total retail 1,287.8 1,527.7 (239.9) (16)
Sales for resale
Associated companies 1.9 20.6 (18.7) (91)
Non-associated companies 10.5 20.0 (9.5) (48)
Other 81.2 1.7 79.5 4,676
---------------------------------
Total $1,381.4 $ 1,570.0 ($188.6) (12)
=================================
Billed Electric Energy
Sales (GWH):
Residential 6,810 6,532 278 4
Commercial 4,195 4,080 115 3
Industrial 11,223 10,832 391 4
Governmental 380 380 - -
---------------------------------
Total retail 22,608 21,824 784 4
Sales for resale
Associated companies 29 269 (240) (89)
Non-associated companies 108 289 (181) (63)
---------------------------------
Total 22,745 22,382 363 2
=================================
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30,
2002 compared to the three months ended September 30, 2001 primarily
due to increased electricity usage in the service territory,
increased other revenue, decreased other operation and maintenance
expenses, and decreased interest expense, partially offset by
decreased interest income.
Net income increased for the nine months ended September 30,
2002 compared to the nine months ended September 30, 2001 primarily
due to an increase in the sales volume of unbilled revenue, increased
other revenue, formula rate plan increases, increased other
regulatory credits, and decreased interest expense. The increase was
partially offset by increased other operation and maintenance
expenses, increased depreciation and amortization expenses, and
decreased interest income.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 2002 compared with the three and nine
months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($1.2) $2.5
Grand Gulf rate rider (5.4) (16.9)
Fuel cost recovery (35.7) (59.7)
Sales volume/weather 3.9 2.2
Unbilled revenue 1.7 5.1
Other revenue 2.6 8.4
Sales for resale (3.7) (56.2)
------ -------
Total ($37.8) ($114.6)
====== =======
Base rate differences
Base rate differences increased revenues for the nine months
ended September 30, 2002 primarily due to formula rate plan increases
that became effective in May 2001 and May 2002. The increase was
partially offset by the effect of block rates on residential and
commercial customers as a result of increased KWH usage.
Grand Gulf rate rider
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Grand Gulf rate rider revenue decreased for the three and nine
months ended September 30, 2002 as a result of a lower rate that
became effective in October 2001.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery
Entergy Mississippi is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy Mississippi's financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the three and nine
months ended September 30, 2002 primarily due to lower fuel factors
resulting from the decrease in the market price of purchased power.
The decrease for the nine months ended was also due to the decrease
in the market price of natural gas.
Sales volume/weather
Higher electric sales volume increased revenues for the three
months ended September 30, 2002 due to increased usage of 136 GWH in
the residential and commercial sectors, after adjusting for the
weather effect.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and reversed the
following month. Unbilled revenue for the nine months ended
September 30, 2002 and 2001 includes the reversal of the estimates
for December 2001 and December 2000, respectively. The increase in
unbilled revenue for the nine months ended September 30, 2002
compared to the nine months ended September 30, 2001 is due to the
effect on the unbilled calculation for the 2001 period of higher
unbilled revenue in December 2000 caused by volume/weather.
Other revenue
Other revenue increased for the three and nine months ended
September 30, 2002 primarily due to Entergy Mississippi beginning in
October 2001 to charge late fees to its customers.
Sales for resale
Sales for resale decreased for the nine months ended September
30, 2002 primarily due to a decrease in sales volume to affiliated
customers, coupled with a decrease in the average price of energy.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three months
ended September 30, 2002 primarily due to:
o a decrease in the average market price of purchased power;
o a decrease in demand; and
o a smaller over-recovery of fuel costs.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel and purchased power expenses decreased for the nine months
ended September 30, 2002 primarily due to:
o the displacement of oil generation by lower priced gas
generation. Oil generation was used in 2001 due to significant
increases in the market price of natural gas;
o a decrease in demand; and
o a decrease in the average market price of purchased power.
The decrease was partially offset by a larger over-recovery of fuel
costs, including the effect of increased recoveries approved by the
MPSC in 2000 to recover previous under-recoveries.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
months ended September 30, 2002 primarily due to a decrease in
property damage expense of $2.1 million.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2002 primarily due to:
o an increase of $4.8 million in plant maintenance expense due to
an unscheduled outage at a fossil plant in 2002;
o an increase in outside contract services of $1.1 million;
o an increase in employee pension and benefits expense of $1.7
million;
o an insurance reimbursement of $1.4 million received in 2001 in
connection with a turbine generator failure; and
o an increase in injuries and damages expense of $1.3 million.
The increase in other operation and maintenance expenses was
partially offset by a decrease in property damage expense of $5.6
million.
Depreciation and amortization
Depreciation and amortization expenses increased for the nine
months ended September 30, 2002 primarily due to revisions made to
the useful lives of certain intangible plant assets to more
appropriately reflect their actual lives, which lowered expense in
2001 in accordance with regulatory treatment.
Other regulatory charges (credits) - net
Other regulatory charges decreased for the three months ended
September 30, 2002 primarily due to a smaller over-recovery of Grand
Gulf 1-related costs in 2002 compared to the same period in 2001.
The decrease was partially offset by the settlement of the System
Energy rate proceeding in 2001 that ceased the deferral of costs
associated with purchases from System Energy. See Note 2 to the
financial statements in the Form 10K for further discussion of the
System Energy rate proceeding and FERC order.
Other regulatory credits increased for the nine months ended
September 30, 2002 primarily due to an under-recovery of Grand Gulf 1-
related costs in 2002 versus an over-recovery in 2001. The increase
was substantially offset by the settlement of the System Energy rate
proceeding in 2001 that ceased the deferral of costs associated with
purchases from System Energy.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income
Interest income decreased for the three and nine months ended
September 30, 2002 primarily due to interest recorded in 2001 on the
deferred System Energy costs that Entergy Mississippi was not
recovering through rates. The deferral of these costs ceased in the
third quarter of 2001 as a result of the final FERC order.
Interest and other charges
Interest on long-term debt decreased for the three months ended
September 30, 2002 primarily due to the retirement of $65 million of
6.875% Series First Mortgage Bonds in June 2002.
Interest and other charges decreased for the nine months ended
September 30, 2002 primarily due to lower interest expense due to the
retirement of $65 million of 6.875% Series First Mortgage Bonds in
June 2002.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 37.9% and 36.7%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 36.9% and 35.3%, respectively.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $316,745 $354,518 $770,178 $884,824
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 127,647 145,168 271,345 350,720
Purchased power 72,699 104,352 222,181 282,190
Other operation and maintenance 36,900 40,230 118,564 112,951
Taxes other than income taxes 13,430 12,962 36,937 36,027
Depreciation and amortization 14,101 12,751 41,352 36,966
Other regulatory charges (credits) - net 1,517 4,753 (16,832) (14,502)
-------- -------- -------- --------
TOTAL 266,294 320,216 673,547 804,352
-------- -------- -------- --------
OPERATING INCOME 50,451 34,302 96,631 80,472
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 899 784 3,044 1,799
Interest and dividend income 777 7,264 3,004 16,516
Miscellaneous - net (363) (639) (1,466) (1,744)
-------- -------- -------- --------
TOTAL 1,313 7,409 4,582 16,571
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 9,545 11,745 30,757 35,048
Other interest - net 859 1,039 2,215 3,351
Allowance for borrowed funds used during construction (828) (685) (2,748) (1,548)
-------- -------- -------- --------
TOTAL 9,576 12,099 30,224 36,851
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 42,188 29,612 70,989 60,192
Income taxes 15,975 10,864 26,195 21,236
-------- -------- -------- --------
NET INCOME 26,213 18,748 44,794 38,956
Preferred dividend requirements and other 842 555 2,527 2,240
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $25,371 $18,193 $42,267 $36,716
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $44,794 $38,956
Noncash items included in net income:
Other regulatory credits - net (16,832) (14,502)
Depreciation and amortization 41,352 36,966
Deferred income taxes and investment tax credits (25,149) (66,707)
Allowance for equity funds used during construction (3,044) (1,799)
Changes in working capital:
Receivables (31,595) (201,114)
Fuel inventory (261) (2,042)
Accounts payable 13,488 (14,127)
Taxes accrued 43,330 81,226
Interest accrued (1,351) 3,370
Deferred fuel costs 63,091 23,844
Other working capital accounts (8,446) 16,765
Provision for estimated losses and reserves 924 (4,100)
Changes in other regulatory assets (3,492) 135,154
Other 20,487 31,239
-------- --------
Net cash flow provided by operating activities 137,296 63,129
-------- --------
INVESTING ACTIVITIES
Construction expenditures (110,707) (106,273)
Allowance for equity funds used during construction 3,044 1,799
Changes in other temporary investments - net 18,566 -
-------- --------
Net cash flow used in investing activities (89,097) (104,474)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 69,620
Retirement of long-term debt (65,000) -
Dividends paid:
Common stock (19,300) (17,300)
Preferred stock (2,527) (2,527)
-------- --------
Net cash flow provided by (used in) financing activities (86,827) 49,793
-------- --------
Net increase (decrease) in cash and cash equivalents (38,628) 8,448
Cash and cash equivalents at beginning of period 54,048 5,113
-------- --------
Cash and cash equivalents at end of period $15,420 $13,561
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $32,344 $33,114
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $15,420 $12,883
Temporary cash investments - at cost,
which approximates market - 41,165
---------- ----------
Total cash and cash equivalents 15,420 54,048
---------- ----------
Other temporary investments - 18,566
Accounts receivable:
Customer 72,905 50,370
Allowance for doubtful accounts (1,044) (1,044)
Associated companies 17,272 14,201
Other 5,281 2,892
Accrued unbilled revenues 33,900 30,300
---------- ----------
Total accounts receivable 128,314 96,719
---------- ----------
Deferred fuel costs 43,067 106,158
Accumulated deferred income taxes 5,696 -
Fuel inventory - at average cost 5,085 4,824
Materials and supplies - at average cost 18,742 16,896
Prepayments and other 3,160 8,521
---------- ----------
TOTAL 219,484 305,732
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,626 6,723
---------- ----------
TOTAL 12,157 12,254
---------- ----------
UTILITY PLANT
Electric 2,031,545 1,939,182
Property under capital lease 184 211
Construction work in progress 114,698 110,450
---------- ----------
TOTAL UTILITY PLANT 2,146,427 2,049,843
Less - accumulated depreciation and amortization 768,413 741,892
---------- ----------
UTILITY PLANT - NET 1,378,014 1,307,951
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 23,688 22,387
Unamortized loss on reacquired debt 13,044 13,925
Other regulatory assets 15,694 13,503
Other 5,991 7,274
---------- ----------
TOTAL 58,417 57,089
---------- ----------
TOTAL ASSETS $1,668,072 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $190,000 $65,000
Accounts payable:
Associated companies 53,534 45,554
Other 32,891 27,383
Customer deposits 32,309 29,421
Taxes accrued 74,814 31,484
Accumulated deferred income taxes - 19,277
Interest accrued 16,316 17,667
Obligations under capital leases 38 36
System Energy refund - 14,836
Other 1,951 1,964
---------- ----------
TOTAL 401,853 252,622
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 270,779 266,498
Accumulated deferred investment tax credits 16,850 17,908
Obligations under capital leases 146 175
Accumulated provisions 8,551 7,627
Other 36,150 37,678
---------- ----------
TOTAL 332,476 329,886
---------- ----------
Long-term debt 400,020 589,762
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 50,381 50,381
Common stock, no par value, authorized 15,000,000
shares; issued and outstanding 8,666,357 shares in 2002
and 2001 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 284,075 261,108
---------- ----------
TOTAL 533,723 510,756
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,668,072 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 133.7 $ 147.6 ($13.9) (9)
Commercial 94.4 106.5 (12.1) (11)
Industrial 44.7 55.8 (11.1) (20)
Governmental 7.8 9.1 (1.3) (14)
-------------------------------
Total retail 280.6 319.0 (38.4) (12)
Sales for resale
Associated companies 25.9 26.9 (1.0) (4)
Non-associated companies 5.1 7.8 (2.7) (35)
Other 5.1 0.8 4.3 538
-------------------------------
Total $ 316.7 $ 354.5 ($37.8) (11)
===============================
Billed Electric Energy
Sales (GWH):
Residential 1,748 1,655 93 6
Commercial 1,358 1,300 58 4
Industrial 774 794 (20) (3)
Governmental 106 106 - -
-------------------------------
Total retail 3,986 3,855 131 3
Sales for resale
Associated companies 483 423 60 14
Non-associated companies 66 117 (51) (44)
-------------------------------
Total 4,535 4,395 140 3
===============================
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 292.3 $ 317.6 ($25.3) (8)
Commercial 234.6 255.0 (20.4) (8)
Industrial 122.3 146.3 (24.0) (16)
Governmental 21.5 23.7 (2.2) (9)
-------------------------------
Total retail 670.7 742.6 (71.9) (10)
Sales for resale
Associated companies 58.2 109.6 (51.4) (47)
Non-associated companies 12.6 17.4 (4.8) (28)
Other 28.7 15.2 13.5 89
-------------------------------
Total $ 770.2 $ 884.8 ($114.6) (13)
===============================
Billed Electric Energy
Sales (GWH):
Residential 3,960 3,907 53 1
Commercial 3,368 3,299 69 2
Industrial 2,151 2,279 (128) (6)
Governmental 285 289 (4) (1)
-------------------------------
Total retail 9,764 9,774 (10) -
Sales for resale
Associated companies 1,091 1,755 (664) (38)
Non-associated companies 163 225 (62) (28)
-------------------------------
Total 11,018 11,754 (736) (6)
===============================
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30,
2002 primarily due to an increase in the price applied to unbilled
revenue, increased electricity usage in the service territory,
decreased other operation and maintenance expenses, and decreased
other regulatory charges, slightly offset by decreased interest
income.
Net income increased for the nine months ended September 30,
2002 primarily due to increased electricity usage in the service
territory and an increase in the price applied to unbilled revenue.
The increase was partially offset by accruals for potential rate
actions and refunds, decreased interest income, and decreased net gas
revenue.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and
nine months ended September 30, 2002 compared with the three and nine
months ended September 30, 2001 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($1.1) ($4.6)
Fuel cost recovery (17.6) (93.1)
Sales volume/weather 2.8 6.5
Unbilled revenue 4.6 3.5
Other revenue 0.3 (5.8)
Sales for resale 0.9 (7.2)
------ -------
Total ($10.1) ($100.7)
====== =======
Fuel cost recovery
Entergy New Orleans is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy New Orleans' financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the three and nine
months ended September 30, 2002 primarily due to lower fuel factors
resulting from decreases in the market prices of natural gas and
purchased power.
Sales volume/weather
Higher electric sales volume increased revenues for the three
and nine months ended September 30, 2002 primarily due to increased
usage of 63 GWH and 136 GWH, respectively, in the residential and
commercial sectors after adjusting for the weather effect.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended
September 30, 2002 and 2001 includes the reversal of the estimates
for June 2002 and June 2001, respectively. The increase for the
three months ended September 30, 2002 compared to the three months
ended September 30, 2001 is due to more favorable volume in September
2002 and the effect on the unbilled calculation for the 2001 period
of higher unbilled revenue in June 2001 caused by higher fuel rates.
Unbilled revenue for the nine months ended September 30, 2002
and 2001 includes the reversal of the estimates for December 2001 and
December 2000, respectively. The increase in unbilled revenue for
the nine months ended September 30, 2002 compared to the nine months
ended September 30, 2001 is due to more favorable volume in September
2002 and the effect on the unbilled calculation for the 2001 period
of higher unbilled revenue in December 2000 caused by higher fuel
rates.
Other revenue
Other revenue decreased for the nine months ended September 30,
2002 primarily due to accruals for potential rate actions and
refunds.
Sales for resale
Sales for resale decreased for the nine months ended September
30, 2002 primarily due to a decrease in the average price of resale
energy coupled with a decrease in net generation resulting in less
energy available for resale.
Gas operating revenues
Gas operating revenues decreased for the nine months ended
September 30, 2002 primarily due to the decreased market price of
natural gas coupled with decreased sales volume.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three months
ended September 30, 2002 primarily due to the decreased market price
of purchased power, partially offset by a slight increase in the
price of natural gas.
Fuel and purchased power expenses decreased for the nine months
ended September 30, 2002 primarily due to the decreased market
prices of natural gas and purchased power.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
months ended September 30, 2002 primarily due to decreases in:
o plant maintenance expense of $1.7 million;
o maintenance overhead line expense of $0.9 million due to
decreased vegetation work; and
o uncollectible accounts expense for miscellaneous accounts
receivable of $1.0 million.
The decreases were partially offset by an increase in rate
proceedings costs of $1.0 million.
Taxes other than income taxes
Taxes other than income taxes decreased for the nine months
ended September 30, 2002 primarily due to a decrease in local
franchise taxes as a result of lower retail revenue.
Other regulatory charges - net
Other regulatory charges decreased for the three months ended
September 30, 2002 primarily due to the completion of the Grand Gulf
1 Rate Deferral Plan in September 2001.
Other
Other income
Other income decreased for the three and nine months ended
September 30, 2002 primarily due to interest recorded in the first
half of 2001 on deferred System Energy costs that Entergy New Orleans
was not recovering through rates. The deferral of these costs ceased
in the third quarter of 2001 as a result of a final FERC order. See
Note 2 to the financial statements in the Form 10-K for further
discussion of the System Energy rate proceeding and FERC order.
Interest and other charges
Other interest expense increased for the nine months ended
September 30, 2002 primarily due to interest recorded for potential
rate actions and refunds.
Income taxes
The effective income tax rate for the three months ended
September 30, 2002 was 41.0%. There was no meaningful effective
income tax rate for the three months ended September 30, 2001 as a
result of the net loss generated, while book and tax timing
differences caused income tax expense for the period. The effective
income tax rate for the nine months ended September 30, 2002 and 2001
were 45.1% and 46.5%, respectively.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $144,373 $154,462 $322,061 $422,751
Natural gas 13,044 12,675 59,725 108,710
-------- -------- -------- --------
TOTAL 157,417 167,137 381,786 531,461
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 61,002 46,139 111,470 206,826
Purchased power 37,811 74,067 118,632 181,393
Other operation and maintenance 22,224 24,575 67,336 67,151
Taxes other than income taxes 11,902 12,424 30,329 37,418
Depreciation and amortization 7,088 6,372 20,822 18,879
Other regulatory charges (credits) - net (1,893) 907 2,438 3,550
-------- -------- -------- --------
TOTAL 138,134 164,484 351,027 515,217
-------- -------- -------- --------
OPERATING INCOME 19,283 2,653 30,759 16,244
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 529 535 1,421 1,386
Interest and dividend income 58 1,875 421 4,036
Miscellaneous - net (195) (314) (1,031) (1,461)
-------- -------- -------- --------
TOTAL 392 2,096 811 3,961
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 4,469 4,661 13,405 13,229
Other interest - net (26) 734 3,974 1,545
Allowance for borrowed funds used during construction (539) (473) (1,406) (1,179)
-------- -------- -------- --------
TOTAL 3,904 4,922 15,973 13,595
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 15,771 (173) 15,597 6,610
Income taxes 6,464 135 7,031 3,073
-------- -------- -------- --------
NET INCOME (LOSS) 9,307 (308) 8,566 3,537
Preferred dividend requirements and other 241 241 724 724
-------- -------- -------- --------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $9,066 ($549) $7,842 $2,813
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $8,566 $3,537
Noncash items included in net income:
Other regulatory charges - net 2,438 3,550
Depreciation and amortization 20,822 18,879
Deferred income taxes and investment tax credits (2,295) (43,474)
Allowance for equity funds used during construction (1,421) (1,386)
Changes in working capital:
Receivables (5,998) (90,495)
Fuel inventory (265) 1,148
Accounts payable (585) (21,707)
Taxes accrued - 44,901
Interest accrued (4,004) (3,145)
Deferred fuel costs 1,854 30,616
Other working capital accounts (24,275) 37,000
Provision for estimated losses and reserves (1,268) (2,234)
Changes in other regulatory assets 12 33,334
Other 4,488 6,630
------- -------
Net cash flow provided by (used in) operating activities (1,931) 17,154
------- -------
INVESTING ACTIVITIES
Construction expenditures (42,863) (44,286)
Allowance for equity funds used during construction 1,421 1,386
Changes in other temporary investments - net 14,859 (100)
------- -------
Net cash flow used in investing activities (26,583) (43,000)
------- -------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 29,763
Dividends paid:
Common stock (700) (800)
Preferred stock (724) (724)
------- -------
Net cash flow provided by (used in) financing activities (1,424) 28,239
------- -------
Net increase (decrease) in cash and cash equivalents (29,938) 2,393
Cash and cash equivalents at beginning of period 38,184 6,302
------- -------
Cash and cash equivalents at end of period $8,246 $8,695
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $20,987 $17,536
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $8,246 $5,237
Temporary cash investments - at cost,
which approximates market - 32,947
-------- --------
Total cash and cash equivalents 8,246 38,184
-------- --------
Other temporary investments - 14,859
Accounts receivable:
Customer 42,147 33,827
Allowance for doubtful accounts (2,234) (2,234)
Associated companies 480 10,527
Other 5,698 4,511
Accrued unbilled revenues 26,565 20,027
-------- --------
Total accounts receivable 72,656 66,658
-------- --------
Accumulated deferred income taxes 5,736 4,882
Fuel inventory - at average cost 3,346 3,081
Materials and supplies - at average cost 7,816 8,273
Prepayments and other 25,964 26,239
-------- --------
TOTAL 123,764 162,176
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 619,200 597,575
Natural gas 147,628 142,741
Construction work in progress 52,579 43,166
-------- --------
TOTAL UTILITY PLANT 819,407 783,482
Less - accumulated depreciation and amortization 408,991 396,535
-------- --------
UTILITY PLANT - NET 410,416 386,947
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Unamortized loss on reacquired debt 602 761
Other regulatory assets 10,831 10,843
Other 1,944 2,051
-------- --------
TOTAL 13,377 13,655
-------- --------
TOTAL ASSETS $550,816 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $25,000 $ -
Accounts payable:
Associated companies 14,762 18,199
Other 26,492 23,640
Customer deposits 19,226 18,931
Interest accrued 3,028 7,032
Deferred fuel costs 12,050 10,196
System Energy Refund - 33,614
Other 10,111 1,799
-------- --------
TOTAL 110,669 113,411
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 18,094 25,326
Accumulated deferred investment tax credits 5,006 5,361
SFAS 109 regulatory liability - net 27,745 19,868
Accumulated provisions 4,534 5,802
Other 22,415 16,735
-------- --------
TOTAL 77,794 73,092
-------- --------
Long-term debt 204,165 229,097
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 19,780 19,780
Common stock, $4 par value, authorized 10,000,000
shares; issued and outstanding 8,435,900 shares in
2002 and 2001 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings 67,762 60,619
Accumulated other comprehensive income 608 -
-------- --------
TOTAL 158,188 150,437
-------- --------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $550,816 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME (LOSS)
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $59,396 $67,940
Add - Earnings (Loss) applicable to common stock 9,066 $9,066 (549) ($549)
Deduct:
Dividends declared on common stock 700 800
Capital stock and other expenses - (1)
------- -------
Total 700 799
------- -------
Retained Earnings - End of period $67,762 $66,592
======= =======
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $ - $ -
Net derivative instrument fair value changes
arising during the period 608 608 - -
------- ------ ------- ------
Balance at end of period:
Accumulated derivative instrument fair value changes $608 $ -
======= ------ ======= ------
Comprehensive Income (Loss) $9,674 ($549)
====== ======
Nine Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $60,619 $64,579
Add - Earnings applicable to common stock 7,842 $7,842 2,813 $2,813
Deduct:
Dividends declared on common stock 700 800
Capital stock and other expenses (1) -
------- -------
Total 699 800
------- -------
Retained Earnings - End of period $67,762 $66,592
======= =======
ACCUMULATED OTHER COMPREHENSIVE
INCOME (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes $ - $ -
Net derivative instrument fair value changes
arising during the period 608 608 - -
------- ------ ------- ------
Balance at end of period:
Accumulated derivative instrument fair value changes $608 $ -
======= ------ ======= ------
Comprehensive Income $8,450 $2,813
====== ======
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 65.3 $ 70.2 ($4.9) (7)
Commercial 47.5 53.8 (6.3) (12)
Industrial 7.7 8.9 (1.2) (13)
Governmental 20.0 23.5 (3.5) (15)
--------------------------------
Total retail 140.5 156.4 (15.9) (10)
Sales for resale
Associated companies 2.0 0.7 1.3 186
Non-associated companies 0.9 1.3 (0.4) (31)
--------------------------------
Other 1.0 (3.9) 4.9 126
Total $ 144.4 $ 154.5 ($10.1) (7)
================================
Billed Electric Energy
Sales (GWH):
Residential 762 721 41 6
Commercial 651 633 18 3
Industrial 118 117 1 1
Governmental 298 293 5 2
--------------------------------
Total retail 1,829 1,764 65 4
Sales for resale
Associated companies 46 9 37 411
Non-associated companies 7 21 (14) (67)
--------------------------------
Total 1,882 1,794 88 5
================================
Nine Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 129.5 $ 157.0 ($27.5) (18)
Commercial 113.0 150.7 (37.7) (25)
Industrial 17.6 25.7 (8.1) (32)
Governmental 47.4 65.3 (17.9) (27)
--------------------------------
Total retail 307.5 398.7 (91.2) (23)
Sales for resale
Associated companies 3.2 9.3 (6.1) (66)
Non-associated companies 1.9 3.0 (1.1) (37)
Other 9.5 11.8 (2.3) (19)
--------------------------------
Total $ 322.1 $ 422.8 ($100.7) (24)
================================
Billed Electric Energy
Sales (GWH):
Residential 1,669 1,576 93 6
Commercial 1,710 1,665 45 3
Industrial 303 313 (10) (3)
Governmental 788 768 20 3
--------------------------------
Total retail 4,470 4,322 148 3
Sales for resale
Associated companies 77 99 (22) (22)
Non-associated companies 27 48 (21) (44)
--------------------------------
Total 4,574 4,469 105 2
================================
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and nine months ended
September 30, 2002 compared with the three and nine months ended
September 30, 2001 primarily due to the effects in 2001 of the final
resolution of System Energy's 1995 rate proceeding.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt.
Operating revenues increased for the three and nine months ended
September 30, 2002 primarily due to the absence of the provision for
rate refund in 2002 due to the final resolution of System Energy's
1995 rate proceeding in 2001. For the nine months ended September
30, 2002, the increase was partially offset by a decrease in
operating revenues as a result of the suspension of the GGART for
Entergy Arkansas in July 2001. The net income impact of the
suspended tariff is substantially offset in other regulatory charges.
See further discussion of the System Energy rate proceeding and the
GGART in Note 2 to the financial statements in the Form 10-K.
Expenses
Nuclear refueling outage expenses
Nuclear refueling outage expenses decreased for the nine months
ended September 30, 2002 due to lower monthly amortization of outage
expenses resulting from lower expenses incurred during the April/May
2001 refueling and maintenance outage compared to the previous
outage.
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended September 30, 2002 primarily due to:
o an increase in payroll accruals of $1.2 million;
o an increase in expense of $0.8 million to reflect the current
estimate of the liability for the future disposal of low-level
radioactive waste materials; and
o an increase in employee pension and benefits expense of $0.7
million.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2002 primarily due to:
o lower nuclear insurance refunds of $1.7 million;
o an increase in outside services employed of $1.5 million;
o an increase in payroll accruals of $1.3 million; and
o an increase in employee pension and benefits expense of $1.3
million.
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Decommissioning
Decommissioning expenses increased for the three and nine
months ended September 30, 2002 primarily due to the effects in 2001
of the final FERC order addressing System Energy's rate proceeding.
Depreciation and amortization
Depreciation and amortization expenses increased for the three
and nine months ended September 30, 2002 primarily due to the
effects in 2001 of the final FERC order addressing System Energy's
rate proceeding.
Other regulatory charges - net
Other regulatory charges decreased for the nine months ended
September 30, 2002 primarily due to the suspension of the GGART for
Entergy Arkansas in July 2001.
Other
Other income
Interest income decreased for the three and nine months ended
September 30, 2002 due to interest recognized in 2001 on
decommissioning funds resulting from the final FERC order addressing
System Energy's rate proceeding combined with a decrease in interest
earned on System Energy's investments in the money pool due to lower
advances to the money pool in 2002 compared to the same period in
2001.
Interest and other charges
Interest on long-term debt increased for the three months ended
September 30, 2002 primarily due to an increase in interest expense
related to the sale-leaseback of Grand Gulf 1.
Interest on long-term debt decreased for the nine months ended
September 30, 2002 primarily due to the retirement of $135 million of
long-term debt in August 2001, partially offset by an increase in
interest expense related to the sale-leaseback of Grand Gulf 1.
Other interest expense decreased for the three and nine months
ended September 30, 2002 due to interest recorded in 2001 on System
Energy's reserve for rate refund. The refund was made in December
2001.
Income taxes
The effective income tax rates for the three months ended
September 30, 2002 and 2001 were 43.0% and 0%, respectively. The
effective income tax rates for the nine months ended September 30,
2002 and 2001 were 42.2% and 30.6%, respectively. The increases in
the effective tax rates in 2002 were due to the effects of the final
resolution of System Energy's 1995 rate proceeding on the 2001
effective tax rates.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $156,930 $66,276 $442,152 $370,343
-------- ------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 7,839 9,092 26,805 26,985
Nuclear refueling outage expenses 2,617 2,627 7,855 10,648
Other operation and maintenance 27,253 23,927 69,508 61,735
Decommissioning 4,013 (26,738) 12,041 (17,266)
Taxes other than income taxes 7,082 6,177 20,659 19,345
Depreciation and amortization 29,502 (44,435) 81,544 12,273
Other regulatory charges - net 13,610 11,720 39,664 50,842
-------- ------- -------- --------
TOTAL 91,916 (17,630) 258,076 164,562
-------- ------- -------- --------
OPERATING INCOME 65,014 83,906 184,076 205,781
-------- ------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 741 544 1,991 1,298
Interest and dividend income 889 13,612 1,978 23,455
Miscellaneous - net (45) (17) (435) (65)
-------- ------- -------- --------
TOTAL 1,585 14,139 3,534 24,688
-------- ------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 21,223 16,032 51,874 53,799
Other interest - net 662 44,728 2,165 62,364
Allowance for borrowed funds used during construction (261) (251) (740) (612)
-------- ------- -------- --------
TOTAL 21,624 60,509 53,299 115,551
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES 44,975 37,536 134,311 114,918
Income taxes 19,335 (257) 56,694 35,125
-------- ------- -------- --------
NET INCOME $25,640 $37,793 $77,617 $79,793
======== ======= ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $77,617 $79,793
Noncash items included in net income:
Reserve for regulatory adjustments - (322,368)
Other regulatory charges - net 39,664 50,842
Depreciation, amortization, and decommissioning 93,585 (4,993)
Deferred income taxes and investment tax credits (30,746) 115,981
Allowance for equity funds used during construction (1,991) (1,298)
Changes in working capital:
Receivables (89,802) 10,421
Accounts payable 20,718 516,329
Taxes accrued 82,240 (68,530)
Interest accrued (20,640) (15,704)
Other working capital accounts 4,645 (30,088)
Provision for estimated losses and reserves (55) (665)
Changes in other regulatory assets 28,961 10,929
Other (9,856) (18,502)
-------- --------
Net cash flow provided by operating activities 194,340 322,147
-------- --------
INVESTING ACTIVITIES
Construction expenditures (31,262) (29,840)
Allowance for equity funds used during construction 1,991 1,298
Nuclear fuel purchases (27,590) (37,639)
Proceeds from sale/leaseback of nuclear fuel 27,590 37,639
Decommissioning trust contributions and realized
change in trust assets (7,867) (14,639)
Changes in other temporary investments - net 22,354 (153,157)
-------- --------
Net cash flow used in investing activities (14,784) (196,338)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 69,505 -
Retirement of long-term debt (100,891) (151,800)
Dividends paid:
Common stock (75,000) (65,800)
-------- --------
Net cash flow used in financing activities (106,386) (217,600)
-------- --------
Net increase (decrease) in cash and cash equivalents 73,170 (91,791)
Cash and cash equivalents at beginning of period 49,579 202,218
-------- --------
Cash and cash equivalents at end of period $122,749 $110,427
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $71,626 $128,588
Income taxes - $3,463
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($13,808) ($6,667)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $57 $15
Temporary cash investments - at cost,
which approximates market 122,692 49,564
---------- ----------
Total cash and cash equivalents 122,749 49,579
---------- ----------
Other temporary investments - 22,354
Accounts receivable:
Associated companies 145,077 70,755
Other 16,673 1,193
---------- ----------
Total accounts receivable 161,750 71,948
---------- ----------
Materials and supplies - at average cost 50,273 51,665
Deferred nuclear refueling outage costs 4,491 8,728
Prepayments and other 2,706 1,631
---------- ----------
TOTAL 341,969 205,905
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 132,605 138,546
---------- ----------
UTILITY PLANT
Electric 3,116,424 3,098,446
Property under capital lease 450,014 450,014
Construction work in progress 45,969 36,868
Nuclear fuel under capital lease 86,005 61,905
---------- ----------
TOTAL UTILITY PLANT 3,698,412 3,647,233
Less - accumulated depreciation and amortization 1,491,260 1,416,337
---------- ----------
UTILITY PLANT - NET 2,207,152 2,230,896
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 148,950 173,470
Unamortized loss on reacquired debt 45,809 48,381
Other regulatory assets 153,508 157,949
Other 8,778 8,894
---------- ----------
TOTAL 357,045 388,694
---------- ----------
TOTAL ASSETS $3,038,771 $2,964,041
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $11,375 $100,891
Accounts payable:
Associated companies 6,731 2,404
Other 30,707 14,316
Taxes accrued 194,762 112,522
Accumulated deferred income taxes 729 2,360
Interest accrued 26,455 47,095
Obligations under capital leases 26,503 26,503
Other 1,674 1,583
---------- ----------
TOTAL 298,936 307,674
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 459,706 498,404
Accumulated deferred investment tax credits 83,433 86,040
Obligations under capital leases 59,502 35,401
Other regulatory liabilities 172,203 135,878
Decommissioning 147,970 140,103
Accumulated provisions 650 705
Other 34,429 39,117
---------- ----------
TOTAL 957,893 935,648
---------- ----------
Long-term debt 888,644 830,038
SHAREHOLDER'S EQUITY
Common stock, no par value, authorized 1,000,000 shares;
issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350
Retained earnings 103,948 101,331
---------- ----------
TOTAL 893,298 890,681
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,038,771 $2,964,041
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures
(including nuclear fuel but excluding AFUDC), which is updated by the
following paragraph, long-term debt and preferred stock maturities,
and cash sinking fund requirements.
ANO 1 Steam Generator and Reactor Vessel Closure Head Replacement
(Entergy Corporation and Entergy Arkansas)
See "ANO Matters" in Part I of the Form 10-K for discussion of
the ANO 1 steam generator and reactor vessel closure head. On July
25, 2002, the Board authorized Entergy Arkansas and Entergy
Operations to replace the ANO 1 steam generator and reactor vessel
closure head. Entergy management estimates the cost of the
fabrication and replacement to be approximately $235 million, of
which approximately $135 million will be incurred through 2004.
Management expects a contractor for the installation of the
replacement steam generator and reactor vessel closure head to be
selected by December 2002. Management expects that the replacement
will occur during a planned refueling outage in 2005. Entergy
Arkansas plans to file in January 2003 a request for a declaratory
order by the APSC that the investment in the replacement is in the
public interest analogous to the order received in 1998 prior to the
replacement of the steam generator for ANO 2. Receipt of an order
relating to the replacement at ANO 1 would support the inclusion of
these costs in a future general rate case; however, management cannot
predict the outcome of either the request for a declaratory order or
a general rate proceeding.
During a planned refueling outage that began October 4, 2002,
visual inspection of the reactor vessel head at ANO 1 revealed one
nozzle leak. Further ultrasonic testing showed the presence of seven
additional minor indications that could potentially develop into
leaks. Entergy Arkansas will make a total of eight repairs during
this outage, extending the outage from the original schedule of 30
days to approximately 40 days. Entergy Arkansas has notified the NRC
of the inspection findings and reported to the NRC the intended plan
to use certain industry-standard procedures for these repairs. The
NRC has agreed with the plans. Entergy Arkansas currently expects to
incur approximately $8 to $10 million of costs for repairs and
management is analyzing the methods available for recovery of these
costs. The extended outage will also result in the need to acquire
replacement power, which will be obtained either from other Entergy
System operating companies or from the wholesale energy market. The
purchased power costs will be included in Entergy Arkansas' April
2003 update of its Energy Cost Recovery Rider.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries
in the Entergy London and CitiPower sales transactions. Regarding
the Entergy London sale, Inland Revenue (the United Kingdom's taxing
authority) has notified Entergy that no tax liability exists with
respect to the sale. Therefore, the notice of claim Entergy received
from the Entergy London purchaser has no basis. Regarding the
CitiPower sale, in November 2002 the Australian taxing authority
assessed CitiPower for taxes for the years 1997 through 1999.
Management believes it has adequately provided for the ultimate
resolution of this matter. See Note 14 to the financial statements
in the Form 10-K for information on certain warranties made by
Entergy or its subsidiaries in the Saltend sale transaction.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear
fuel, other high-level radioactive waste, and decommissioning costs
associated with Entergy's nuclear power plants. Regarding nuclear
insurance, the Price-Anderson Act expired on August 1, 2002, and the
U.S. Congress is currently considering a number of proposals for its
renewal. Entergy's current nuclear operating licenses will not be
affected by the expiration, because operating licenses issued prior
to August 2002 are not affected by the expiration.
In July 2002, Entergy's domestic non-utility nuclear business
purchased the Vermont Yankee nuclear power plant from Vermont Yankee
Nuclear Power Corporation (VYNPC). Entergy's domestic non-utility
nuclear business has accepted assignment of the Vermont Yankee spent
fuel disposal contract with the DOE previously held by VYNPC. VYNPC
has paid or retained liability for the DOE fees for all generation
prior to the purchase date of Vermont Yankee. Vermont Yankee
currently has sufficient spent fuel storage capacity until
approximately 2007.
As part of the Vermont Yankee purchase, VYNPC transferred a $310
million decommissioning trust fund, along with the liability to
decommission Vermont Yankee, to Entergy's domestic non-utility
nuclear business. Entergy believes that Vermont Yankee's
decommissioning trust fund will be adequate to cover future
decommissioning costs for the plant without any additional deposits
to the trust.
Environmental Issues
(Entergy Arkansas)
In previous years, Entergy Arkansas has received notices from
the EPA and the ADEQ alleging that Entergy Arkansas, along with
others, may be a potentially responsible party (PRP) for clean-up
costs associated with a site in Arkansas. As of September 30, 2002,
a remaining recorded liability of approximately $5.0 million existed
related to the cleanup of that site.
(Entergy Gulf States)
Entergy Gulf States has been designated as a PRP for the cleanup
of certain hazardous waste disposal sites. Entergy Gulf States is
currently negotiating with the EPA and state authorities regarding
the cleanup of these sites. As of September 30, 2002, a remaining
recorded liability of approximately $13.6 million existed related to
the cleanup of the remaining sites at which the EPA has designated
Entergy Gulf States as a PRP.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the LDEQ issued new rules for solid waste
regulation, including regulation of wastewater impoundments. Entergy
Louisiana and Entergy New Orleans have determined that certain of
their power plant wastewater impoundments were affected by these
regulations and have chosen to upgrade or close them. Recorded
liabilities in the amounts of $5.8 million for Entergy Louisiana and
$0.5 million for Entergy New Orleans existed at September 30, 2002
for wastewater upgrades and closures. Completion of this work is
awaiting LDEQ approval.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the
City of New Orleans pursuant to franchise ordinances. These
ordinances contain a continuing option for the City of New Orleans to
purchase Entergy New Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
separate but substantially identical transactions for the sale and
leaseback of undivided interests (aggregating approximately 9.3%) in
Waterford 3, which were refinanced in 1997. Upon the occurrence of
certain events, Entergy Louisiana may be obligated to pay amounts
sufficient to permit the termination of the lease transactions and
may be required to assume the outstanding bonds issued to finance, in
part, the lessors' acquisition of the undivided interests in
Waterford 3. See Note 10 to the financial statements in the Form 10-
K for further information.
Off Balance Sheet Turbine Financing Arrangement (Entergy
Corporation)
As discussed in Note 9 to the financial statements in the Form
10-K, EWO obtained contracts in October 1999 to acquire 36 turbines
from General Electric. Entergy's rights and obligations under the
contracts for 22 of the turbines were sold to an independent special-
purpose entity in May 2001. Entergy reacquired from the special-
purpose entity the rights to the turbines in April 2002. For the
nine months ended September 30, 2002, Entergy recorded a $180.2
million ($117.1 million net of tax) provision for Entergy's estimate
of the impairments resulting from cancellation or sale of the
turbines subject to purchase commitments with the special-purpose
entity. The Consolidated Statements of Income reflects the pre-tax
effect of this liability in operation and maintenance expenses.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are
defendants in numerous lawsuits filed by former employees asserting
that they were wrongfully terminated and/or discriminated against on
the basis of age, race, sex, or other protected characteristics. The
defendant companies are vigorously defending these suits and deny any
liability to the plaintiffs. Nevertheless, no assurance can be given
as to the outcome of these cases.
Asbestos and Hazardous Material Litigation (Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in
Texas and Louisiana primarily by contractor employees in the 1950-
1980 timeframe against Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans, as premises owners of power plants, for damages
caused by alleged exposure to asbestos or other hazardous material.
See Note 9 to the financial statements in the Form 10-K for further
information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In addition to those proceedings discussed elsewhere herein and
in the Form 10-K, Entergy and the domestic utility companies are
involved in a number of other legal proceedings and claims in the
ordinary course of their businesses. While management is unable to
predict the outcome of these other legal proceedings and claims, it
is not reasonably expected that their ultimate resolution
individually or collectively will have a material adverse effect on
the results of operations, cash flows, or financial condition of
these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring and the Continued Application of SFAS
71
Previous developments and information related to electric
industry restructuring are presented in Note 2 to the financial
statements in the Form 10-K.
Texas
(Entergy Corporation and Entergy Gulf States)
Retail open access legislation is in place in Texas, but the
implementation of retail open access in Entergy Gulf States' service
territory has been delayed. Management does not expect that retail
open access in Entergy Gulf States' Texas service territory within
the context of a functional FERC-approved RTO is likely to begin
before the first quarter of 2004. Several proceedings necessary to
implement retail open access are still pending, including the
proceeding to set the price-to-beat fuel rate that will be charged by
Entergy's retail electric provider. In September 2002, the PUCT
granted a motion extending by several months certain filing deadlines
established in the December 2001 settlement delaying retail open
access. In addition, the LPSC has not approved for the Louisiana
jurisdictional operations the transfer of generation assets to, or a
power purchase agreement with, Entergy's Texas generation company.
Given the delay in implementing retail open access, Entergy Gulf
States cannot predict what, if any, additional changes to previously
approved plans may be required by the PUCT or the LPSC. Therefore,
neither the necessary regulatory actions nor the opportunity for a
reasonable determination of the effect of deregulation has occurred
that are prerequisites for Entergy Gulf States to discontinue the
application of regulatory accounting principles to its Texas
generation operations.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
March 2002 Settlement Agreement
As discussed in the Form 10-K, in March 2002, Entergy Arkansas,
the APSC staff, and the Arkansas Attorney General submitted a
settlement agreement to the APSC for approval. The settlement
agreement proposed a resolution of issues discussed in the Form 10-K
under "Retail Rates," "Transition Cost Account," and "December 2000
Ice Storm Cost Recovery." In May 2002, the APSC approved the March
2002 settlement agreement without revision.
Transition Cost Account
In May 2002, Entergy Arkansas filed its 2001 earnings evaluation
report with the APSC. In June 2002, the APSC approved a contribution
of $5.9 million to the TCA. The balance in the TCA after this
contribution was $155.5 million, including interest, through June
2002. A principal provision in the March 2002 settlement agreement
was to offset $137.4 million of ice storm recovery costs with the TCA
on a rate class basis. In accordance with the settlement agreement
and following the APSC's approval of Entergy Arkansas' 2001 earnings
review, Entergy Arkansas filed to return $18.1 million of the TCA to
certain large general service class customers that paid more into the
TCA than their allocation of storm costs. In August 2002, the APSC
approved the return of funds to the large general service customer
class in the form of refund checks.
December 2000 Ice Storm Cost Recovery
The March 2002 settlement agreement provisions allowed Entergy
Arkansas to offset incremental ice storm expenses with the funds
accumulated in the TCA on a rate class basis, and any excess of ice
storm costs over the amount available in the TCA would be deferred
for recovery. The allocated ice storm expenses exceeded the
available TCA funds by $15.8 million. This excess amount was
recorded as a regulatory asset in June 2002 and is being amortized
over a 30-year period.
Fuel Cost Recovery
In March 2002, Entergy Arkansas filed its annually redetermined
energy cost rate with the APSC, including a new energy allocation
factor. The filing reflected a decrease due to reduced fuel and
purchased power costs in 2001 and the accumulated over-recovery of
2001 energy costs. The decreased energy cost rate is effective April
2002 through March 2003. In September 2002, Entergy Arkansas filed
and the APSC approved an interim revision to the energy cost rate
effective October 2002 through March 2003. Entergy Arkansas will
reduce the energy cost rate to offset the current and projected over-
recovery of fuel and purchased power costs for 2002. The revised
energy cost rate will be effective October 2002 through March 2003,
when the annual energy cost rate redetermination will be filed for
the period from April 2003 through March 2004.
Filings with the PUCT and Texas Cities (Entergy Corporation and
Entergy Gulf States)
Rate Proceedings
As discussed in the Form 10-K, in June 1999, the PUCT approved a
settlement agreement that Entergy Gulf States entered into in
February 1999. This settlement agreement resolved Entergy Gulf
States' 1996 and 1998 rate proceedings and all of the settling
parties' pending appeals in other matters, except for the appeal in
the River Bend abeyed cost recovery proceeding discussed below. The
Office of Public Utility Counsel, an intervenor in the proceeding,
appealed certain aspects of this settlement to the Travis County
District Court in Texas. In August 2002, this appeal was dismissed.
Recovery of River Bend Costs
In March 1998, the PUCT disallowed recovery of $1.4 billion of
company-wide abeyed River Bend plant costs, which have been held in
abeyance since 1988. Entergy Gulf States appealed the PUCT's
decision on this matter to the Travis County District Court in Texas.
In June 1999, subsequent to the settlement agreement discussed in the
Form 10-K, Entergy Gulf States removed the reserve for River Bend
plant costs held in abeyance and reduced the value of the plant
asset. The settlement agreement limits potential recovery of the
remaining plant asset to $115 million as of January 1, 2002, less
depreciation after that date. In a settlement in its transition to
competition proceedings, and consistent with the June 1999
settlement, Entergy Gulf States agreed not to prosecute its appeal
until January 1, 2002. Entergy Gulf States also agreed that it will
not seek recovery of the abeyed plant costs through any additional
charge to Texas ratepayers. In its interim order approving this
settlement, however, the PUCT recognized that any additional River
Bend investment found prudent, subject to the $115 million cap, could
be used as an offset against stranded benefits, should legislation be
passed requiring Entergy Gulf States to return stranded benefits to
retail customers.
In April 2002, the Travis County District Court issued an order
affirming the PUCT's order on remand disallowing recovery of the
abeyed plant costs. Entergy Gulf States has appealed this ruling to
the Third District Court of Appeals. Oral argument is scheduled for
November 2002. The financial statement impact of the retail rate
settlement agreement on the remaining abeyed plant costs will
ultimately depend on several factors, including the possible
discontinuance of SFAS 71 accounting treatment for the Texas
generation business, the determination of the market value of
generation assets, and any future legislation in Texas addressing the
pass-through or sharing of any stranded benefits with Texas
ratepayers. While Entergy Gulf States expects to prevail in its
lawsuit, no assurance can be given that additional reserves or write-
offs will not be required in the future.
PUCT Fuel Cost Review
As determined in the June 1999 retail rate settlement agreement,
Entergy Gulf States adopted a methodology for calculating its fixed
fuel factor based on the market price of natural gas. This
calculation and any necessary adjustments occur semi-annually. The
settlement that delayed implementation of retail open access in Texas
for Entergy Gulf States provides that Entergy Gulf States will
continue the use of this methodology until retail open access begins.
The amounts collected under Entergy Gulf States' fixed fuel factor
until the date retail open access commences are subject to fuel
reconciliation proceedings before the PUCT. The interim surcharges
discussed below will also be subject to the fuel reconciliation
proceeding.
In January 2001, Entergy Gulf States filed a fuel reconciliation
case covering the period from March 1999 through August 2000.
Entergy Gulf States is reconciling approximately $583.0 million of
fuel and purchased power costs. As part of this filing, Entergy Gulf
States requested authority to collect $28.0 million, plus interest,
of under-recovered fuel and purchased power costs. A hearing on the
merits concluded in August 2001, and the ALJ recommended that Entergy
Gulf States' request be reduced to $7.0 million. The PUCT considered
the ALJ's recommendation in February 2002, but did not reach a final
decision at that time. The PUCT remanded certain issues related to
the eligibility of costs for Entergy Gulf States' 30% non-regulated
share of River Bend for further consideration by the ALJ. After
considering the remanded issues, the PUCT decided in August 2002 to
reduce Entergy Gulf States' request to approximately $6.3 million,
including interest through July 31, 2002. Approximately $4.7 million
of the total reduction to the requested surcharge relates to nuclear
fuel costs that the PUCT deferred ruling on at this time. The PUCT
issued a written order supporting its decisions and has rejected
Entergy Gulf States' motion for rehearing challenging that order. In
October 2002, Entergy Gulf States appealed the PUCT's final order in
Texas District Court. In its appeal, Entergy Gulf States is
challenging the PUCT's disallowance of approximately $4.2 million
related to imputed capacity costs and its disallowance related to
costs for energy delivered from the 30% non-regulated share of River
Bend. No assurance can be given as to the final outcome of this
proceeding.
In November 2001, Entergy Gulf States filed an application with
the PUCT requesting an interim surcharge to collect $71 million, plus
interest, of under-recovered fuel and purchased power expenses
incurred from September 2000 through September 2001. Entergy Gulf
States made the application pursuant to one of the terms of the
settlement agreement that delayed implementation of retail open
access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf
States revised its request to collect $30.3 million, plus interest,
of under-recovered fuel and purchased power expenses incurred from
September 2000 through February 2002. Entergy Gulf States requested
that the surcharge begin in April 2002 and extend through August
2002, or until the fuel cost is fully recovered, whichever is sooner.
In March 2002, the PUCT issued an order approving the surcharge. The
surcharge was implemented in the first billing cycle of April 2002
and was completed with the last billing cycle of August 2002.
In September 2002, Entergy Gulf States filed an application with
the PUCT for an interim surcharge to collect $53.9 million, including
interest, of under-recovered fuel and purchased power expenses
incurred from March 2001 through August 2002. Entergy Gulf States'
application contains a request to implement the surcharge over a six-
month period beginning January 2003. Certain parties have contested
the request. The PUCT staff has recommended that the surcharge
period occur over a twelve-month period instead of the six-month
period requested. Hearings were held in October 2002. The schedule
for the hearing still allows for the implementation to occur by the
requested date. No assurance can be given as to the PUCT's decision
with respect to the timing or amount of this request.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf
States)
In May 2001, Entergy Gulf States filed its eighth required post-
merger earnings review with the LPSC. This filing is subject to
review by the LPSC and may result in a change in rates. In April
2002, the LPSC staff filed testimony recommending a $16.5 million
rate refund relating to a prior period and a $40.1 million
prospective rate reduction. The prospective reduction includes a
recommended reduction in the rate of return on common equity (ROE) to
10.1% that would not take effect until the later of June 2003 or the
date of an LPSC order changing the ROE from the current 11.1%.
Hearings were held in April 2002 and in August 2002. Entergy Gulf
States is awaiting an ALJ recommendation.
In May 2002, Entergy Gulf States filed its ninth and last
required post-merger earnings analysis with the LPSC. The filing
included an earnings review filing for the 2001 test year that
resulted in a rate decrease of $11.5 million, which was implemented
effective June 2002. The filing also contained a prospective revenue
requirement study based on the 2001 test year seeking a prospective
rate increase of approximately $21.7 million. Both components of the
filing are subject to review by the LPSC and may result in changes in
rates other than those sought in the filing. A procedural schedule
has been adopted and hearings are scheduled for June 2003.
In June 2002, an ALJ issued a proposed prospective
recommendation to the LPSC with regard to issues raised in Entergy
Gulf States' fifth annual post-merger earnings review. The ALJ
recommended adoption of the LPSC Staff's position on most issues,
including the recommendation that Entergy Gulf States' authorized ROE
be set at 10.0%. However, due to a settlement agreement currently in
effect, Entergy Gulf States' currently authorized ROE of 11.1% will
remain in effect until the later of June 2003 or the date of an LPSC
order changing the current ROE. Entergy Gulf States cannot predict
the timing or outcome of this proceeding. A decision has not yet
been rendered by the LPSC in the fifth earnings review.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In May 1997, Entergy Louisiana made its second annual
performance-based formula rate plan filing with the LPSC for the 1996
test year. This filing resulted in a rate reduction of approximately
$54.5 million, which was implemented in July 1997. At the same time,
rates were reduced by an additional $0.7 million and by an additional
$2.9 million effective March 1998. Upon completion of the hearing
process in December 1998, the LPSC issued an order requiring an
additional rate reduction and refund. The resulting amounts were not
quantified, although they are expected to be immaterial. Entergy
Louisiana appealed this order and obtained a preliminary injunction
pending a final decision on appeal. The Louisiana Supreme Court
rendered a non-unanimous decision in April 2002 affirming the LPSC's
order. Entergy Louisiana has filed with the U.S. Supreme Court an
application for writ of certiorari.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based formula rate plan filing for the 1999 test year.
As a result of this filing, Entergy Louisiana implemented a $24.8
million base rate reduction in August 2000. In September 2001, the
LPSC approved a settlement in which Entergy Louisiana agreed to
increase to $28.2 million the total base rate reduction, effective
August 2000. The additional rate reduction and the associated credit
were implemented in September 2001. The settlement resolved all
issues in the proceeding except for Entergy Louisiana's claim for an
increase in its allowed ROE from 10.5% to 11.6%. A hearing to
address the ROE issue was held in March 2002. This issue was
resolved in the June 2002 settlement between Entergy Louisiana and
the LPSC discussed below.
In April 2001, Entergy Louisiana submitted its sixth annual
performance-based formula rate plan filing, which used a 2000 test
year. The filing indicated that an immaterial base rate reduction
might be appropriate. Subsequently, Entergy Louisiana agreed to
implement a $3.4 million rate reduction effective August 2001. This
stipulation resolved all issues relating to the 2000 test year,
except issues relating to its return on common equity and the
treatment of certain capacity costs in the formula rate plan process.
These issues were addressed in a hearing in June 2002 and were
resolved in the settlement discussed below.
In June 2002, Entergy Louisiana and the LPSC Staff reached a
settlement that resolved all remaining issues in the 2000 and 2001
formula rate plan proceedings. The LPSC approved the settlement in
July 2002. Entergy Louisiana agreed to a $5 million rate reduction
effective August 2001. The prospective rate reduction was
implemented beginning in August 2002 and the refund for the
retroactive period occurred in September 2002. As part of the
settlement, Entergy Louisiana's current rates, including its
previously authorized ROE of 10.5%, remain in effect until changed
pursuant to a new formula rate plan filing or a revenue requirement
analysis to be filed by June 30, 2003.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
Formula Rate Plan Filings
In March 2002, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 2001 test year.
The submittal indicated that a $2.8 million rate increase was
appropriate under the formula rate plan. In April 2002, the MPSC
Staff and Entergy Mississippi entered into a stipulation, which the
MPSC approved, that provided for an increase of $1.95 million
effective in May 2002.
In August 2002, Entergy Mississippi filed a rate case with the
MPSC requesting a $68.8 million rate increase effective January 2003.
Entergy Mississippi requested this increase as a result of capital
investments and operation and maintenance expenditures necessary to
replace and maintain aging electric facilities and to improve
reliability and customer service. In October 2002, Entergy
Mississippi and the Mississippi Public Utilities Staff entered into a
joint stipulation which would result in a $48.2 million rate increase
and an ROE of 11.75%. The stipulation endorsed a new power
management rider schedule designed to more efficiently collect
capacity portions of purchased power costs. Also, the stipulation
provides for improvements in the return on equity formula and more
robust performance measures for Entergy Mississippi's formula rate
plan. Entergy Mississippi will make its next formula rate plan filing
during March 2004. A hearing before the MPSC is scheduled for
December 2002. Under the Mississippi Public Utilities Act, the MPSC
is required to issue its final order in this general rate proceeding
by December 16, 2002.
Filings with the City Council (Entergy Corporation and Entergy New
Orleans)
Retail Rate Filings
In May 2002, Entergy New Orleans filed a cost of service study
and revenue requirement filing with the City Council for the 2001
test year. The filing indicated that a revenue deficiency exists and
that a $28.9 million electric rate increase and a $15.3 million gas
rate increase are appropriate. Additionally, Entergy New Orleans has
proposed a $6.0 million public benefit fund. The City Council has
established a procedural schedule for consideration of the filing and
hearings are scheduled to begin in April 2003. The procedural
schedule provides for the City Council's decision with respect to
Entergy New Orleans' filing by June 15, 2003.
Natural Gas
In a resolution adopted in August 2001, the City Council ordered
Entergy New Orleans to account for $36 million of certain natural gas
costs charged to its gas distribution customers from July 1997
through May 2001. The resolution suggests that refunds may be due to
the gas distribution customers if Entergy New Orleans cannot account
satisfactorily for these costs. Entergy New Orleans filed a response
to the City Council in September 2001, which is still being evaluated
by the City Council. Entergy New Orleans has documented a full
reconciliation for the natural gas costs during that period. The
ultimate outcome of the proceeding cannot be predicted at this time.
Fuel Adjustment Clause Litigation
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state court in Orleans Parish purportedly on behalf
of all Entergy New Orleans ratepayers. The plaintiffs seek treble
damages for alleged injuries arising from the defendants' alleged
violations of Louisiana's antitrust laws in connection with certain
costs passed on to ratepayers in Entergy New Orleans' fuel adjustment
filings with the City Council. In particular, plaintiffs allege that
Entergy New Orleans improperly included certain costs in the
calculation of fuel charges and that Entergy New Orleans imprudently
purchased high-cost fuel from other Entergy affiliates. Plaintiffs
allege that Entergy New Orleans and the other defendant Entergy
companies conspired to make these purchases to the detriment of
Entergy New Orleans' ratepayers and to the benefit of Entergy's
shareholders, in violation of Louisiana's antitrust laws. Plaintiffs
also seek to recover interest and attorneys' fees. Entergy filed
exceptions to the plaintiffs' allegations, asserting, among other
things, that jurisdiction over these issues rests with the City
Council and FERC. If necessary, at the appropriate time, Entergy
will also raise its defenses to the antitrust claims. At present,
the suit in state court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the City Council in
order to initiate a review by the City Council of the plaintiffs'
allegations and to force restitution to ratepayers of all costs they
allege were improperly and imprudently included in the fuel
adjustment filings. Testimony was filed on behalf of the plaintiffs
in this proceeding in April 2000 and has been supplemented. The
testimony, as supplemented, asserts, among other things, that Entergy
New Orleans and other defendants have engaged in fuel procurement and
power purchasing practices and included costs in Entergy New Orleans'
fuel adjustment that could have resulted in New Orleans customers
being overcharged by more than $100 million over a period of years.
In June 2001, the City Council's advisors filed testimony on these
issues in which they allege that Entergy New Orleans ratepayers may
have been overcharged by more than $32 million, the vast majority of
which is reflected in the plaintiffs' claim. However, it is not
clear precisely what periods and damages are being alleged in the
proceeding. Entergy intends to defend this matter vigorously, both
in court and before the City Council. Hearings were held in February
and March 2002. The parties have submitted post-hearing briefs and
the matter has been submitted to the City Council for a decision. In
October 2002, the plaintiffs filed a motion to re-open the
evidentiary record, or in the alternative, a motion for a new trial
seeking to re-open the record to accept certain testimony filed by
the City Council advisors in a separate proceeding at the FERC. The
ultimate outcome of the lawsuit and the City Council proceeding
cannot be predicted at this time.
Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies requested that the APSC, the
LPSC, the MPSC, and the City Council approve the sale of power by
Entergy Gulf States from its unregulated, undivided 30% interest in
River Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. These applications were
approved subject to subsequent prudence reviews. In addition,
Entergy Gulf States and Entergy Louisiana filed an application with
the LPSC for authorization to purchase capacity and electric power
from third parties for the summer of 2000, and filed a similar
application for the summer of 2001. The LPSC approved these
applications, with reservation of its rights to review the prudence
of the purchases and the appropriate categorization of the costs as
either capacity or energy charges for purposes of recovery.
The LPSC reviewed the 2000 purchases and found that Entergy
Louisiana's and Entergy Gulf States' costs were prudently incurred,
but decided that approximately 34% of the costs should be categorized
as capacity charges, and therefore should be recovered through base
rates and not through the fuel adjustment clause. In November 2000,
the LPSC ordered refunds of $11.1 million for Entergy Louisiana and
$3.6 million for Entergy Gulf States, for which adequate provisions
were made. In May 2001, the LPSC determined that 24% of Entergy
Louisiana's and Entergy Gulf States' costs relating to summer 2001
purchases should be categorized as capacity charges, and has reviewed
certain prudence issues related to the 2001 purchases. The prudence
issues involve approximately $6 million of Entergy Louisiana costs
and approximately $5 million of Entergy Gulf States costs. The LPSC
has questioned in the prudence review the Entergy system's contract
mix and raised issues relating to potential uprates at nuclear
facilities. Hearings on those issues were conducted in May 2002 and
briefs have been filed by the parties. Those costs that are
categorized as capacity charges will be included in the costs of
service used to determine the base rates of Entergy Louisiana and
Entergy Gulf States. In 2001, these companies recorded a regulatory
asset for the capacity charges incurred in both 2000 and 2001. The
capacity charges for 2000 were amortized through May 2002 for Entergy
Gulf States and through July 2002 for Entergy Louisiana. The
capacity charges for 2001 are being amortized over a twelve-month
period, which began in June 2002 for Entergy Gulf States and in
August 2002 for Entergy Louisiana.
In March 2002, Entergy Louisiana and Entergy Gulf States filed
an application with the LPSC for the approval of capacity and energy
purchases for the summer of 2002 similar to the applications filed
for the summers of 2000 and 2001. Entergy Louisiana, Entergy Gulf
States, and the LPSC Staff reached a settlement in which those
parties agreed that 14% of Entergy Louisiana's and Entergy Gulf
States' costs relating to summer 2002 purchases should be categorized
as capacity charges. The LPSC approved the settlement at its July
2002 public meeting. Prudence issues relating to summer 2002
purchases were resolved in a settlement approved by the LPSC at its
September 2002 open session. The settlement reserves the LPSC's
right to reflect for the summer of 2002 the effect of any finding
that may be made in the summer 2001 case, discussed above, regarding
the prudence of decisions relating to potential uprates at nuclear
facilities. No refunds were ordered and all other purchases were
found to be prudent. Issues relating to the reasonableness of the
long-term planning process were moved into a separate sub-docket.
Issues relating to the need for and potential scope of that
proceeding are currently under review.
System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy)
As discussed in the Form 10-K, FERC denied requests for
rehearing in the System Energy rate increase proceeding and the July
2000 order became final. System Energy made a compliance tariff
filing in August 2001 and it was accepted by FERC in November 2001.
System Energy made refunds to the domestic utility companies in
December 2001. Entergy Arkansas refunded $54.3 million, including
interest, through the issuance of refund checks in March 2002 as
approved by the APSC. Entergy Mississippi refunded $14.8 million to
its customers through credits to the Grand Gulf Riders. The credits
began in October 2001 and occurred through September 2002. Entergy
New Orleans refunded $27.0 million to its customers through the
issuance of refund checks in the first quarter of 2002. Entergy
Louisiana refunded $4.9 million, including interest, to its customers
through a credit on the September 2002 bills as approved by the LPSC.
NOTE 3. COMMON STOCK (Entergy Corporation)
The average number of common shares outstanding for the
presentation of diluted earnings per share was greater by 3,339,872
and 3,154,478 shares for the three months ended September 30, 2002
and 2001, respectively, and 4,066,732 and 3,871,903 shares for the
nine months ended September 30, 2002 and 2001, respectively, than the
number of such shares for the presentation of basic earnings per
share due to Entergy's stock option and other stock compensation
plans discussed more thoroughly in Note 5 to the financial statements
in the Form 10-K. The dilutive effect of the stock options on
earnings per share for the three months ended September 30, 2002 and
2001 was $.02 for both periods. The dilutive effect of the stock
options on earnings per share for the nine months ended September 30,
2002 and 2001 was $.04 and $.05, respectively.
During the nine months ended September 30, 2002, Entergy
Corporation repurchased 2,516,000 shares of common stock in the open
market for an aggregate purchase price of approximately $103.6
million.
During the nine months ended September 30, 2002, Entergy
Corporation issued 4,046,894 shares of its previously repurchased
common stock to satisfy stock option exercises.
NOTE 4. LONG-TERM DEBT
(Entergy Corporation)
As discussed in Note 7 to the financial statements in the Form
10-K, the Damhead Creek credit facility requires that the annual debt
service coverage ratio be at least 1.05 to 1 for the previous 12
months at semi-annual dates commencing with June 30, 2002. Given the
low electricity prices currently affecting the UK market, Damhead
Creek would not have met the annual debt service coverage ratio test
in respect of the 12 months ended June 30, 2002, but the lenders
amended the facility so that the coverage ratio calculations would
not commence until December 31, 2002. In addition, some of the
Damhead Creek affiliates are technically insolvent since October 31,
2002, which has caused a default under the credit agreement. Damhead
Creek has requested a waiver of this default from the lenders.
Damhead Creek is currently in negotiations with the lenders to
develop and implement a debt restructuring for the project prior to
December 2002. If a debt restructuring agreement cannot be reached
prior to December 31, 2002, EPDC may (1) sell its shares in the
project to a third party, (2) transfer ownership of the project to
the Damhead Creek bank syndicate or (3) ask the bank syndicate to
appoint an administrative receiver to the project. There is no
requirement for Entergy or EPDC to make additional capital
contributions or provide credit support to Damhead Creek, even if
there is an occurrence of an event of default. Neither Entergy nor
EDPC will make additional capital contributions or provide credit
support to Damhead Creek.
(Entergy Arkansas)
On March 1, 2002, Entergy Arkansas retired, at maturity, $85
million of 7% Series First Mortgage Bonds with internally generated
funds.
On March 28, 2002, Entergy Arkansas issued $100 million of 6.70%
Series First Mortgage Bonds due April 1, 2032. A portion of the net
proceeds was used to satisfy the annual replacement fund requirement
under the mortgage relating to the bonds by redeeming $85 million of
8.75% Series First Mortgage Bonds due March 1, 2026. The remaining
net proceeds were used to replace a portion of the cash that was used
to meet the maturity of the $85 million 7% Series First Mortgage
Bonds retired on March 1, 2002 discussed above.
(Entergy Gulf States)
On January 1, 2002, Entergy Gulf States retired, at maturity,
$148 million of 8.21% Series First Mortgage Bonds with proceeds from
$300 million of Floating Rate Series First Mortgage Bonds issued on
August 22, 2001.
On November 7, 2002, Entergy Gulf States issued $200 million of
5.2% Series First Mortgage Bonds due December 3, 2007. The proceeds
will be used to retire, at maturity, or to redeem or repurchase prior
to maturity, a portion of the $300 million Floating Rate Series First
Mortgage Bonds due June 2, 2003.
(Entergy Louisiana)
On January 1, 2002, Entergy Louisiana retired, at maturity, $23
million of 7.5% Series First Mortgage Bonds. On March 1, 2002,
Entergy Louisiana retired, at maturity, $75 million of 5.80% Series
First Mortgage Bonds.
On March 27, 2002, Entergy Louisiana issued $150 million of
7.60% Series First Mortgage Bonds due April 1, 2032. A portion of
the net proceeds was used to satisfy the annual replacement fund
requirement under the mortgage relating to the bonds by redeeming
$115 million of 8.75% Series First Mortgage Bonds due March 1, 2026.
The remaining net proceeds will be used to reduce short-term debt
that, among other things, was incurred to meet the maturities of the
First Mortgage Bonds discussed above.
On June 1, 2002, Entergy Louisiana remarketed $55 million St.
Charles Parish Pollution Control Revenue Refunding Bonds due 2030,
resetting the interest rate to 4.9% through May 31, 2005.
On July 1, 2002, Entergy Louisiana retired, at maturity, $56.4
million of 7.74% Series First Mortgage Bonds with internally
generated funds.
(Entergy Mississippi)
On June 1, 2002, Entergy Mississippi retired, at maturity, $65
million of 6.875% Series First Mortgage Bonds with internally
generated funds.
On October 22, 2002, Entergy Mississippi issued $75 million of
6% Series First Mortgage Bonds due November 1, 2032. The net
proceeds will be used to retire, at maturity, $70 million of 6.25%
Series First Mortgage Bonds due February 1, 2003, and a portion of
$120 million 7.75% Series First Mortgage Bonds due February 15, 2003.
(Entergy New Orleans)
On October 18, 2002, Entergy New Orleans issued $25 million of
6.75% Series First Mortgage Bonds due October 15, 2017. The net
proceeds will be used to redeem, prior to maturity, $25 million of 7%
Series First Mortgage Bonds due March 1, 2003.
(System Energy)
On September 24, 2002, System Energy issued $70 million of
4.875% Series First Mortgage Bonds due 2007. The net proceeds were
used to redeem, on September 30, 2002, $70 million in principal
amount of 8.25% Series First Mortgage Bonds that were scheduled to
mature on October 1, 2002.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On October 25, 2002, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.35 per share, payable on
December 1, 2002, to holders of record as of November 12, 2002.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
Entergy's reportable segments as of September 30, 2002 are
domestic utility, domestic non-utility nuclear, and energy commodity
services. "All Other" includes the parent company, Entergy
Corporation, and other business activity, which is principally gains
or losses on the sales of businesses and the earnings on the proceeds
of those sales.
Entergy's segment financial information for the three months
ended September 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Eliminations Consolidated
Utility Utility Commodity Other*
Nuclear* Services*
2002
Operating Revenues $2,057,317 $347,220 $56,078 $8,780 ($520) $2,468,875
Equity in earnings of
unconsolidated equity affiliates - - 50,159 - - 50,159
Income Taxes (Benefit) 157,886 49,210 26,163 (4,581) - 228,678
Net Income (Loss) 249,625 73,097 48,283 (4,205) - 366,800
2001
Operating Revenues $2,005,043 $203,783 $362,913 $5,970 ($820) $2,576,889
Equity in earnings of
unconsolidated equity affiliates - - 58,414 - - 58,414
Income Taxes (Benefit) 125,218 23,399 44,138 (7,455) - 185,300
Net Income (Loss) 228,523 34,636 67,241 (12,946) - 317,454
Entergy's segment financial information for the nine months
ended September 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Other* Eliminations Consolidated
Utility Utility Commodity
Nuclear* Services*
2002
Operating Revenues $5,217,365 $923,187 $258,683 $30,593 ($3,539) $6,426,289
Equity in earnings of
unconsolidated equity affiliates - - 142,964 - - 142,964
Income Taxes (Benefit) 359,798 111,120 (107,345) (12,259) - 351,314
Net Income (Loss) 558,651 166,693 (169,083) (14,860) - 541,401
Total Assets 20,174,890 4,405,919 2,388,982 1,057,669 (1,250,467) 26,776,993
2001
Operating Revenues $6,011,105 $533,199 $1,034,451 $26,450 ($3,054) $7,602,151
Equity in earnings of
unconsolidated equity affiliates - - 153,957 - - 153,957
Income Taxes (Benefit) 325,951 65,642 78,706 (10,726) - 459,573
Net Income (Loss) 524,116 98,966 115,765 (14,940) - 723,907
Total Assets 20,597,897 3,367,953 2,210,727 878,371 (873,314) 26,181,634
Businesses marked with * are sometimes referred to as the
"competitive businesses," with the exception of the parent company,
Entergy Corporation. Eliminations are primarily intersegment
activity.
Energy commodity services' net loss for the nine months ended
September 30, 2002 includes net charges of $391.6 million to
operating expenses ($254.2 million net of tax) to reflect the effect
of Entergy's decision to discontinue additional EWO greenfield power
plant development and to reflect asset impairments resulting from the
deteriorating economics of wholesale power markets in the United
States and the United Kingdom. The charges consist of the following:
o as discussed in Note 1, $178.0 million of the charges is a
provision for the net costs resulting from cancellation or sale of
the turbines subject to purchase commitments with a special-purpose
entity;
o $167.5 million of the charges result from the write-off of
EPDC's equity investment in the Damhead Creek project ($55.0 million)
and the impairment of the values of the Warren Power power plant, the
Crete project, and the RS Cogen project ($112.5 million combined).
This portion of the charges reflects Entergy's estimate of the
effects of reduced spark spreads in the United States and the United
Kingdom. These estimates are based on various sources of
information, including discounted cash flow projections and current
market prices;
o $39.1 million of the charges relate to the restructuring of EWO,
including impairments of EWO administrative fixed assets, estimated
sublease losses, and employee-related costs for approximately 135
affected employees. These restructuring costs, which are included in
the "Provision for turbine commitments, asset impairments and
restructuring charges" in the accompanying consolidated statement of
income as of September 30, 2002, were comprised of the following (in
millions):
Restructuring Paid in Non-Cash Remaining
Costs Cash Portion Accrual
Fixed asset impairments $22.5 - $22.5 -
Sublease losses 10.7 $0.4 - $10.3
Severance and related costs 5.9 2.5 - 3.4
----- ---- ----- -----
Total $39.1 $2.9 $22.5 $13.7
===== ==== ===== =====
Management expects the restructuring of EWO to be
substantially complete by the end of 2002; and
o $32.7 million of the charges result from the write-off of
capitalized project development costs for projects that will not be
completed.
The net charges include a gain of $25.7 million ($15.9 million net of
tax) on the sale of EWO's interest in projects under development in
Spain in August 2002.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation)
As discussed in the Form 10-K, Entergy implemented SFAS 142,
"Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for
the Impairment or Disposal of Long-lived Assets" effective January 1,
2002. The implementation of SFAS 142 resulted in the cessation of
Entergy's amortization of the remaining plant acquisition adjustment
recorded in conjunction with its acquisition of Entergy Gulf States;
this will increase Entergy's annual net income by approximately $16.3
million. The following table is a reconciliation of reported
earnings applicable to common stock to earnings applicable to common
stock without goodwill amortization for the three and nine months
ended September 30, 2002 and 2001.
Three Months Ended Nine Months Ended
2002 2001 2002 2001
(In Thousands, Except Share Data)
Reported earnings applicable to common stock $360,876 $312,484 $523,605 $705,544
Add back: Goodwill amortization - 4,066 - 12,199
-------- -------- -------- --------
Adjusted earnings applicable to common stock without
goodwill amortization $360,876 $316,550 $523,605 $717,743
======== ======== ======== ========
Basic earnings per average common share:
Reported earnings applicable to common stock $1.61 $1.41 $2.34 $3.19
Goodwill amortization - 0.02 - 0.06
-------- -------- -------- --------
Adjusted earnings applicable to common stock without
goodwill amortization $1.61 $1.43 $2.34 $3.25
======== ======== ======== ========
Diluted earnings per average common share:
Reported earnings applicable to common stock $1.59 $1.39 $2.30 $3.14
Goodwill amortization - 0.02 - 0.05
-------- -------- -------- --------
Adjusted earnings applicable to common stock without
goodwill amortization $1.59 $1.41 $2.30 $3.19
======== ======== ======== ========
NOTE 8. ACQUISITIONS (Entergy Corporation)
In July 2002, Entergy's domestic non-utility nuclear business
acquired the 510 MW Vermont Yankee nuclear power plant located in
Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation
(VYNPC). Entergy paid approximately $180 million in cash at the
closing of the purchase and received the plant, nuclear fuel,
inventories, and related real estate. As part of the Vermont Yankee
purchase, VYNPC transferred a $310 million decommissioning trust
fund, along with the liability to decommission Vermont Yankee, to
Entergy. The acquisition included a 10-year power purchase agreement
(PPA) under which the former owners will buy the power produced by
the plant. The PPA includes an adjustment clause where the prices
specified in the PPA will be adjusted downward annually, beginning in
2006, if power market prices drop below the PPA prices.
The acquisition was accounted for using the purchase method.
The results of operations of Vermont Yankee subsequent to the
purchase date have been included in Entergy's consolidated results of
operations. The Vermont Yankee purchase price has been preliminarily
allocated to the assets acquired and liabilities assumed based on
their estimated fair values on the purchase date. The allocation was
based on preliminary information and the final allocation may differ,
although management does not expect the difference to be material.
NOTE 9. EQUITY METHOD INVESTMENTS (Entergy Corporation)
See Note 13 to the financial statements in the Form 10-K for a
discussion of Entergy's equity method investments.
In the first quarter of 2002, EWO sold its interests in projects
in Argentina, Chile, and Peru, including Generandes Peru S.A. and
Compania Electrica San Isidro S.A. EWO had $100.8 million reflected
in "Investments in affiliates - at equity" for these investments as
of December 31, 2001, and reported $11.6 million of "Equity in
earnings of unconsolidated equity affiliates" from these investments
for the year ended December 31, 2001. After impairment provisions
recorded for these interests in 2001, the net loss realized on the
sale in the first quarter of 2002 is insignificant. Approximately
$66 million of cumulative translation adjustments were realized in
the sale.
As discussed in Note 6 to the financial statements, in the first
and second quarters of 2002, Entergy recorded a total impairment of
$78.3 million against the book value of its investments in Crete
Energy Ventures, LLC and RS Cogen LLC.
__________________________________
In the opinion of the management of Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy, the accompanying
unaudited financial statements contain all adjustments (consisting
primarily of normal recurring accruals and reclassification of
previously reported amounts to conform to current classifications)
necessary for a fair statement of the results for the interim periods
presented. However, the business of the domestic utility companies
and System Energy is subject to seasonal fluctuations with the peak
periods occurring during the third quarter. The results for the
interim periods presented should not be used as a basis for
estimating results of operations for a full year.
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this report,
evaluations were performed under the supervision and with the
participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy Resources (individually "Registrant" and
collectively the "Registrants") management, including their
respective Chief Executive Officers (CEO) and Chief Financial
Officers (CFO). The evaluations assessed the effectiveness of the
Registrants' disclosure controls and procedures. Based on the
evaluations, each CEO and CFO has concluded that, as to the
Registrant or Registrants for which they serve as CEO or CFO, the
Registrants' disclosure controls and procedures are effective to
ensure that information required to be disclosed by each Registrant
in reports that it files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules
and forms. Subsequent to the date of the evaluations, there were no
significant changes in the Registrants' internal controls or in other
factors that could significantly affect the disclosure controls,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Other Regulation and Litigation" in the
Form 10-K for a discussion of legal proceedings affecting Entergy.
Murphy Oil Lawsuit (Entergy Corporation and Entergy Louisiana)
Residents located near the Murphy Oil Refinery in Meraux,
Louisiana filed several lawsuits in state court in St. Bernard
Parish, Louisiana against Murphy Oil, Entergy Louisiana, and others
for injuries they allegedly suffered as a result of an explosion at
the refinery in June 1995. The lawsuits were consolidated and a
class of plaintiffs was certified. Plaintiffs alleged, among other
things, that an electrical fault at an Entergy Louisiana substation
contributed to causing the explosion. Murphy Oil filed a cross-claim
against Entergy Louisiana based on the same allegation, in which
Murphy Oil seeks recovery of any damages it has paid to the
plaintiffs. Claiborne P. Deming, who became a director of Entergy
Corporation in 2002, is the President and Chief Executive Officer of
Murphy Oil.
Murphy Oil and other defendants settled with the plaintiffs for
$8.8 million, but Entergy Louisiana did not participate in the
settlement. Entergy Louisiana believes the claims against it are
without merit and is vigorously defending itself. Entergy Louisiana
also has insurance in place for claims of this type. A trial date
for the remaining parties in the proceeding has been set for
September 2003.
Franchise Fee Litigation (Entergy Gulf States)
See "Franchise Fee Litigation" in Item 1 of Part I of the Form
10-K for a discussion of the litigation with the City of Nederland.
By agreement of the parties, an order abating the case has been
entered.
Fiber Optic Cable Litigation (Entergy Corporation, Entergy Gulf
States, Entergy Louisiana, and Entergy Mississippi)
See "Fiber Optic Cable Litigation" in Item 1 of Part I of the
Form 10-K for a discussion of the litigation pertaining to the
alleged installment by defendants of fiber optic cable across
plaintiffs' property without obtaining appropriate easements. In June
2002, a class action lawsuit was filed by two defendants in the
United States District Court of the Northern District of Mississippi
against Entergy Mississippi, purportedly on behalf of others
similarly situated, alleging that Entergy Mississippi installed fiber
optic cable across their property without obtaining the appropriate
easement. The plaintiffs seek declaratory relief and an unspecified
amount of damages, including punitive damages. Entergy Mississippi
filed a motion to dismiss in September 2002, contending that it has
no fiber optic cables attached to its facilities and has not
authorized any party to place fiber optic facilities on or under its
right of way on the property in question. Entergy Mississippi
intends to vigorously defend the lawsuit. At this time, management
cannot determine the specific amount of damages being sought.
Franchise Service Area Litigation (Entergy Gulf States)
See "Franchise Service Area Legislation" in Item 1 of Part I of
the Form 10-K for a discussion of the litigation with Beaumont Power
& Light (BP&L). In September 2002, the PUCT denied BP&L's
application. BP&L did not file a timely motion for rehearing, and
the proceeding has ended.
Ratepayer Lawsuits
(Entergy Corporation and Entergy Gulf States)
See "Entergy Gulf States Merger Savings Lawsuit" in Item 1 of
Part I of the Form 10-K for a discussion of the litigation filed by
ratepayers against Entergy Gulf States and Entergy Corporation. The
district court has denied Entergy Gulf States' and Entergy
Corporation's motions to transfer venue and to dismiss or abate on
the basis of the PUCT's jurisdiction over this matter. In September
2002, Entergy Gulf States and Entergy Corporation sought mandamus
relief at the Ninth District Court of Appeals. Proceedings have been
stayed in the district court pending the decision in the mandamus
application.
(Entergy Louisiana)
See "Vidalia Project Sub-Docket" in Item 1 of Part I of the Form
10-K for a discussion of the proceeding in which the LPSC was
reviewing several issues related to the contract entered into by
Entergy Louisiana to purchase energy generated by the Vidalia
project. The LPSC has approved a settlement of the proceeding and
has concluded the Vidalia project subdocket. The settlement is based
on Entergy Louisiana sharing with Entergy Louisiana customers a
portion of the benefits of a tax deduction that became available when
Entergy Louisiana elected to mark the Vidalia contract to market for
tax accounting purposes. The tax benefit sharing is described in
more detail in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" under the heading "Entergy Louisiana
Tax Accounting Election." Three of the issues listed in the Form 10-
K disclosure as part of the proceeding are not addressed by the
settlement, but there is no proceeding pending before the LPSC at
this time to consider them. Those issues are: (i) the LPSC's
jurisdiction over the Vidalia project; (ii) the appropriateness of
Entergy Louisiana's recovery of 100% of the Vidalia contract costs
from customers; and (iii) the appropriate regulatory treatment of the
Vidalia contract in the event the LPSC approves implementation of
retail competition.
(Entergy New Orleans)
See "Entergy New Orleans Rate of Return Lawsuit" in Item 1 of
Part I of the Form 10-K for a discussion of the litigation filed by
ratepayers against Entergy New Orleans. The hearing scheduled for
June 2002 was postponed and the proceeding has been continued without
a proposed trial date.
Street Lighting Lawsuit (Entergy New Orleans)
See "Street Lighting Lawsuit" in Item 1 of Part I of the Form
10-K for a discussion of the lawsuit filed by the City of New
Orleans alleging that Entergy New Orleans breached its obligations
to the City related to the provision of street lighting maintenance
services. After mediation, the City dismissed its lawsuit with
prejudice on October 28, 2002, and any amounts that might be owed by
Entergy New Orleans will be determined by an independent third party
audit. Management believes that Entergy New Orleans does not owe
the City any net amount under the street lighting contract, and
therefore does not expect to pay a significant amount to the City
after the audit.
Item 5. Other Information
Environmental Regulation (Entergy Gulf States)
The State of Louisiana is implementing emission control
strategies to address continued ozone non-attainment status of areas
in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued
a final rule for control of NOx as part of the State Implementation
Plan (SIP) to bring this area into attainment with the National
Ambient Air Quality standards for ozone by 2005. In August 2002, the
LDEQ issued a revision to this rule that is expected to lead to
installation of new NOx control equipment at Entergy Gulf States
generating units. The latest analyses indicate compliance costs at
these units may be as much as $12 million in new capital spending.
Most of the related expenditures would take place in 2003 and 2004.
Cost estimates will be refined as engineering studies progress.
Entergy Gulf States will be required to obtain revised operating
permits from the LDEQ and meet new, lower emission limits for NOx.
In September 2002, the EPA approved revisions to the SIP that
address NOx control. On October 2, 2002, the EPA then approved the
entire ozone attainment demonstration SIP for the Baton Rouge area.
In conjunction with this approval, the EPA also approved Louisiana's
transport demonstration and extended the ozone attainment date to
November 15, 2005, while retaining the area's current classification
as a serious ozone non-attainment area. The EPA withdrew its
previous rulemaking that determined non-attainment and
reclassification of the Baton Rouge area. Additionally, the EPA
found that the Baton Rouge ozone non-attainment area meets the
reasonably available control measures requirements of the Clean Air
Act; approved the State's enforceable commitment to submit revised
emission budgets for the transportation sector; and approved an
enforceable transportation control measure.
Wholesale Rate Matters (Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
As discussed in Part I, Item 1 of the Form 10-K, Entergy is
involved in litigation before the FERC and the LPSC regarding
production cost equalization under the System Agreement.
Negotiations among the parties have not resolved the proceeding
before the FERC, and that proceeding is now set for hearing
commencing in June 2003. The case had been set for hearing in
February 2003, and the extension of the trial date has also extended
the refund effective date reported in the Form 10-K by 120 days. In
the ex-parte proceeding commenced by the LPSC, the procedural
schedule has now been suspended through at least the June 2003
expected hearing date in the FERC proceeding. The LPSC staff has
filed testimony suggesting that the remedy for the alleged imprudence
of Entergy Louisiana and Entergy Gulf States should be a reduction in
allowed rate of return on common equity of 100 basis points.
Regional Transmission Organizations (Entergy, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi and
Entergy New Orleans)
On June 27, 2002, a number of utilities in the southeastern
United States, including the domestic utility companies, filed a
petition for declaratory order with the FERC, seeking guidance on
whether certain aspects of the proposed SeTrans RTO satisfied the
FERC's RTO requirements. On October 11, 2002, FERC issued an order
granting conditional approval of the central aspects of the SeTrans
proposal, including the governance structure, the transmission
pricing policy, the business model, and the selection process for the
Independent System Administrator. The FERC order states that the
FERC will not revisit findings made in the SeTrans docket if
inconsistencies exist between those findings and the final rules
issued in the standardized market design proceeding discussed
immediately below. At the state level, cost-benefit studies of RTO
participation have been ordered by the APSC and the LPSC, and the
Southeast Association of Regulatory Utility Commissions (SEARUC)
requested a cost-benefit study for the entire southeastern United
States, including the SeTrans region. The SEARUC study was released
on November 7, 2002 and is currently being analyzed by Entergy
management. Both the FERC order and the SEARUC cost-benefit study
will be discussed at the SeTrans Stakeholder Advisory Committee
meeting scheduled for November 14, 2002.
FERC Notice of Proposed Rulemaking (Entergy, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans)
On July 31, 2002, FERC issued a notice of proposed rulemaking to
establish a standardized transmission service and wholesale electric
market design. The proposed rules would
o establish a network access transmission service applicable to
all transmission users;
o require utilities to take the transmission component of bundled
transmission service under an open access transmission tariff;
o require transmission facilities to be operated by an independent
transmission provider;
o require that the independent transmission provider administer
the day-ahead and real-time energy and ancillary services markets;
o establish an access charge for embedded transmission costs;
o use location marginal pricing for transmission congestion
management and provide tradable congestion revenue rights;
o establish open imbalance energy markets;
o establish procedures to mitigate market power in the day-ahead
and real-time markets
o require under certain conditions that generation owners submit
offers to supply energy at prices that do not exceed specified price
ceilings; and
o establish procedures to assure adequate transmission, generation
and demand-side resources.
Comments on certain aspects of the proposed rule are due by mid-
November 2002, with comments due on the remaining issues in January
2003. Reply comments on all issues are due in February 2003.
Several technical conferences are scheduled for November and December
2002. Some of the retail regulators in Entergy's service territory
have publicly expressed opposition to the proposed rulemaking.
Management is in the process of evaluating this complex and lengthy
proposal.
Generating Capacity (Entergy, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
As discussed in Part I of the Form 10-K, the domestic utility
companies have met summer capacity needs by contracting for up to
3,000 MW of short-term purchased power. In September 2002, Entergy
Louisiana and Entergy Gulf States made an informational filing with
the LPSC containing a draft request for proposal for supply-side
resources. The final request for proposal was issued on November 1,
2002 by Entergy Services on behalf of the domestic utility companies.
The request for proposal seeks to meet both Entergy's summer 2003 and
longer term reliability needs through a broad range of wholesale
power products, including short and long-term contractual products
and possibly asset acquisitions. The request for proposals contains
a timeline for both short and long-term proposals that would enable
Entergy to enter into definitive agreements with winning bidders for
a portion of the summer capacity by the end of the first quarter
2003. Additional procurements will be made in early 2003 enabling
Entergy to sign definitive agreements in time to cover summer
capacity requirements.
Sarbanes-Oxley Act and Other Corporate Governance Standards
(Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
In response to recent corporate collapses resulting from
accounting irregularities and perceived failures of ethics and
controls, the U.S. Congress passed the Sarbanes-Oxley Act on July 25,
2002. President Bush signed the Act on July 30, 2002. The stated
purpose of the Act is to increase the reliability and accuracy of
corporate reporting and accounting and audit practices and to ensure
the independence of securities analyst advice and recommendations.
The Act purports to strengthen accounting oversight and corporate
accountability by enhancing disclosure requirements, increasing
accounting and auditor regulation, creating new federal crimes and
increasing penalties for existing federal crimes. In addition, on
August 1, 2002, the New York Stock Exchange adopted, subject to
approval by the Securities and Exchange Commission, new standards and
changes in corporate governance and practices for companies whose
securities are listed on that exchange. Management and the Board are
reviewing the new law and regulations as they are issued, and Entergy
is adopting new policies or procedures necessary to comply with the
new law and regulations as their various provisions become effective.
Entergy Corporation and Entergy Gulf States Merger
See "Entergy Corporation and Entergy Gulf States Merger" in Part
I, Item 1 of the Form 10-K for a discussion of the appeal to the D.C.
Circuit by the APSC, Arkansas Cities and Cooperatives, Arkansas
Electric Energy Consumers, the MPSC, and the State of Mississippi of
the FERC's approval of the merger of Entergy Corporation and Gulf
States Utilities. In May 2002 the D.C. Circuit denied the petitions
for review, thereby upholding the FERC's decision approving the
merger.
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, September 30,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 2.75
Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.57
Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.08
Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.50
Entergy New Orleans 2.70 2.65 3.00 2.66 (b) 1.10
System Energy 2.31 2.52 1.90 2.41 2.12 3.26
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, September 30,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.49
Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.39
Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 2.81
Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 2.25
Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c)
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock for the twelve months
ended December 31, 1997, 1998, and 1999.
(b) Earnings for the twelve months ended December 31, 2001, for
Entergy New Orleans were not adequate to cover fixed charges
and combined fixed charges and preferred dividends by $6.6
million and $9.5 million, respectively.
(c) Earnings for the twelve months ended September 30, 2002, for
Entergy New Orleans were not adequate to cover combined fixed
charges and preferred dividends by $.5 million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
** 4(a) - Twenty-second Supplemental Indenture, dated as of
September 1, 2002, to System Energy's Mortgage and Deed
of Trust, dated as of June 15, 1977 (filed as Exhibit A-
2(a) to Rule 24 Certificate dated October 4, 2002 in File
No. 70-9753).
4(b) - Tenth Supplemental Indenture, dated as of October 1,
2002, to Entergy New Orleans' Mortgage and Deed of Trust,
dated as of May 1, 1987.
** 4(c) - Seventeenth Supplemental Indenture, dated as of October
1, 2002, to Entergy Mississippi's Mortgage and Deed of
Trust, dated as of February 1, 1988 (filed as Exhibit A-
2(b) to Rule 24 Certificate dated October 31, 2002 in
File No. 70-9757).
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended September 30, 2002, which list, prepared in
accordance with Item 102 of Regulation S-T of the SEC,
immediately precedes the exhibits being filed with this
report on Form 10-Q for the quarter ended September 30,
2002.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation
A Current Report on Form 8-K, dated July 8, 2002, was
filed with the SEC on July 8, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2002,
was filed with the SEC on July 30, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy
A Current Report on Form 8-K, dated August 12, 2002,
was filed with the SEC on August 12, 2002, reporting
information under Item 9. "Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated August 13, 2002,
was filed with the SEC on August 13, 2002, reporting
information under Item 9. "Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated September 4,
2002, was filed with the SEC on September 4, 2002,
reporting information under Item 7. "Financial
Statements, Pro Forma Financial Statements and
Exhibits" and Item 9. "Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated September 18,
2002, was filed with the SEC on September 18, 2002,
reporting information under Item 7. "Financial
Statements, Pro Forma Financial Statements and
Exhibits" and Item 9. "Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated October 7, 2002,
was filed with the SEC on October 7, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Mississippi
A Current Report on Form 8-K, dated October 16, 2002,
was filed with the SEC on October 18, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure" and Item 7. "Financial
Statements, Pro Forma Financial Statements and
Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated October 18, 2002,
was filed with the SEC on October 18, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated October 22, 2002,
was filed with the SEC on October 22, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated October 30, 2002,
was filed with the SEC on October 30, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Arkansas
A Current Report on Form 8-K, dated November 1, 2002,
was filed with the SEC on November 4, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure" and Item 7. "Financial
Statements, Pro Forma Financial Statements and
Exhibits".
Entergy Arkansas
A Current Report on Form 8-K, dated November 6, 2002,
was filed with the SEC on November 8, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure" and Item 7. "Financial
Statements, Pro Forma Financial Statements and
Exhibits".
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Nathan E. Langston
Nathan E. Langston
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
Date: November 11, 2002
CERTIFICATIONS
I, J. Wayne Leonard, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Entergy
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ J. Wayne Leonard
J. Wayne Leonard
Chief Executive Officer,
Entergy Corporation
Date: November 11, 2002
CERTIFICATIONS
I, C. John Wilder, certify that:
1. I have reviewed these quarterly reports on Form 10-Q of Entergy
Corporation and System Energy Resources, Inc.;
2. Based on my knowledge, these quarterly reports do not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by these quarterly
reports;
3. Based on my knowledge, the financial statements, and other
financial information included in these quarterly reports,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrants as of,
and for, the periods presented in these quarterly reports;
4. The registrants' other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrants and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrants, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants' disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrants' other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants'
auditors and the audit committee of registrants' board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants'
ability to record, process, summarize and report financial data
and have identified for the registrants' auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants' internal controls; and
6. The registrants' other certifying officers and I have indicated
in these quarterly reports whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ C. John Wilder
C. John Wilder
Executive Vice President and Chief Financial Officer,
Entergy Corporation, System Energy Resources, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Hugh T. McDonald, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Entergy
Arkansas, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Hugh T. McDonald
Hugh T. McDonald
Chairman, President, and Chief Executive Officer,
Entergy Arkansas, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Joseph F. Domino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Entergy
Gulf States, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Joseph F. Domino
Joseph F. Domino
Chairman, President and Chief Executive Officer,
Texas of Entergy Gulf States, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, E. Renae Conley, certify that:
1. I have reviewed these quarterly reports on Form 10-Q of Entergy
Gulf States, Inc. and Entergy Louisiana, Inc.;
2. Based on my knowledge, these quarterly reports do not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by these quarterly
reports;
3. Based on my knowledge, the financial statements, and other
financial information included in these quarterly reports,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrants as of,
and for, the periods presented in these quarterly reports;
4. The registrants' other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrants and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrants, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants' disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrants' other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants'
auditors and the audit committee of registrants' board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants'
ability to record, process, summarize and report financial data
and have identified for the registrants' auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants' internal controls; and
6. The registrants' other certifying officers and I have indicated
in these quarterly reports whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ E. Renae Conley
E. Renae Conley
Chairman, President, and Chief Executive Officer of
Entergy Louisiana, Inc.; President and Chief Executive
Officer- Louisiana of Entergy Gulf States, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Carolyn C. Shanks, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Entergy
Mississippi, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Carolyn C. Shanks
Carolyn C. Shanks
Chairman, President, and Chief Executive Officer,
Entergy Mississippi, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Daniel F. Packer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Entergy
New Orleans, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Daniel F. Packer
Daniel F. Packer
Chairman, President, and Chief Executive Officer,
Entergy New Orleans, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Jerry W. Yelverton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of System
Energy Resources, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Jerry W. Yelverton
Jerry W. Yelverton
Chairman, President, and Chief Executive Officer,
System Energy Resources, Inc.
Date: November 11, 2002
CERTIFICATIONS
I, Theodore H. Bunting, Jr., certify that:
1. I have reviewed these quarterly reports on Form 10-Q of Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana,
Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc.;
2. Based on my knowledge, these quarterly reports do not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by these quarterly
reports;
3. Based on my knowledge, the financial statements, and other
financial information included in these quarterly reports,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrants as of,
and for, the periods presented in these quarterly reports;
4. The registrants' other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrants and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrants, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants' disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrants' other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants'
auditors and the audit committee of registrants' board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants'
ability to record, process, summarize and report financial data
and have identified for the registrants' auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrants' internal controls; and
6. The registrants' other certifying officers and I have indicated
in these quarterly reports whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Theodore H. Bunting, Jr.
Theodore H. Bunting, Jr.
Vice President and Chief Financial Officer,
Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc.,
Entergy New Orleans, Inc.
Date: November 11, 2002