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ENTERGY MISSISSIPPI, LLC - Quarter Report: 2006 March (Form 10-Q)

__________________________________________________________________________________________

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 March 31, 2006

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   
 

For the transition period from ____________ to ____________


Commission
File Number

Registrant, State of Incorporation, Address of
Principal Executive Offices, Telephone Number, and
IRS Employer Identification No.

 


Commission
File Number

Registrant, State of Incorporation, Address of
Principal Executive Offices, Telephone Number, and
IRS Employer Identification No.

1-11299

ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, LA 70113
Telephone (504) 576-4000
72-1229752

 

1-32718

ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
446 North Boulevard
Baton Rouge, LA 70802
Telephone (225) 381-5868
75-3206126

         
         

1-10764

ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900

 

1-31508

ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830

         
         

1-27031

ENTERGY GULF STATES, INC.
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
74-0662730

 

0-5807

ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street, Building 529
New Orleans, Louisiana 70112
Telephone (504) 670-3620
72-0273040

         
         

1-8474

ENTERGY LOUISIANA HOLDINGS, INC.
(a Texas corporation)
10055 Grogans Mill Road
Parkwood II Building
Suite 500
The Woodlands, Texas 77380
Telephone (281) 297-3647
72-0245590

 

1-9067

SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777

         

__________________________________________________________________________________________

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes

X

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

 

Large
accelerated
filer

 



Accelerated filer

 


Non-accelerated filer

Entergy Corporation

Ö

       

Entergy Arkansas, Inc.

       

Ö

Entergy Gulf States, Inc.

       

Ö

Entergy Louisiana Holdings, Inc.

       

Ö

Entergy Louisiana, LLC

       

Ö

Entergy Mississippi, Inc.

       

Ö

Entergy New Orleans, Inc.

       

Ö

System Energy Resources, Inc.

       

Ö

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Yes

No

X

Common Stock Outstanding

 

Outstanding at April 28, 2006

Entergy Corporation

($0.01 par value)

207,940,770

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana Holdings, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2005, filed by the individual registrants with the SEC, and should be read in conjunction therewith.

 

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2006

 

Page Number

   

Definitions

1

Entergy Corporation and Subsidiaries

 
 

Management's Financial Discussion and Analysis

 
   

Hurricane Katrina and Hurricane Rita

4

   

Results of Operations

5

   

Liquidity and Capital Resources

7

   

Significant Factors and Known Trends

10

   

Critical Accounting Estimates

14

 

Consolidated Statements of Income

15

 

Consolidated Statements of Cash Flows

16

 

Consolidated Balance Sheets

18

 

Consolidated Statements of Retained Earnings, Comprehensive Income, and
Paid-In Capital

20

 

Selected Operating Results

21

 

Notes to Consolidated Financial Statements

22

Entergy Arkansas, Inc.

 
 

Management's Financial Discussion and Analysis

 
   

Results of Operations

30

   

Liquidity and Capital Resources

31

   

Significant Factors and Known Trends

33

   

Critical Accounting Estimates

34

 

Income Statements

35

 

Statements of Cash Flows

37

 

Balance Sheets

38

 

Selected Operating Results

40

Entergy Gulf States, Inc.

 
 

Management's Financial Discussion and Analysis

 
   

Hurricane Rita and Hurricane Katrina

41

   

Results of Operations

41

   

Liquidity and Capital Resources

43

   

Significant Factors and Known Trends

44

   

Critical Accounting Estimates

46

 

Income Statements

47

 

Statements of Cash Flows

49

 

Balance Sheets

50

 

Statements of Retained Earnings and Comprehensive Income

52

 

Selected Operating Results

53

Entergy Louisiana Holdings, Inc. and Entergy Louisiana, LLC

 
 

Management's Financial Discussion and Analysis

 
   

Hurricane Rita and Hurricane Katrina

54

   

Results of Operations

54

   

Liquidity and Capital Resources

56

   

Significant Factors and Known Trends

58

   

Critical Accounting Estimates

59

Entergy Louisiana Holdings, Inc. and Subsidiaries

 
 

Income Statements

60

 

Statements of Cash Flows

61

 

Balance Sheets

62

 

Selected Operating Results

64

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2006

 

Page Number

   

Entergy Louisiana, LLC

 
 

Income Statements

65

 

Statements of Cash Flows

67

 

Balance Sheets

68

 

Statements of Members' Equity

70

Entergy Mississippi, Inc.

 
 

Management's Financial Discussion and Analysis

 
   

Hurricane Katrina

71

   

Results of Operations

71

 

 

Liquidity and Capital Resources

72

   

Significant Factors and Known Trends

74

Critical Accounting Estimates

75

 

Income Statements

76

 

Statements of Cash Flows

77

 

Balance Sheets

78

 

Selected Operating Results

80

Entergy New Orleans, Inc.

 
 

Management's Financial Discussion and Analysis

 
   

Hurricane Katrina

81

   

Bankruptcy Proceedings

81

   

Results of Operations

82

   

Liquidity and Capital Resources

83

   

Significant Factors and Known Trends

85

   

Critical Accounting Estimates

85

 

Income Statements

86

 

Statements of Cash Flows

87

 

Balance Sheets

88

 

Selected Operating Results

90

System Energy Resources, Inc.

 
 

Management's Financial Discussion and Analysis

 
   

Results of Operations

91

   

Liquidity and Capital Resources

91

   

Significant Factors and Known Trends

92

   

Critical Accounting Estimates

92

 

Income Statements

93

 

Statements of Cash Flows

95

 

Balance Sheets

96

Notes to Respective Financial Statements

98

Part I, Item 4. Controls and Procedures

107

Part II. Other Information

 
 

Item 1. Legal Proceedings

108

 

Item 1A. Risk Factors

108

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

109

 

Item 5. Other Information

109

 

Item 6. Exhibits

110

Signature

112

 

FORWARD-LOOKING INFORMATION

In this filing and from time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to the risk factors in the Form 10-K as well as others described elsewhere in this report and in subsequent securities filings) include:

  • resolution of pending and future rate cases and negotiations, including various performance-based rate discussions and implementation of new Texas legislation, and other regulatory proceedings, including those related to Entergy's System Agreement and Entergy's utility supply plan
  • Entergy's ability to manage its operation and maintenance costs
  • the performance of Entergy's generating plants, and particularly the capacity factors at its nuclear generating facilities
  • prices for power generated by Entergy's unregulated generating facilities, the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Non-Utility Nuclear plants, the ability to meet credit support requirements, and the prices and availability of power and fuel Entergy must purchase for its utility customers and operations
  • Entergy's ability to develop and execute on a point of view regarding prices of electricity, natural gas, and other energy-related commodities
  • changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute its share repurchase program, and fund investments and acquisitions
  • actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria
  • changes in inflation, interest rates, and foreign currency exchange rates
  • Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
  • volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
  • changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, the establishment of a regional transmission organization that includes Entergy's utility service territory, and the application of market power criteria by the FERC
  • changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those in the northeastern United States
  • uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel storage and disposal
  • resolution of pending or future applications for license extensions or modifications of nuclear generating facilities
  • changes in law resulting from the new federal energy legislation, including the effects of PUHCA repeal
  • changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances
  • the economic climate, and particularly growth in Entergy's service territory
  • variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of Hurricanes Katrina and Rita and recovery of costs associated with restoration including Entergy's ability to obtain financial assistance from governmental authorities in connection with these storms
  • the outcome of the Chapter 11 bankruptcy proceeding of Entergy New Orleans, and the impact of this proceeding on other Entergy companies
  • the potential effects of threatened or actual terrorism and war
  • the effects of Entergy's strategies to reduce tax payments
  • the effects of litigation and government investigations
  • changes in accounting standards, corporate governance, and securities law requirements
  • Entergy's ability to attract and retain talented management and directors

 

 

 

 

 

 

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DEFINITIONS

Certain abbreviations or acronyms used in the text are defined below:

Abbreviation or Acronym

Term

AEEC

Arkansas Electric Energy Consumers

AFUDC

Allowance for Funds Used During Construction

ALJ

Administrative Law Judge

ANO 1 and 2

Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas

APSC

Arkansas Public Service Commission

Board

Board of Directors of Entergy Corporation

Cajun

Cajun Electric Power Cooperative, Inc.

capacity factor

Actual plant output divided by maximum potential plant output for the period

City Council or Council

Council of the City of New Orleans, Louisiana

CPI-U

Consumer Price Index - Urban

DOE

United States Department of Energy

domestic utility companies

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively

EITF

FASB's Emerging Issues Task Force

Energy Commodity Services

Entergy's business segment that includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business

Entergy

Entergy Corporation and its direct and indirect subsidiaries

Entergy Corporation

Entergy Corporation, a Delaware corporation

Entergy-Koch

Entergy-Koch, LP, a joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc.

Entergy Louisiana

Entergy Louisiana Holdings, Inc. and Entergy Louisiana, LLC

EPA

United States Environmental Protection Agency

EPDC

Entergy Power Development Corporation, a wholly-owned subsidiary of Entergy Corporation

FASB

Financial Accounting Standards Board

FEMA

Federal Emergency Management Agency

FERC

Federal Energy Regulatory Commission

firm liquidated damages

Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset); if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract

FSP

FASB Staff Position

Grand Gulf

Unit No. 1 of Grand Gulf Steam Electric Generating Station (nuclear), 90% owned or leased by System Energy

GWh

Gigawatt-hour(s), which equals one million kilowatt-hours

Independence

Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power

IRS

Internal Revenue Service

ISO

Independent System Operator

kV

Kilovolt

kW

Kilowatt

kWh

Kilowatt-hour(s)

LDEQ

Louisiana Department of Environmental Quality

LPSC

Louisiana Public Service Commission

Mcf

One thousand cubic feet of gas

MMBtu

One million British Thermal Units

DEFINITIONS (Continued)

Abbreviation or Acronym

Term

MPSC

Mississippi Public Service Commission

MW

Megawatt(s), which equals one thousand kilowatt(s)

MWh

Megawatt-hour(s)

Nelson Unit 6

Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, owned 70% by Entergy Gulf States

Net debt ratio

Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents

Net MW in operation

Installed capacity owned or operated

Net revenue

Operating revenue net of fuel, fuel-related, and purchased power expenses; and other regulatory credits

Non-Utility Nuclear

Entergy's business segment that owns and operates five nuclear power plants and sells electric power produced by those plants primarily to wholesale customers

NRC

Nuclear Regulatory Commission

NYPA

New York Power Authority

OASIS

Open Access Same Time Information Systems

PPA

Purchased power agreement

production cost

Cost in $/MMBtu associated with delivering gas, excluding the cost of the gas

PRP

Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination)

PUCT

Public Utility Commission of Texas

PUHCA 1935

Public Utility Holding Company Act of 1935, as amended

PUHCA 2005

Public Utility Holding Company Act of 2005, which repealed PUHCA 1935, among other things

PURPA

Public Utility Regulatory Policies Act of 1978

Ritchie Unit 2

Unit 2 of the R.E. Ritchie Steam Electric Generating Station (gas/oil)

River Bend

River Bend Steam Electric Generating Station (nuclear), owned by Entergy Gulf States

SEC

Securities and Exchange Commission

SFAS

Statement of Financial Accounting Standards as promulgated by the FASB

SMEPA

South Mississippi Electric Power Agency, which owns a 10% interest in Grand Gulf

spark spread

Dollar difference between electricity prices per unit and natural gas prices after assuming a conversion ratio for the number of natural gas units necessary to generate one unit of electricity

System Agreement

Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources

System Energy

System Energy Resources, Inc.

System Fuels

System Fuels, Inc.

TWh

Terawatt-hour(s), which equals one billion kilowatt-hours

unit-contingent

Transaction under which power is supplied from a specific generation asset; if the specified generation asset is unavailable as a result of forced or planned outage or unanticipated event or circumstance, the seller is not liable to the buyer for any damages resulting from the seller's failure to deliver power

 

DEFINITIONS (Concluded)

Abbreviation or Acronym

Term

   

unit-contingent with
availability guarantees

Transaction under which power is supplied from a specific generation asset; if the specified generation asset is unavailable as a result of forced or planned outage or unanticipated event or circumstance, the seller is not liable to the buyer for any damages resulting from the seller's failure to deliver power unless the actual availability over a specified period of time is below an availability threshold specified in the contract

Unit Power Sales Agreement

Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf

Utility

Entergy's business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution

Waterford 3

Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana

weather-adjusted usage

Electric usage excluding the estimated effects of deviations from normal weather

White Bluff

White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas

 

ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.

  • Utility generates, transmits, distributes, and sells electric power in a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
  • Non-Utility Nuclear owns and operates five nuclear power plants located in the northeastern United States and sells the electric power produced by those plants primarily to wholesale customers. This business also provides services to other nuclear power plant owners.

In addition to its two primary, reportable, operating segments, Entergy also operates the Energy Commodity Services segment and the Competitive Retail Services business. Energy Commodity Services includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business. Entergy-Koch sold its businesses in the fourth quarter of 2004 and is no longer an operating entity. In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as part of All Other in its segment disclosures.

Hurricane Katrina and Hurricane Rita

See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. Following are updates to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy is currently preparing applications to seek CDBG funding. In March 2006, Entergy New Orleans, Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials. The statements, which will be reviewed by the Louisiana Recovery Authority, include the estimated costs of Hurricanes Katrina and Rita damage, as well as for Entergy New Orleans a lost customer base component intended to help offset the need for storm-related rate increases. The statements include justification for requests for CDBG funding of $718 million by Entergy New Orleans, $472 million by Entergy Louisiana, and $164 million by Entergy Gulf States-Louisiana.

As discussed more fully in the Form 10-K, Entergy estimates that its net insurance recoveries for the losses caused by Hurricanes Katrina and Rita will be approximately $382 million. Entergy has received $15 million thus far on its insurance claim, as it continues working towards payment of its covered losses.

See State and Local Rate Regulation below for an update on activity at Entergy Mississippi directed towards recovery of its storm restoration costs.

Entergy New Orleans Bankruptcy

See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following is an update to the discussion in the Form 10-K. In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006. In addition, the bankruptcy judge had set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.

Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding.  If dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors.  If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group.  If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.

As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans retroactive to January 1, 2005. Because Entergy owns all of the common stock of Entergy New Orleans, this change will not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' net income or loss being presented as "Equity in earnings (loss) of unconsolidated equity affiliates" rather than its results being included in each individual income statement line item, as is the case for periods prior to 2005.

Results of Operations

Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, and Entergy comparing the first quarter 2006 to the first quarter 2005 showing how much the line item increased or (decreased) in comparison to the prior period:

 


Utility

 

Non-Utility
Nuclear

 

Parent & Other


Entergy

 

 

 

 

 

 

 

2005 Consolidated Net Income

 

$96,027 

 

$77,966 

 

$4,386 

$178,379 

Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory credits)

 



65,472 



37,190 



10,253 



112,915 

Other operation and maintenance expenses

 

13,106 

7,799 

4,887 

25,792 

Taxes other than income taxes

 

6,807 

4,819 

1,096 

12,722 

Depreciation

 

(9,888)

219 

(464)

(10,133)

Other income

 

12,754 

(19,719)

(8,819)

(15,784)

Interest charges

 

4,895 

(492)

12,819 

17,222 

Other expenses and discontinued operations

 

950 

(186)

889 

1,653 

Income taxes

 

31,448 

1,748 

(6,608)

26,588 

2006 Consolidated Net Income

 

$126,935 

 

$81,530 

 

($6,799)

$201,666 

Refer to "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS" for further information with respect to operating statistics.

Net Revenue

Utility

Following is an analysis of the change in net revenue, which is Entergy's measure of gross margin, comparing the first quarter of 2006 to the first quarter of 2005.

  

 

Amount

  

 

(In Millions)

 

 

 

2005 net revenue

 

$858.8 

Base revenues/Attala cost deferral

 

21.9 

Net wholesale revenue

 

13.0 

Fuel recovery

 

11.9 

Rate refund provisions

 

4.3 

Volume/weather

 

(8.8)

Other

 

23.1 

2006 net revenue

 

$924.2 

The base revenues and Attala cost deferral variance resulted primarily from increases at Entergy Gulf States due to formula rate plan increases and the inclusion of Perryville-related revenues in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider that began in December 2005 in the Texas jurisdiction and the transition to competition rider that began in March 2006 in the Texas jurisdiction. In addition, Entergy Mississippi deferred under-recovered Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.

The net wholesale revenue variance resulted from higher volume and higher margins on wholesale contracts.

The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction, partially offset by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.

The rate refund provisions variance resulted primarily from a provision recorded at Entergy Louisiana in the first quarter of 2005 as a result of a settlement with the LPSC staff.

The volume/weather variance resulted primarily from milder weather in the first quarter of 2006 compared to the first quarter of 2005. Billed usage decreased by 208 GWh in the residential sector. The decrease was partially offset by increased usage during the unbilled period.

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to fewer refueling outages in 2006 and power uprates at certain plants completed in 2005 and 2006. Following are key performance measures for Non-Utility Nuclear for the first quarters of 2006 and 2005:

 

 

2006

 

2005

 

 

 

 

 

Net MW in operation at March 31

 

4,135

 

4,058

Average realized price per MWh

 

$44.39

 

$41.56

Generation in GWh for the quarter

 

8,742

 

8,267

Capacity factor for the quarter

 

97.1%

 

93.2%

Other Operation and Maintenance Expenses

Utility

Other operation and maintenance expenses increased from $346 million for the first quarter of 2005 to $359 million for the first quarter of 2006 primarily due to:

  • an increase of $5.2 million in storm reserves;
  • an increase of $4.2 million in nuclear expenses for contract and labor costs associated with an unplanned outage and timing issues; and
  • a credit against bad debt expense of $4.1 million at Entergy Arkansas in the first quarter of 2005 in accordance with a settlement agreement with the APSC.

Non-Utility Nuclear

Other operation and maintenance expenses increased from $142 million for the first quarter of 2005 to $150 million for the first quarter of 2006 primarily due to the absence of refueling outages in the current period. As discussed in Note 1 to the consolidated financial statements in the Form 10-K, nuclear refueling outage costs are deferred during the outage and amortized over the period to the next outage.

Other Income

Utility

Other income increased from $31 million for the first quarter of 2005 to $43 million for the first quarter of 2006 primarily due to an increase in interest and dividend income due to both increased interest income recorded on the deferred fuel balance and additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K.

Non-Utility Nuclear

Other income decreased primarily due to miscellaneous income of $26 million in 2005 resulting from a reduction in the decommissioning liability for a plant in conjunction with a new decommissioning cost study. The decrease was partially offset by an increase of $3.6 million in interest income.

Interest Charges

Interest charges increased for Parent & Other Business Segments primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricane Katrina and Hurricane Rita.

Income Taxes

The effective income tax rates for the first quarters of 2006 and 2005 were 36.8% and 33.9%, respectively.

Liquidity and Capital Resources

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.

Debtor-in-Possession Credit Agreement

See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Following is an update to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, primarily using its portion of the income tax refund that resulted from application of the Gulf Opportunity Zone Act, which is discussed below in "Operating Activities." As of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility.

Capital Structure

Entergy's capitalization is balanced between equity and debt, as shown in the following table.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

Net debt to net capital

 

50.0%

 

51.5%

Effect of subtracting cash from debt

 

2.1%

 

1.6%

Debt to capital

 

52.1%

 

53.1%

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.

As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expires in May 2010 and the three-year facility expires in December 2008. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of March 31, 2006:


Facility

 


Capacity

 


Borrowings

 

Letters
of Credit

 

Capacity
Available

   

(In Millions)

                 

5-Year Facility

 

$2,000 

 

$805 

 

$111 

 

$1,084

3-Year Facility

 

$1,500 

 

$- 

 

$-  

 

$1,500

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, each have credit facilities available as of March 31, 2006 as follows:


Company

 


Expiration Date

 

Amount of
Facility

 

Amount Drawn as of
March 31, 2006

 

 

 

 

 

 

 

Entergy Arkansas

 

April 2006

 

$85 million (a)

 

-

Entergy Gulf States

 

February 2011

 

$25 million (b)

 

-

Entergy Louisiana

 

April 2006

 

$85 million (a)

 

-

Entergy Mississippi

 

May 2006

 

$25 million (c)

 

-

(a)

The combined amount borrowed by Entergy Arkansas and Entergy Louisiana under these facilities at any one time cannot exceed $85 million. Entergy Louisiana granted a security interest in its receivables to secure its $85 million facility.

(b)

The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of March 31, 2006, $1.4 million in letters of credit had been issued.

(c)

Borrowings under the Entergy Mississippi facility may be secured by a security interest in its receivables.

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' renewed facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.

In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.

See Note 4 to the consolidated financial statements for additional discussion of Entergy's credit facilities.

Capital Expenditure Plans and Other Uses of Capital

See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of planned construction and other capital investments by operating segment for 2006 through 2008.

Cash Flow Activity

As shown in Entergy's Statements of Cash Flows, cash flows for the three months ended March 31, 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Millions)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$583 

 

$620 

 

 

 

 

 

Effect of deconsolidating Entergy New Orleans in 2005

(8)

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

 1,012 

 

497 

 

Investing activities

 

(859)

 

(559)

 

Financing activities

 

16 

 

(73)

Net increase (decrease) in cash and cash equivalents

 

169 

 

(135)

 

 

 

 

 

Cash and cash equivalents at end of period

 

$752 

 

$477 

Operating Activities

Entergy's cash flow provided by operating activities increased by $515 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to receipt of a $344 million income tax refund, increased collection of deferred fuel costs, and increased net revenue at Non-Utility Nuclear, partially offset by storm restoration spending. Following are cash flows from operating activities by segment:

  • Utility provided $483 million in cash from operating activities in 2006 compared to providing $383 million in 2005.
  • Non-Utility Nuclear provided $213 million in cash from operating activities in 2006 compared to providing $131 million in 2005.
  • Parent & Other provided $338 million in cash from operating activities in 2006 compared to using $12 million in 2005.

The income tax refund was received by Entergy Corporation (including $71 million attributable to Entergy New Orleans) as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, $273 million of the refund was distributed to the Utility in April 2006, with most of the remainder distributed to Non-Utility Nuclear.

Investing Activities

Net cash used in investing activities increased by $300 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to the following activity:

  • Construction expenditures were $392 million higher in 2006 than in 2005, primarily due to an increase of $426 million in the Utility business because of storm restoration expenditures.
  • The purchase of the 480 MW Attala power plant by Entergy Mississippi in January 2006.

The increase was partially offset because Entergy's investment in other temporary investments increased by $289 million during the first quarter 2005. Entergy had no activity in other temporary investments during the first quarter 2006.

Financing Activities

Financing activities provided $16 million of cash for the three months ended March 31, 2006 compared to using $73 million of cash for the three months ended March 31, 2005 primarily due to the following activity:

  • Net issuances of long-term debt by the Utility segment provided $73 million in the first quarter 2006 compared to retirements of long-term debt net of issuances using $39 million in the first quarter 2005. See Note 4 to the consolidated financial statements for the details of long-term debt activity in the first quarter of 2006.
  • Entergy Corporation repurchased $383 million of its common stock in the first quarter 2005.
  • In the first quarter 2006, Entergy Corporation increased the net borrowings on its credit facilities by $20 million, compared to increasing the net borrowings on its credit facilities by $408 million in the first quarter 2005. See Note 4 to the consolidated financial statements for a description of the Entergy Corporation credit facilities.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for discussions of rate regulation, federal regulation, market and credit risks, utility restructuring, and nuclear matters. Following are updates to the information provided in the Form 10-K.

State and Local Rate Regulation

See the Form 10-K for the chart summarizing material rate proceedings. Following are updates to that chart.

Entergy Arkansas

In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh would replace the interim rate of $0.01900 per kWh that has been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.

On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.

Entergy Gulf States-Louisiana

In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.

Entergy Mississippi

In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing shows that an increase of $3.1 million in electric revenues is warranted.  The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing.  Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006.  A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as securitization).  Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

Entergy New Orleans

In April 2006, the City Council agreed to delay Entergy New Orleans' 2005 formula rate plan filing to July 2006 from the originally scheduled May 1, 2006 deadline.

Federal Regulation

System Agreement Litigation

See the Form 10-K for a discussion of the System Agreement litigation proceedings at the FERC. In April 2006, Entergy filed with the FERC its compliance filing to implement the provisions of the FERC's decision. The filing amends the System Agreement to provide for the calculation of production costs, average production costs, and payments among the domestic utility companies to the extent required to maintain rough production cost equalization pursuant to the FERC's decision, and makes clear that all payments/receipts will be classified as energy costs. The payments would be based on calendar year 2006 production costs, with any payments between the domestic utility companies to be made in twelve equal monthly installments, commencing in June 2007.

Independent Coordinator of Transmission (ICT)

In April 2006 the FERC issued an order approving with modification Entergy's ICT proposal filed in May 2005. In its order, the FERC: (1) approved the establishment of the ICT, with modifications; (2) approved Entergy's proposed pricing policy, with modifications; (3) approved the implementation of a weekly procurement process (WPP); and (4) ordered Entergy to submit a compliance filing and an executed contract with the Southwest Power Pool, the approved ICT, within 60 days of the order. Requests for rehearing of the FERC order are due May 24, 2006.

The proposed modifications include, among other things: (1) Entergy must file with the FERC the criteria used to grant and deny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to four years; and Entergy is precluded from terminating the ICT prior to the end of the four year period; (3) the establishment of a transmission users group that will provide input directly to the ICT on the effectiveness of the ICT Proposal and also will propose to the FERC an appropriate means by which they could be given access to inputs in the process and models under the direction of the ICT; (4) With regard to any dispute between the ICT and Entergy concerning transmission service requests, transmission planning, and interconnection requests, the ICT's position will prevail during the pendency of the dispute resolution; (5) The WPP must be operational within approximately 14 months of the FERC order or the FERC may reevaluate all approvals to proceed with the ICT.

Market and Credit Risks

Commodity Price Risk

Power Generation

As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business and Energy Commodity Services business, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward as of March 31, 2006 under physical or financial contracts (2006 represents the remaining three quarters of the year):

   

2006

 

2007

 

2008

 

2009

 

2010

Non-Utility Nuclear:

                   

Percent of planned generation sold forward:

                   
 

Unit-contingent

 

34%

 

32%

 

27%

 

21%

 

12%

 

Unit-contingent with guarantee of availability

 

53%

 

47%

 

32%

 

13%

 

5%

 

Firm liquidated damages

 

4%

 

2%

 

0%

 

0%

 

0%

 

Total

 

91%

 

81%

 

59%

 

34%

 

17%

Planned generation (TWh)

 

26

 

34

 

34

 

35

 

34

Average contracted price per MWh

 

$41

 

$45

 

$50

 

$56

 

$46

A sale of power on a unit contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy's outstanding guarantees of availability provide for dollar limits on Entergy's maximum liability under such guarantees. The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy the power produced by the plant through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly if power market prices drop below PPA prices.

See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants.

Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary will be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary form of collateral to satisfy these requirements would be an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2006, based on power prices at that time, Entergy had in place as collateral $1,527 million of Entergy Corporation guarantees for wholesale transactions, $108 million of which support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount up to $400 million if gas prices increase $1 per MMBtu in both the short- and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.

In addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward as of March 31, 2006 (2006 represents the remaining three quarters of the year):

   

2006

 

2007

 

2008

 

2009

 

2010

Non-Utility Nuclear:

                   

Percent of capacity sold forward:

                   
 

Bundled capacity and energy contracts

 

12%

 

12%

 

12%

 

12%

 

12%

 

Capacity contracts

 

77%

 

48%

 

36%

 

24%

 

3%

 

Total

 

89%

 

60%

 

48%

 

36%

 

15%

Planned net MW in operation

 

4,200

 

4,200

 

4,200

 

4,200

 

4,200

Average capacity contract price per kW per month

 

$1.1

 

$1.1

 

$1.1

 

$1.0

 

$0.9

Blended Capacity and Energy (based on revenues)

                   

% of planned generation and capacity sold forward

 

85%

 

72%

 

50%

 

29%

 

12%

Average contract revenue per MWh

 

$42

 

$46

 

$51

 

$57

 

$46

Following is a summary of the amount of Energy Commodity Services' output and installed capacity that is sold forward under physical or financial contracts at fixed prices as of March 31, 2006 (2006 represents the remaining three quarters of the year):

   

2006

 

2007

 

2008

 

2009

 

2010

Energy Commodity Services:

                   

Capacity

                   

Planned MW in operation

 

1,578

 

1,578

 

1,578

 

1,578

 

1,578

% of capacity sold forward

 

30%

 

29%

 

29%

 

19%

 

17%

Energy

                   

Planned generation (TWh)

 

3

 

4

 

4

 

4

 

4

% of planned generation sold forward

 

40%

 

38%

 

40%

 

33%

 

35%

Blended Capacity and Energy (based on revenues)

                   

% of planned energy and capacity sold forward

 

21%

 

21%

 

23%

 

15%

 

16%

Average contract revenue per MWh

 

$25

 

$28

 

$28

 

$21

 

$20

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies. Following is an update to that discussion.

Unbilled Revenue

Effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
    2006   2005
    (In Thousands, Except Share Data)
         
OPERATING REVENUES        
Domestic electric   $2,092,933    $1,702,017 
Natural gas   37,415    26,855 
Competitive businesses   437,683    381,310 
TOTAL   2,568,031    2,110,182 
         
OPERATING EXPENSES        
Operating and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   840,171    498,986 
  Purchased power   461,370    431,623 
  Nuclear refueling outage expenses   41,993    39,811 
  Other operation and maintenance   529,430    503,639 
Decommissioning   35,596    36,998 
Taxes other than income taxes   103,338    90,616 
Depreciation and amortization   205,388    215,521 
Other regulatory credits - net   (44,018)   (18,020)
TOTAL   2,173,268    1,799,174 
         
OPERATING INCOME   394,763    311,008 
         
OTHER INCOME        
Allowance for equity funds used during construction   15,459    12,602 
Interest and dividend income   43,831    30,618 
Equity in earnings of unconsolidated equity affiliates   3,586    3,302 
Miscellaneous - net   (6,207)   25,931 
TOTAL   56,669    72,453 
         
INTEREST AND OTHER CHARGES        
Interest on long-term debt   120,481    107,266 
Other interest - net   17,261    11,485 
Allowance for borrowed funds used during construction   (9,045)   (7,277)
TOTAL   128,697    111,474 
         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES   322,735    271,987 
         
Income taxes   118,830    92,242 
         
INCOME FROM CONTINUING OPERATIONS   203,905    179,745 
         
LOSS FROM DISCONTINUED OPERATIONS (net of income tax        
benefit of ($1,204) and ($732) , respectively)   (2,239)   (1,366)
          
CONSOLIDATED NET INCOME   201,666    178,379 
         
Preferred dividend requirements and other   8,038    6,383 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $193,628    $171,996 
         
Basic earnings (loss) per average common share:        
  Continuing operations   $0.94    $0.81 
  Discontinued operations   ($0.01)   ($0.01)
  Basic earnings per average common share   $0.93    $0.80 
Diluted earnings (loss) per average common share:        
  Continuing operations   $0.93    $0.80 
  Discontinued operations   ($0.01)   ($0.01)
  Diluted earnings per average common share   $0.92    $0.79 
Dividends declared per common share   $0.54    $0.54 
         
Basic average number of common shares outstanding   207,732,341    214,128,023 
Diluted average number of common shares outstanding   211,374,512    218,633,202 
         
See Notes to Consolidated Financial Statements.        

 

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
    2006   2005
    (In Thousands)
   
OPERATING ACTIVITIES        
Consolidated net income   $201,666    $178,379 
Adjustments to reconcile consolidated net income to net cash flow        
 provided by operating activities:        
  Reserve for regulatory adjustments   42,162    16,498 
  Other regulatory credits - net   (44,018)   (18,020)
  Depreciation, amortization, and decommissioning   241,807    253,089 
  Deferred income taxes and investment tax credits   (52,261)   23,878 
  Equity in earnings of unconsolidated equity affiliates - net of dividends   (1,412)   (2,702)
  Changes in working capital:        
    Receivables   328,019    134,939 
    Fuel inventory   (28,607)   (3,273)
    Accounts payable   (256,420)   (165,269)
    Taxes accrued   459,003    23,070 
    Interest accrued   (16,861)   (9,804)
    Deferred fuel   199,619    69,825 
    Other working capital accounts   140,795    (96,149)
  Provision for estimated losses and reserves   15,029    11,116 
  Changes in other regulatory assets   (75,674)   11,995 
  Other   (140,332)   69,193 
Net cash flow provided by operating activities   1,012,515    496,765 
         
INVESTING ACTIVITIES        
Construction/capital expenditures   (664,178)   (271,829)
Allowance for equity funds used during construction   15,459    12,602 
Nuclear fuel purchases   (91,027)   (103,606)
Proceeds from sale/leaseback of nuclear fuel   8,827    82,658 
Payment for purchase of plant   (88,199)  
Investment in nonutility properties     (1,476)
Decrease in other investments   12,340    37,280 
Purchases of other temporary investments     (1,437,725)
Liquidation of other temporary investments     1,148,725 
Proceeds from nuclear decommissioning trust fund sales   283,874    227,290 
Investment in nuclear decommissioning trust funds   (312,417)   (252,371)
Other regulatory investments   (23,448)  
Net cash flow used in investing activities   (858,769)   (558,452)
         
See Notes to Consolidated Financial Statements.        
         
         
         
         
         
         
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
    2006   2005
    (In Thousands)
     
FINANCING ACTIVITIES        
Proceeds from the issuance of:        
  Long-term debt   748,584    705,551 
  Preferred stock   73,354   
  Common stock and treasury stock   11,805    64,280 
Retirement of long-term debt   (655,649)   (336,314)
Repurchase of common stock     (382,593)
Redemption of preferred stock   (2,250)   (2,250)
Changes in credit line borrowings - net   (40,000)   (75)
Dividends paid:        
  Common stock   (112,190)   (115,504)
  Preferred stock   (7,661)   (6,409)
Net cash flow provided by (used in) financing activities   15,993    (73,314)
         
Effect of exchange rates on cash and cash equivalents   (173)   44 
         
Net increase (decrease) in cash and cash equivalents   169,566    (134,957)
         
Cash and cash equivalents at beginning of period   582,820    619,786 
         
Effect of the deconsolidation of Entergy New Orleans on cash and cash equivalents     (7,954)
         
Cash and cash equivalents at end of period   $752,386    $476,875 
         
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
  Cash paid (received) during the period for:        
    Interest - net of amount capitalized   $146,429    $122,258 
    Income taxes   ($345,366)   $10,011 
         
See Notes to Consolidated Financial Statements.        
         

 

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
    2006   2005
    (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents:        
  Cash   $150,640    $221,773 
  Temporary cash investments - at cost,        
   which approximates market   601,746    361,047 
     Total cash and cash equivalents   752,386    582,820 
Note receivable - Entergy New Orleans DIP loan   80,000    90,000 
Notes receivable   3,102    3,227 
Accounts receivable:        
  Customer   597,140    732,455 
  Allowance for doubtful accounts   (29,270)   (30,805)
  Other   359,024    356,414 
  Accrued unbilled revenues   233,907    477,570 
     Total receivables   1,160,801    1,535,634 
Deferred fuel costs   268,270    543,927 
Fuel inventory - at average cost   234,802    206,195 
Materials and supplies - at average cost   564,253    610,932 
Deferred nuclear refueling outage costs   127,244    157,764 
Prepayments and other   93,246    325,795 
TOTAL   3,284,104    4,056,294 
         
OTHER PROPERTY AND INVESTMENTS        
Investment in affiliates - at equity   295,872    296,784 
Decommissioning trust funds   2,658,192    2,606,765 
Non-utility property - at cost (less accumulated depreciation)   235,323    228,833 
Other   83,716    81,535 
TOTAL   3,273,103    3,213,917 
         
PROPERTY, PLANT AND EQUIPMENT        
Electric   29,899,453    29,161,027 
Property under capital lease   726,597    727,565 
Natural gas   86,051    86,794 
Construction work in progress   1,090,723    1,524,085 
Nuclear fuel under capital lease   257,467    271,615 
Nuclear fuel   424,824    436,646 
TOTAL PROPERTY, PLANT AND EQUIPMENT   32,485,115    32,207,732 
Less - accumulated depreciation and amortization   13,174,882    13,010,687 
PROPERTY, PLANT AND EQUIPMENT - NET   19,310,233    19,197,045 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  SFAS 109 regulatory asset - net   709,514    735,221 
  Other regulatory assets   2,273,111    2,133,724 
  Deferred fuel costs   210,149    120,489 
Long-term receivables   24,265    25,572 
Goodwill   377,172    377,172 
Other   1,054,395    991,835 
TOTAL   4,648,606    4,384,013 
          
TOTAL ASSETS   $30,516,046    $30,851,269 
         
See Notes to Consolidated Financial Statements.        
 
 
 
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
    2006   2005
    (In Thousands)
         
CURRENT LIABILITIES        
Currently maturing long-term debt   $103,863    $103,517 
Notes payable   41    40,041 
Accounts payable   965,229    1,655,787 
Customer deposits   230,092    222,206 
Taxes accrued   224,126    188,159 
Accumulated deferred income taxes   95,644    143,409 
Nuclear refueling outage costs   19,101    15,548 
Interest accrued   137,994    154,855 
Obligations under capital leases   138,488    130,882 
Other   347,776    473,510 
TOTAL   2,262,354    3,127,914 
         
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued   5,551,039    5,279,228 
Accumulated deferred investment tax credits   372,084    376,550 
Obligations under capital leases   149,674    175,005 
Other regulatory liabilities   432,878    408,667 
Decommissioning and retirement cost liabilities   1,958,524    1,923,971 
Transition to competition   79,098    79,101 
Regulatory reserves   17,245    18,624 
Accumulated provisions   555,472    556,028 
Long-term debt   8,924,931    8,824,493 
Preferred stock with sinking fund   11,700    13,950 
Other   1,641,917    1,879,017 
TOTAL   19,694,562    19,534,634 
         
Commitments and Contingencies        
         
Preferred stock without sinking fund   520,909    445,974 
         
SHAREHOLDERS' EQUITY        
Common stock, $.01 par value, authorized 500,000,000        
 shares; issued 248,174,087 shares in 2006 and in 2005   2,482    2,482 
Paid-in capital   4,816,037    4,817,637 
Retained earnings   5,509,897    5,428,407 
Accumulated other comprehensive loss   (149,006)   (343,819)
Less - treasury stock, at cost (40,251,611 shares in 2006 and        
 40,644,602 shares in 2005)   2,141,189    2,161,960 
TOTAL   8,038,221    7,742,747 
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $30,516,046    $30,851,269 
         
See Notes to Consolidated Financial Statements.        

 

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
         
        2006   2005
        (In Thousands)
RETAINED EARNINGS                    
Retained Earnings - Beginning of period       $5,428,407        $4,984,302     
                     
  Add - Earnings applicable to common stock       193,628    $193,628   171,996    $171,996 
                     
  Deduct:                    
    Dividends declared on common stock       112,138        115,629     
    Other             14     
      Total       112,138        115,643     
                     
Retained Earnings - End of period       $5,509,897        $5,040,655     
                     
ACCUMULATED OTHER COMPREHENSIVE LOSS                    
Balance at beginning of period                    
  Accumulated derivative instrument fair value changes       ($392,614)       ($141,411)    
  Other accumulated comprehensive income items       48,795        47,958     
     Total       (343,819)       (93,453)    
                     
Net derivative instrument fair value changes                    
 arising during the period (net of tax expense (benefit) of $120,392 and ($12,610))       191,313    191,313   (20,035)   (20,035)
                     
Foreign currency translation (net of tax expense (benefit) of $93 and ($24))       173    173   (44)   (44)
                     
Minimum pension liability (net of tax benefit of ($1,344))         -   (2,053)   (2,053)
                     
Net unrealized investment gains (net of tax expense (benefit) of $2,315 and ($808))       3,327    3,327   (1,212)   (1,212)
                     
Balance at end of period:                    
  Accumulated derivative instrument fair value changes       (201,301)       (161,446)    
  Other accumulated comprehensive income items       52,295        44,649     
     Total       ($149,006)       ($116,797)    
Comprehensive Income           $388,441       $148,652 
                     
PAID-IN CAPITAL                    
Paid-in Capital - Beginning of period       $4,817,637        $4,835,375     
                     
    Add: Common stock issuances related to stock plans       (1,600)       (8,578)    
                     
Paid-in Capital - End of period       $4,816,037        $4,826,797     
                     
                     
                     
See Notes to Consolidated Financial Statements.                    

 

ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
                 
            Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars in Millions)    
Utility Electric Operating Revenues:                
   Residential   $697    $593    $104    18 
   Commercial   541    428    113    26 
   Industrial   667    549    118    21 
   Governmental   40    32      25 
      Total retail   1,945    1,602    343    21 
   Sales for resale   175    139    36    26 
   Other   (27)   (39)   12    31 
      Total   $2,093    $1,702    $391    23 
                 
Utility Billed Electric Energy                
 Sales (GWh):                 
   Residential   6,963    7,170    (207)   (3)
   Commercial   5,534    5,471    63   
   Industrial   9,053    9,452    (399)   (4)
   Governmental   382    383    (1)  
      Total retail   21,932    22,476    (544)   (2)
   Sales for resale   1,435    1,122    313    28 
      Total   23,367    23,598    (231)   (1)
                 
                 

 

ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. COMMITMENTS AND CONTINGENCIES

Entergy New Orleans Bankruptcy

See Note 9 to the consolidated financial statements for information on the Entergy New Orleans bankruptcy proceeding.

Nuclear Insurance

See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy's nuclear power plants

Non-Nuclear Property Insurance

See Note 8 to the consolidated financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited for any one occurrence will be reduced to $500 million.

Nuclear Decommissioning and Other Asset Retirement Costs

See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.

Employment Litigation

Entergy Corporation and certain subsidiaries are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies deny any liability to the plaintiffs.

NOTE 2. RATE AND REGULATORY MATTERS

Regulatory Assets

Other Regulatory Assets

See Note 2 to the consolidated financial statements in the Form 10-K for information regarding regulatory assets reflected on the balance sheets of the domestic utility companies and System Energy. The following are updates to the Form 10-K.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as securitization). 

Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

Deferred Fuel Costs

See Note 2 to the consolidated financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies.

Entergy Arkansas

In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh would replace the interim rate of $0.01900 per kWh that has been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.

On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.

Entergy Gulf States

On March 1, 2006, Entergy Gulf States filed with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97 million including interest of eligible fuel costs for the period August 2005 through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States has entered into a unanimous settlement that would reduce the requested surcharge for actual over-collections from the months of February and March 2006, resulting in a surcharge of $78.8 million to be implemented over a twelve-month period beginning in June 2006. Amounts collected through the interim fuel surcharges are subject to final reconciliation in a future fuel reconciliation proceeding.

Entergy Gulf States and Entergy Louisiana

In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities of Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006, the LPSC accepted the LPSC Staff's audit report finding that the prices paid for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and Entergy Gulf States acted reasonably and prudently in response to an extremely difficult environment.

Unbilled Revenue and Deferred Fuel Costs

Effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.

Retail Rate Proceedings

See Note 2 to the consolidated financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.

Filings with the PUCT and Texas Cities

As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement in principle on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The settlement agreement has been filed and is expected to be considered by the PUCT in May 2006.

Filings with the LPSC

Retail Rates - Electric (Entergy Gulf States)

In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.

Retail Rates - Gas (Entergy Gulf States)

In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff. The rates are implemented subject to refund pending approval by the LPSC. An LPSC decision is expected during the second quarter of 2006.

Filings with the MPSC

In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing shows that an increase of $3.1 million in electric revenues is warranted.  The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing.  Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006.  A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.

NOTE 3. COMMON EQUITY

Common Stock

Earnings per Share

The following tables present Entergy's basic and diluted earnings per share (EPS) calculations included on the consolidated income statement:

 

 

For the Three Months Ended March 31,

 

 

2006

 

2005

 

 

(In Millions, Except Per Share Data)

 

 

 

 

$/share

 

 

 

$/share

Earnings applicable to common stock

 

$193.6

 

 

 

$172.0

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares
  outstanding - basic

 


207.7

 


$0.93 

 


214.1

 


$0.80 

Average dilutive effect of:

 

 

 

 

 

 

 

 

 

Stock Options

 

3.5

 

(0.015)

 

4.3

 

(0.016)

 

Deferred Units

 

0.2

 

(0.001)

 

0.2

 

(0.001)

Average number of common shares
  outstanding - diluted

 


211.4

 


$0.92 

 


218.6

 


$0.79 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Entergy's stock option and other equity compensation plans are discussed in Note 7 to the consolidated financial statements in the Form 10-K.

Treasury Stock

During the first quarter of 2006, Entergy Corporation issued 392,991 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards.

Retained Earnings

On April 11, 2006, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54 per share, payable on June 1, 2006 to holders of record as of May 11, 2006.

Accumulated Other Comprehensive Income

Cash flow hedges with net unrealized losses of approximately $206 million at March 31, 2006 are scheduled to mature during the next twelve months.

NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT

Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion, of which $805 million was outstanding as of March 31, 2006. The three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion, none of which was outstanding as of March 31, 2006. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities, and letters of credit totaling $111 million had been issued against the five-year facility at March 31, 2006. The total unused capacity for these facilities as of March 31, 2006 was approximately $2.6 billion. The commitment fee for this facility is currently 0.13% per annum of the unused amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior debt ratings of the domestic utility companies.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, each have credit facilities available as of March 31, 2006 as follows:


Company

 


Expiration Date

 

Amount of
Facility

 

Amount Drawn as of
March 31, 2006

 

 

 

 

 

 

 

Entergy Arkansas

 

April 2006

 

$85 million (a)

 

-

Entergy Gulf States

 

February 2011

 

$25 million (b)

 

-

Entergy Louisiana

 

April 2006

 

$85 million (a)

 

-

Entergy Mississippi

 

May 2006

 

$25 million (c)

 

-

(a)

The combined amount borrowed by Entergy Arkansas and Entergy Louisiana under these facilities at any one time cannot exceed $85 million. Entergy Louisiana granted a security interest in its receivables to secure its $85 million facility.

(b)

The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of March 31, 2006, $1.4 million in letters of credit had been issued.

(c)

Borrowings under the Entergy Mississippi facility may be secured by a security interest in its receivables.

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.

In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.

The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.

The FERC has issued an order ("FERC Short-Term Order") approving the short-term borrowing limits of the domestic utility companies (except Entergy New Orleans) and System Energy through March 31, 2008. Entergy New Orleans may rely on existing SEC PUHCA 1935 orders for its financing authority, subject to bankruptcy court approval. In addition to borrowings from commercial banks, the FERC Short-Term Order authorized the domestic utility companies (except Entergy New Orleans which is authorized by an SEC PUHCA 1935 order) and System Energy to continue as participants in the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the authorized limits. As of March 31, 2006, Entergy's subsidiaries' aggregate authorized limit was $2.0 billion and the aggregate outstanding borrowing from the money pool was $201.8 million.

In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.

NOTE 5. PREFERRED STOCK

In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which are outstanding as of March 31, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share.

The proceeds from this issuance were used in the second quarter of 2006 to redeem all $10 million of Entergy Arkansas' $100 par value 7.32% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.80% Series Preferred Stock, all $20 million of Entergy Arkansas' $100 par value 7.40% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.88% Series Preferred Stock, and all $15 million of Entergy Arkansas' $25 par value $1.96 Series Preferred Stock.

NOTE 6. STOCK-BASED COMPENSATION PLANS

Entergy grants stock options, which are described more fully in Note 7 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The impact of adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the first quarters of 2006 and 2005 is $1.7 million and $1.8 million, respectively.

NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

Components of Net Pension Cost

Entergy's qualified pension cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Service cost - benefits earned during the period

 

$23,176 

 

$21,010 

Interest cost on projected benefit obligation

 

41,814 

 

37,484 

Expected return on assets

 

(44,482)

 

(38,781)

Amortization of transition asset

 

 

(166)

Amortization of prior service cost

 

1,365 

 

1,306 

Amortization of loss

 

10,931 

 

7,305 

Net pension costs

 

$32,804 

 

$28,158 

Entergy recognized $3.9 million and $4.1 million in pension cost for its non-qualified pension plans in the first quarters of 2006 and 2005, respectively.

Components of Net Other Postretirement Benefit Cost

Entergy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Service cost - benefits earned during the period

 

$10,370 

 

$9,208 

Interest cost on APBO

 

14,316 

 

13,501 

Expected return on assets

 

(4,756)

 

(4,363)

Amortization of transition obligation

 

542 

 

1,340 

Amortization of prior service cost

 

(3,688)

 

(1,989)

Amortization of loss

 

5,698 

 

5,271 

Net other postretirement benefit cost

 

$22,482 

 

$22,968 

Employer Contributions

Entergy expects to contribute $349 million to its qualified pension plans in 2006 (including $107 million delayed from 2005 as a result of the Katrina Emergency Tax Relief Act). As of the end of April 2006, Entergy contributed $157 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $192 million to fund its pension plans in 2006.

Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)

Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation by $176 million, and reduced the first quarter 2006 and 2005 other postretirement benefit cost by $6.9 million and $6.4 million, respectively. Refer to Note 10 to the consolidated financial statements in the Form 10-K for further discussion.

NOTE 8. BUSINESS SEGMENT INFORMATION

Entergy's reportable segments as of March 31, 2006 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the Energy Commodity Services segment, the Competitive Retail Services business, and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy has discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005, and is reporting Entergy New Orleans results under the equity method of accounting in the Utility segment.

Entergy's segment financial information for the first quarters of 2006 and 2005 is as follows:

 



Utility

 


Non-Utility
Nuclear*

 



All Other*

 



Eliminations

 



Consolidated

(In Thousands)

2006

 

 

 

 

 

 

 

 

 

Operating Revenues

$2,131,020

 

$388,010

 

$66,688 

 

($17,687)

 

$2,568,031

Equity in earnings (loss) of

 

 

 

 

 

  unconsolidated equity affiliates

5,643

 

-

 

(2,057)

 

 

3,586

Income Taxes (Benefit)

76,973

 

52,916

 

(11,059)

 

 

118,830

Net Income (Loss)

126,935

 

81,530

 

(6,767)

 

(32)

 

201,666

Total Assets

24,736,486

5,037,167

3,451,763 

(2,709,370)

30,516,046

 

 

 

 

 

 

 

 

2005

 

 

 

 

 

 

Operating Revenues

$1,729,340

 

$343,575

 

$54,327 

 

($17,060)

 

$2,110,182

Equity in earnings (loss) of

 

 

 

 

 

 

  unconsolidated equity affiliates

5,495

 

-

 

(2,193)

 

 

3,302

Income Taxes (Benefit)

45,525

 

51,168

 

(4,451)

 

 

92,242

Net Income (Loss)

96,027

 

77,965

 

4,460 

 

(73)

 

178,379

Total Assets

22,585,904

4,631,292

3,288,980 

(2,480,265)

28,025,911

Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity.

NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING

See Note 16 to the consolidated financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding, and a discussion of Entergy's decision to deconsolidate its investment in Entergy New Orleans and report it under the equity method of accounting. Entergy's income statement for the three months ended March 31, 2006 includes $61 million in operating revenues and $7 million in purchased power from transactions with Entergy New Orleans. Entergy's income statement for the three months ended March 31, 2005 includes $43 million in operating revenues and $46 million in purchased power from transactions with Entergy New Orleans. Entergy's balance sheet as of March 31, 2006 includes $55.7 million of pre-petition accounts that are payable to Entergy affiliates by Entergy New Orleans. As discussed in the Form 10-K, because Entergy owns all of the common stock of Entergy New Orleans, Entergy's deconsolidation of Entergy New Orleans does not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations.

__________________________________

In the opinion of the management of Entergy Corporation, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Utility segment, however, is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.

ENTERGY ARKANSAS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

 

Results of Operations

Net Income

Net income decreased $3 million primarily due to higher other operation and maintenance expenses and a higher effective income tax rate, partially offset by higher net revenue and other income.

Net Revenue

Net revenue, which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.

 

 

Amount

 

 

(In Millions)

 

 

 

2005 net revenue

 

$223.7 

Net wholesale revenue

 

10.0 

Volume/weather

 

5.4 

Deferred fuel cost revisions

 

(4.7)

Capacity costs

 

(4.9)

Other

 

2.2 

2006 net revenue

 

$231.7 

The net wholesale revenue variance is primarily due to higher wholesale prices and improved results related to co-owner contracts.

The volume/weather variance is primarily due to an increase of a total of 237 GWh in weather-adjusted usage in all sectors, partially offset by the effect of milder weather in the first quarter of 2006 compared to the first quarter of 2005.

The deferred fuel cost revisions variance is primarily due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4 million.

The capacity costs variance is primarily due to higher capacity related costs including the revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.

Gross operating revenues, fuel and purchased power expenses, and other regulatory credits

Gross operating revenues increased primarily due to an increase of $44.9 million in fuel cost recovery revenues due to increases in the energy cost recovery rider effective April 2005 and October 2005. The increases in volume/weather and net wholesale revenue, as discussed above, also contributed to the increase.

Fuel and purchased power expenses increased primarily due to increased deferred fuel expense resulting primarily from higher purchased energy costs as a result of higher natural gas prices and increased power purchases.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to $4.1 million applied as a credit against bad debt expense in the first quarter of 2005 in accordance with a settlement agreement with the APSC. Also contributing to the increase was an increase of $2.7 million in payroll and benefits costs.

Other income increased primarily due to:

  • an increase of $2.1 million related to additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K;
  • an increase of $1.9 million in interest income recorded on the deferred fuel balance; and
  • an increase of $1 million in interest earned on decommissioning trust funds.

Partially offsetting the increase was a decrease in allowance for equity funds used during construction primarily due to increased construction expenditures in the first quarter of 2005 resulting from the steam generator and reactor vessel head replacement at ANO 1 completed in the fourth quarter 2005.

Income Taxes

The effective income tax rates for the first quarters of 2006 and 2005 were 44.1% and 35.2%, respectively. The difference in the effective income tax rate for the first quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items in addition to state income taxes, partially offset by the amortization of investment tax credits. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items in addition to state income taxes, offset by a downward revision in the estimate of federal income tax expense for prior tax periods.

Liquidity and Capital Resources

Cash Flow

Cash flows for the first quarters of 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$9,393 

 

$89,744 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

95,463 

 

148,171 

 

Investing activities

 

(89,049)

 

(57,297)

 

Financing activities

 

28,556 

 

(18,575)

Net increase in cash and cash equivalents

 

34,970 

 

72,299 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$44,363 

 

$162,043 

Operating Activities

Cash flow from operations decreased $52.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the timing of payments to vendors and the timing of the collection of receivables from customers, partially offset by increased recovery of deferred fuel costs.

In the first quarter 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $12 million of the refund to Entergy Arkansas.

Investing Activities

Net cash flow used in investing activities increased $31.8 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to money pool activity. Also contributing to the increase was a difference in the timing of nuclear construction expenditures combined with insurance credits at ANO 1 in 2005.

Financing Activities

Financing activities provided $28.6 million for the first quarter of 2006 compared to using $18.6 million for the first quarter of 2005 primarily due to the issuance of $75 million of preferred stock in March 2006, partially offset by money pool activity. See Note 4 to the domestic utility companies and System Energy financial statements for the details of Entergy Arkansas' preferred stock activity in 2006.

Capital Structure

Entergy Arkansas' capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital percentage as of March 31, 2006 is primarily the result of an increase in shareholders' equity due to the issuance of $75 million of preferred stock in March 2006. As discussed below, $75 million of preferred stock was redeemed in April 2006 using the proceeds of the March 2006 issuance.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Net debt to net capital

 

45.2%

 

47.4%

 

Effect of subtracting cash from debt

 

0.8%

 

0.1%

 

Debt to capital

 

46.0%

 

47.5%

 

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas' financial condition.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 30, 2007. The facility is no longer subject to a combined borrowing limit with Entergy Louisiana's credit facility. There were no outstanding borrowings under the Entergy Arkansas credit facility as of March 31, 2006.

In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which are outstanding as of March 31, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. The proceeds from this issuance were used in the second quarter of 2006 to redeem all $10 million of Entergy Arkansas' $100 par value 7.32% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.80% Series Preferred Stock, all $20 million of Entergy Arkansas' $100 par value 7.40% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.88% Series Preferred Stock, and all $15 million of Entergy Arkansas' $25 par value $1.96 Series Preferred Stock.

Entergy Arkansas' receivables from or (payables to) the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

$24,577

 

($27,346)

 

$28,252

 

$23,561

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of utility restructuring, federal regulation and proceedings, market and credit risks, state and local rate regulatory risks, nuclear matters, and environmental risks.

In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh would replace the interim rate of $0.01900 per kWh that has been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.

On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.

Federal Regulation

System Agreement Proceedings

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.

Independent Coordinator of Transmission (ICT)

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $447,622    $367,360 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   102,471    36,803 
  Purchased power   118,930    107,632 
  Nuclear refueling outage expenses   7,355    6,317 
  Other operation and maintenance   91,755    85,829 
Decommissioning   7,483    8,113 
Taxes other than income taxes   9,620    9,837 
Depreciation and amortization   52,818    51,777 
Other regulatory credits - net   (5,527)   (795)
TOTAL   384,905    305,513 
         
OPERATING INCOME   62,717    61,847 
         
OTHER INCOME        
Allowance for equity funds used during construction   1,902    3,959 
Interest and dividend income   7,675    4,292 
Miscellaneous - net   (885)   (632)
TOTAL   8,692    7,619 
         
INTEREST AND OTHER CHARGES  
Interest on long-term debt   18,978    20,782 
Other interest - net   1,540    1,426 
Allowance for borrowed funds used during construction   (857)   (2,011)
TOTAL   19,661    20,197 
         
INCOME BEFORE INCOME TAXES   51,748    49,269 
         
Income taxes   22,825    17,338 
         
NET INCOME   28,923    31,931 
         
Preferred dividend requirements and other   2,038    1,944 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $26,885    $29,987 
         
See Notes to Respective Financial Statements.        
         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $28,923    $31,931 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Reserve for regulatory adjustments   7,082    (791)
  Other regulatory credits - net   (5,527)   (795)
  Depreciation, amortization, and decommissioning   60,301    59,890 
  Deferred income taxes and investment tax credits   (24,650)   11,865 
  Changes in working capital:        
    Receivables   25,549    57,845 
    Fuel inventory   (14,869)   (10,013)
    Accounts payable   (69,957)   14,503 
    Taxes accrued   55,774    12,447 
    Interest accrued   3,666    1,621 
    Deferred fuel costs   47,312    (9,431)
    Other working capital accounts   4,114    (59,926)
  Provision for estimated losses and reserves   (1,214)   (378)
  Changes in other regulatory assets   2,037    15,917 
  Other   (23,078)   23,486 
Net cash flow provided by operating activities   95,463    148,171 
         
INVESTING ACTIVITIES        
Construction expenditures   (63,547)   (54,718)
Allowance for equity funds used during construction   1,902    3,959 
Nuclear fuel purchases   -    (39,615)
Proceeds from sale/leaseback of nuclear fuel   -    39,615 
Proceeds from nuclear decommissioning trust fund sales   48,526    67,750 
Investment in nuclear decommissioning trust funds   (51,353)   (69,597)
Change in money pool receivable - net   (24,577)   (4,691)
Net cash flow used in investing activities   (89,049)   (57,297)
         
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt   -    173,464 
Retirement of long-term debt   -    (179,895)
Proceeds from the issuance of preferred stock   73,446    - 
Change in money pool payable - net   (27,346)   - 
Dividends paid:        
  Common stock   (15,600)   (10,200)
  Preferred stock   (1,944)   (1,944)
Net cash flow provided by (used in) financing activities   28,556    (18,575)
         
Net increase in cash and cash equivalents   34,970    72,299 
         
Cash and cash equivalents at beginning of period   9,393    89,744 
         
Cash and cash equivalents at end of period   $44,363    $162,043 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $14,049    $18,522 
Noncash financing activities:        
  Proceeds from long-term debt issued for the purpose        
   of refunding other long-term debt     $45,000 
         
See Notes to Respective Financial Statements.        

 

ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents:        
  Cash   $15,117    $9,393 
  Temporary cash investments - at cost,        
   which approximates market   29,246   
     Total cash and cash equivalents   44,363    9,393 
Accounts receivable:        
  Customer   100,500    115,321 
  Allowance for doubtful accounts   (15,490)   (15,777)
  Associated companies   56,540    30,902 
  Other   66,373    63,702 
  Accrued unbilled revenues   53,681    68,428 
     Total accounts receivable   261,604    262,576 
Deferred fuel costs   156,870    153,136 
Fuel inventory - at average cost   27,211    12,342 
Materials and supplies - at average cost   88,701    87,875 
Deferred nuclear refueling outage costs   24,765    30,967 
Prepayments and other   10,975    9,628 
TOTAL   614,489    565,917 
         
OTHER PROPERTY AND INVESTMENTS        
Investment in affiliates - at equity   11,206    11,206 
Decommissioning trust funds   409,886    402,124 
Non-utility property - at cost (less accumulated depreciation)   1,448    1,449 
Other   2,976    2,976 
TOTAL   425,516    417,755 
         
UTILITY PLANT        
Electric   6,391,536    6,344,435 
Property under capital lease   8,943    9,900 
Construction work in progress   143,189    139,208 
Nuclear fuel under capital lease   79,109    92,181 
Nuclear fuel   20,910    22,616 
TOTAL UTILITY PLANT   6,643,687    6,608,340 
Less - accumulated depreciation and amortization   2,882,779    2,843,904 
UTILITY PLANT - NET   3,760,908    3,764,436 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  SFAS 109 regulatory asset - net   57,873    61,236 
  Other regulatory assets   463,501    461,015 
  Deferred fuel costs     51,046 
Other   52,458    46,605 
TOTAL   573,832    619,902 
         
TOTAL ASSETS   $5,374,745    $5,368,010 
         
See Notes to Respective Financial Statements.        
 
 
 
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Accounts payable:        
  Associated companies   $32,151   $135,357
  Other   124,063   120,090
Customer deposits   46,167   45,432
Taxes accrued   9,570   -
Accumulated deferred income taxes   35,615   56,186
Interest accrued   22,873   19,207
Obligations under capital leases   49,819   46,857
Other   23,140   21,836
TOTAL   343,398   444,965
         
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued   1,143,059   1,105,712
Accumulated deferred investment tax credits   62,959   64,001
Obligations under capital leases   38,233   55,224
Other regulatory liabilities   81,442   76,507
Decommissioning   449,598   442,115
Accumulated provisions   27,859   29,073
Long-term debt   1,299,955   1,298,238
Other   297,371   306,034
TOTAL   3,400,476   3,376,904
         
Commitments and Contingencies        
         
SHAREHOLDERS' EQUITY        
Preferred stock without sinking fund   191,350   116,350
Common stock, $0.01 par value, authorized 325,000,000        
 shares; issued and outstanding 46,980,196 shares in 2006        
 and 2005   470   470
Paid-in capital   589,547   591,102
Retained earnings   849,504   838,219
TOTAL   1,630,871   1,546,141
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $5,374,745   $5,368,010
         
See Notes to Respective Financial Statements.        
         

 

ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
            Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars In Millions)    
Electric Operating Revenues:                
  Residential   $ 151   $ 135   $ 16   12
  Commercial   80   69   11   16
  Industrial   89   72   17   24
  Governmental   4   4   -   -
     Total retail   324   280   44   16
  Sales for resale                
    Associated companies   78   41   37   90
    Non-associated companies   51   51   -   -
  Other   (5)   (5)   -   -
     Total   $ 448   $ 367   $ 81   22
                 
Billed Electric Energy                
 Sales (GWh):                
  Residential   1,910   1,890   20   1
  Commercial   1,279   1,249   30   2
  Industrial   1,778   1,664   114   7
  Governmental   65   68   (3)   (4)
     Total retail   5,032   4,871   161   3
  Sales for resale                
    Associated companies   1,865   1,355   510   38
    Non-associated companies   856   1,107   (251)   (23)
     Total   7,753   7,333   420   6
                 
                 

ENTERGY GULF STATES, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

 

Hurricane Rita and Hurricane Katrina

See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which hit Entergy Gulf States' service territory in the Texas and Louisiana jurisdictions in August and September 2005. The storms resulted in power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations. Following is an update to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy Gulf States is currently preparing applications to seek CDBG funding. In March 2006 Entergy Gulf States provided a justification statement to state and local officials in Louisiana. The statement, which will be reviewed by the Louisiana Recovery Authority, includes the estimated costs of Hurricanes Katrina and Rita damage in the Louisiana jurisdiction. The statement includes justification for a request for $164 million in CDBG funding attributable to the Louisiana portion of Entergy Gulf States' business.

Results of Operations

Net Income

Net income increased $21.7 million primarily due to higher net revenue and higher other income, significantly offset by higher operation and maintenance expenses, higher interest charges, and a higher effective income tax rate.

Net Revenue

Net revenue, which is Entergy Gulf States' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.

 

 

Amount

 

 

(In Millions)

 

 

 

2005 net revenue

 

$241.7 

Fuel recovery

 

19.8 

Base revenues

 

15.1 

Volume/weather

 

7.1 

Net wholesale revenue

 

4.7 

Other

 

6.6 

2006 net revenue

 

$295.0 

The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction.

Base revenues increased primarily due to formula rate plan and Perryville increases in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider which began in December 2005 in the Texas jurisdiction and the transition to competition rider which began in March 2006 in the Texas jurisdiction.

The volume/weather variance is primarily due to increased usage during the unbilled sales period. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K and Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues. The increase was partially offset by a decrease in usage of 361 GWh in the residential and industrial sectors.

The net wholesale revenue variance is primarily due to increased volume and higher margins on sales to municipal and co-op customers.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to an increase in fuel cost recovery revenues due to higher fuel rates.

Fuel and purchased power expenses increased primarily due to an increase in the market prices of natural gas and purchased power and an increase in deferred fuel expense.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

  • an increase of $5.2 million in nuclear labor and contract costs due to an unplanned outage in February 2006 and timing issues;
  • an increase of $3.1 million in loss reserves for storm damages consistent with the formula rate plan rate change in October 2005;
  • an increase of $2.7 million primarily due to a planned maintenance outage at a fossil plant; and
  • an increase of $1.2 million in injuries and damages reserves.

Taxes and other income taxes increased primarily due to higher Louisiana franchise taxes primarily due to higher fuel recovery revenues as discussed above.

Other income increased primarily due to:

  • an increase of $2.2 million in interest income recorded on the deferred fuel balance; and
  • an increase of $1.7 million related to additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K.

Interest and other charges increased primarily due to the increase in long-term debt outstanding as a result of the funding of the storm restoration costs resulting from Hurricanes Katrina and Rita.

Income Taxes

The effective income tax rates for the first quarters of 2006 and 2005 were 27.6% and 19.6%, respectively. The difference in the effective income tax rate for the first quarter of 2006 versus the federal statutory rate of 35% is primarily due to book and tax differences related to the allowance for funds used during construction and utility plant items, the amortization of investment tax credits, and flow-through book and tax timing differences. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35% is primarily due to a downward revision in the estimate of federal income tax expense for prior tax periods, book and tax differences related to utility plant items, and flow-through book and tax timing differences.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$25,373 

 

$6,974 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

138,424 

 

112,365 

 

Investing activities

 

(153,109)

 

(62,556)

 

Financing activities

 

1,845 

 

(51,310)

Net decrease in cash and cash equivalents

 

(12,840)

 

(1,501)

 

 

 

 

 

Cash and cash equivalents at end of period

 

$12,533 

 

$5,473 

Operating Activities

Cash flow from operations increased $26.1 million in the first quarter of 2006 compared to the first quarter of 2005 primarily due to the timing of collections of receivables from customers.

In the first quarter 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $23 million of the refund to Entergy Gulf States.

Investing Activities

Net cash used in investing activities increased $90.6 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to an increase in construction expenditures of $139.4 million due to storm-related projects, partially offset by money pool activity.

Financing Activities

Financing activities provided cash of $1.8 million for the first quarter of 2006 compared to using cash of $51.3 million for the first quarter of 2005 primarily due to money pool activity.

Capital Structure

Entergy Gulf States' capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital percentage as of March 31, 2006 is primarily the result of an increase in shareholders' equity due to an increase in retained earnings.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Net debt to net capital

 

51.2%

 

51.4%

 

Effect of subtracting cash from debt

 

0.1%

 

0.3%

 

Debt to capital

 

51.3%

 

51.7%

 

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States' financial condition.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Gulf States' uses and sources of capital. Following are updates to the information provided in the Form 10-K.

Entergy Gulf States' receivables from or (payables to) the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

($5,124)

 

$64,011

 

($19,630)

 

($59,720)

Entergy Gulf States' short-term indebtedness, including its money pool borrowings, is limited to $350 million by a FERC order. See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.

In February 2006, Entergy Gulf States established a $25 million line of credit. The line of credit allows Entergy Gulf States to borrow money and to issue letters of credit. $1.4 million in letters of credit were issued under the facility at March 31, 2006, and no borrowings were outstanding. The line of credit terminates in February 2011.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of transition to retail competition, state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, state and local rate regulatory risk, industrial, commercial, and wholesale customers, market and credit risks, nuclear matters, environmental risks, and litigation risks. Following are updates to the information disclosed in the Form 10-K.

Transition to Retail Competition

Jurisdictional Separation Plan

See the Form 10-K for a discussion of business and jurisdictional separation plans concerning Entergy Gulf States. In January 2006, the LPSC directed that Entergy Gulf States file a complete jurisdictional separation plan as soon as possible. Therefore, on April 26, 2006, Entergy Gulf States filed its plan for jurisdictional separation with the LPSC and requested that it grant approval no later than September 30, 2006.  The plan provides for Entergy Gulf States to be separated into two vertically integrated utilities, one subject solely to the retail jurisdiction of the LPSC and the other subject solely to the retail jurisdictional of the PUCT. The plan also provides that the Texas utility should own all the distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, and undivided ownership shares of Entergy Gulf States' 70% interest in Nelson 6 and 42% interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana. The Louisiana utility would own all of the remaining assets currently owned by Entergy Gulf States.  The Texas utility would purchase from the Louisiana utility pursuant to a life-of-the unit purchase power agreement (PPA) a share of capacity and energy of River Bend. Each separated utility also would purchase pursuant to a PPA a share of capacity and energy of the gas-fired generating plants owned by the other utility. The PPAs associated with the gas-fired generating plants would terminate when retail open access commences in the Texas utility's service territory. Until that time, each utility will participate in the System Agreement and the Entergy System generation will continue to be dispatched in the same manner as before the jurisdictional separation. Under the provisions of the System Agreement, the Texas utility will terminate its participation in the System Agreement, except for the aspects related to transmission equalization, when Texas implements retail open access for Entergy Gulf States. The plan also provides that the operation of the generating plants will not change as a result of the jurisdictional separation. A hearing is currently scheduled for August 2006, but as a result of Entergy Gulf States' April 26, 2006 filing, the procedural schedule and hearing date may change. Approvals of the FERC and the NRC may also be required for certain matters before any implementation of the jurisdictional separation of Entergy Gulf States. Although formal approval of the PUCT is not required for implementation of the jurisdictional separation, Entergy Gulf States will seek input from the PUCT and continue to keep it informed of the status of the proceedings.

 

State and Local Rate Regulation

As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement in principle on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The settlement agreement has been filed and is expected to be considered by the PUCT in May 2006.

In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.

In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff. The rates are implemented subject to refund pending approval by the LPSC. An LPSC decision is expected during the second quarter of 2006.

Federal Regulation

System Agreement Proceedings

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.

Independent Coordinator of Transmission (ICT)

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States' accounting for nuclear decommissioning costs, the application of SFAS 71, unbilled revenue, and qualified pension and other postretirement benefits. Following is an update to that discussion.

Unbilled Revenue

Effective January 1, 2006, the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.

ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
   
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $855,790    $652,395 
Natural gas   37,415    26,855 
TOTAL   893,205    679,250 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   284,876    219,956 
  Purchased power   313,092    217,736 
  Nuclear refueling outage expenses   4,674    4,071 
  Other operation and maintenance   121,557    108,693 
Decommissioning   2,622    2,298 
Taxes other than income taxes   36,025    30,538 
Depreciation and amortization   48,695    48,736 
Other regulatory charges (credits) - net   269    (121)
TOTAL   811,810    631,907 
          
OPERATING INCOME   81,395    47,343 
         
OTHER INCOME        
Allowance for equity funds used during construction   6,046    4,799 
Interest and dividend income   8,103    3,435 
Miscellaneous - net   (910)   651 
TOTAL   13,239    8,885 
         
INTEREST AND OTHER CHARGES  
Interest on long-term debt   33,653    28,225 
Other interest - net   2,096    1,985 
Allowance for borrowed funds used during construction   (3,309)   (3,006)
TOTAL   32,440    27,204 
         
INCOME BEFORE INCOME TAXES   62,194    29,024 
         
Income taxes   17,145    5,675 
         
NET INCOME   45,049    23,349 
         
Preferred dividend requirements and other   1,022    1,063 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $44,027    $22,286 
         
See Notes to Respective Financial Statements.        

 

 

 

 

 

 

 

 

 

 

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ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $45,049    $23,349 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Reserve for regulatory adjustments   6,087    11,848 
  Other regulatory charges (credits) - net   269    (121)
  Depreciation, amortization, and decommissioning   51,317    51,034 
  Deferred income taxes and investment tax credits   (5,228)   4,346 
  Changes in working capital:        
    Receivables   120,195    21,439 
    Fuel inventory   (9,143)   5,864 
    Accounts payable   (17,833)   (38,927)
    Taxes accrued   9,714    (6,108)
    Interest accrued   (102)   1,917 
    Deferred fuel costs   27,723    33,983 
    Other working capital accounts   27,614    (10,142)
  Provision for estimated losses and reserves   (769)   623 
  Changes in other regulatory assets   (106,199)   5,879 
  Other   (10,270)   7,381 
Net cash flow provided by operating activities   138,424    112,365 
         
INVESTING ACTIVITIES        
Construction expenditures   (206,217)   (66,813)
Allowance for equity funds used during construction   6,046    4,799 
Nuclear fuel purchases   (6,102)   (2)
Proceeds from sale/leaseback of nuclear fuel   5,391    54 
Proceeds from nuclear decommissioning trust fund sales   20,360    7,409 
Investment in nuclear decommissioning trust funds   (23,891)   (10,632)
Change in money pool receivable - net   64,011    - 
Changes in other investments - net   915    2,629 
Other regulatory investments   (13,622)   - 
Net cash flow used in investing activities   (153,109)   (62,556)
         
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt   -    84,148 
Retirement of long-term debt   -    (87,629)
Change in money pool payable - net   5,124    (40,090)
Redemption of preferred stock   (2,250)   (2,250)
Dividends paid:        
  Common stock   -    (4,400)
  Preferred stock   (1,029)   (1,089)
Net cash flow provided by (used in) financing activities   1,845    (51,310)
         
Net decrease in cash and cash equivalents   (12,840)   (1,501)
         
Cash and cash equivalents at beginning of period   25,373    6,974 
         
Cash and cash equivalents at end of period   $12,533    $5,473 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $33,485    $26,465 
         
See Notes to Respective Financial Statements.        

 

ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
         
    2006   2005
  (In Thousands)
       
CURRENT ASSETS            
Cash and cash equivalents:            
  Cash       $11,531    $7,341 
  Temporary cash investments - at cost,            
   which approximates market       1,002    18,032 
     Total cash and cash equivalents       12,533    25,373 
Accounts receivable:            
  Customer       165,331    203,205 
  Allowance for doubtful accounts       (4,666)   (4,794)
  Associated companies       36,566    90,223 
  Other       75,060    50,445 
  Accrued unbilled revenues       69,109    186,527 
     Total accounts receivable       341,400    525,606 
Deferred fuel costs       168,141    254,950 
Fuel inventory - at average cost       69,339    60,196 
Materials and supplies - at average cost       116,039    112,544 
Prepayments and other       42,807    36,996 
TOTAL       750,259    1,015,665 
             
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds       317,787    310,779 
Non-utility property - at cost (less accumulated depreciation)       96,676    91,589 
Other       22,426    22,498 
TOTAL       436,889    424,866 
             
UTILITY PLANT        
Electric       8,824,179    8,569,073 
Natural gas       85,633    86,375 
Construction work in progress       292,382    526,017 
Nuclear fuel under capital lease       71,285    55,155 
Nuclear fuel       11,338    11,338 
TOTAL UTILITY PLANT       9,284,817    9,247,958 
Less - accumulated depreciation and amortization       4,113,328    4,075,724 
UTILITY PLANT - NET       5,171,489    5,172,234 
             
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:            
  SFAS 109 regulatory asset - net       460,047    459,136 
  Other regulatory assets       643,055    604,419 
  Deferred fuel costs       142,151    69,443 
Long-term receivables       14,844    16,151 
Other       43,624    41,195 
TOTAL       1,303,721    1,190,344 
             
TOTAL ASSETS       $7,662,358    $7,803,109 
             
See Notes to Respective Financial Statements.            
 
 
 
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
   
    2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Accounts payable:            
  Associated companies       $110,812    $100,313 
  Other       217,303    479,232 
Customer deposits       64,067    57,756 
Accumulated deferred income taxes       64,967    71,196 
Nuclear refueling outage costs       19,101    15,548 
Interest accrued       34,236    34,338 
Obligations under capital leases       24,935    33,516 
Other       33,664    14,945 
TOTAL       569,085    806,844 
             
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued       1,639,602    1,619,890 
Accumulated deferred investment tax credits       131,482    132,909 
Obligations under capital leases       46,350    20,724 
Other regulatory liabilities       40,873    37,482 
Decommissioning and retirement cost liabilities       179,253    175,480 
Transition to competition       79,098    79,098 
Regulatory reserves       15,674    16,153 
Accumulated provisions       68,191    67,747 
Long-term debt       2,358,153    2,358,130 
Preferred stock with sinking fund       11,700    13,950 
Other       207,778    203,665 
TOTAL       4,778,154    4,725,228 
             
Commitments and Contingencies            
             
SHAREHOLDERS' EQUITY        
Preferred stock without sinking fund       47,327    47,327 
Common stock, no par value, authorized 200,000,000            
 shares; issued and outstanding 100 shares in 2006 and 2005       114,055    114,055 
Paid-in capital       1,457,486    1,457,486 
Retained earnings       697,605    653,578 
Accumulated other comprehensive income       (1,354)   (1,409)
TOTAL       2,315,119    2,271,037 
             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $7,662,358    $7,803,109 
             
See Notes to Respective Financial Statements.            

 

ENTERGY GULF STATES, INC.
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
                     
         
        2006   2005
        (In Thousands)
RETAINED EARNINGS                    
Retained Earnings - Beginning of period       $653,578        $513,182     
                     
  Add: Net Income       45,049    $45,049    23,349    $23,349 
                     
  Deduct:                    
    Dividends declared on common stock             4,400     
    Preferred dividend requirements and other       1,022    1,022    1,063    1,063 
        1,022        5,463     
                     
Retained Earnings - End of period       $697,605        $531,068     
                     
ACCUMULATED OTHER COMPREHENSIVE                    
INCOME (LOSS) (Net of Taxes):                    
Balance at beginning of period:                    
 Other accumulated comprehensive income items       ($1,409)       $714     
                     
Net unrealized investment gains       55    55    8   
                     
Balance at end of period:                    
 Other accumulated comprehensive income items       ($1,354)       $722     
Comprehensive Income           $44,082        $22,294 
                     
                     
See Notes to Respective Financial Statements.                    

 

ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
                 
        Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars In Millions)    
Electric Operating Revenues:                
  Residential   $240    $196    $44    22 
  Commercial   210    159    51    32 
  Industrial   317    244    73    30 
  Governmental   13    10      30 
    Total retail   780    609    171    28 
  Sales for resale                
    Associated companies   27    26     
    Non-associated companies   52    32    20    63 
  Other   (3)   (15)   12    80 
     Total   $856    $652    $204    31 
                 
Billed Electric Energy                
 Sales (GWh):                
  Residential   2,096    2,155    (59)   (3)
  Commercial   1,970    1,914    56   
  Industrial   3,679    3,981    (302)   (8)
  Governmental   112    105     
     Total retail   7,857    8,155    (298)   (4)
  Sales for resale                
    Associated companies   585    565    20   
    Non-associated companies   617    539    78    14 
     Total   9,059    9,259    (200)   (2)
                 

 

 

ENTERGY LOUISIANA HOLDINGS, INC. AND ENTERGY LOUISIANA, LLC

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Hurricane Rita and Hurricane Katrina

See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which caused catastrophic damage to Entergy Louisiana's service territory in August and September 2005, including the effect of extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory. Following is an update to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy Louisiana is currently preparing an application to seek CDBG funding. In March 2006, Entergy Louisiana provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, includes the estimated costs of Hurricanes Katrina and Rita damage. The statement includes justification for a request for $472 million in CDBG funding.

Results of Operations

Net income for the three months ended March 31, 2006 for Entergy Louisiana, LLC differs from the net income for the three months ended March 31, 2006 for Entergy Louisiana Holdings, Inc. and Subsidiaries almost entirely due to income tax expense. Because income before income taxes differs by an immaterial amount, the discussion below applies to both Entergy Louisiana, LLC and Entergy Louisiana Holdings, except where specifically noted.

Net Income

Net income increased for the first quarter of 2006 compared to the first quarter of 2005 primarily due to lower depreciation and amortization expenses, higher other income, lower other operation and maintenance expenses, and higher net revenue.

Net Revenue

Net revenue, which is Entergy Louisiana's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.

 

 

Amount

 

 

(In Millions)

 

 

 

2005 net revenue

 

$184.6 

Net wholesale revenue

 

6.3 

Rate refund provisions

 

5.5 

Price applied to unbilled sales

 

3.4 

Storm cost recovery

 

2.1 

Volume/weather

 

(21.5)

Other

 

7.2 

2006 net revenue

 

$187.6 

The net wholesale revenue variance is primarily due to the sale of 75% of Perryville generation to Entergy Gulf States pursuant to a long-term purchased power agreement.

The rate refund provisions variance is primarily due to provisions recorded in the first quarter of 2005 as a result of the LPSC staff and Entergy Louisiana proposed settlement in March 2005, which settlement was approved by the LPSC in the second quarter of 2005.

The price applied to unbilled sales variance is due to a decrease in the fuel cost component included in the price applied to unbilled sales in 2005. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.

The storm cost recovery variance is due to the LPSC order for the interim recovery of storm costs. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - State and Local Rate Regulation" in the Form 10-K for a discussion of Entergy Louisiana's filing with the LPSC regarding storm cost recovery.

The volume/weather variance is due to a decrease in usage in all sectors primarily due to load losses caused by Hurricane Katrina and the effect of less favorable weather in 2006.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to:

  • an increase of $64.8 million in gross wholesale revenue due to increased sales to affiliated systems and the sale of a portion of the generation from Perryville;
  • an increase of $16.1 million in fuel cost recovery revenues due to higher fuel rates;
  • an increase of $5.5 million in rate refund provisions, as discussed above; and
  • an increase of $3.4 million in the price applied to unbilled sales, as discussed above.

The increase was offset by the volume/weather variance discussed above.

Fuel and purchased power expenses increased primarily due to:

  • an increase in the market prices of natural gas and purchased power; and
  • an increase in the recovery from customers of deferred fuel costs.

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to:

  • a decrease of $3.7 million primarily due to timing of vegetation management spending; and
  • a decrease of $3.2 million in the timing of routine fossil plant maintenance outages and substation maintenance.

The decrease was partially offset by the following:

  • an increase of $2.3 million in customer service support costs; and
  • an increase of $1.8 million in storm reserves in connection with the March 2005 rate case.

Depreciation and amortization expenses decreased primarily due to a change in the depreciation rate for Waterford 3 as approved by the LPSC effective April 2005 and a revision of estimated depreciable lives involving certain intangible assets.

Other income increased primarily due to:

  • an increase in the allowance for equity funds used during construction due to an increase in construction work in progress as a result of Hurricanes Katrina and Rita;
  • an increase related to additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K; and
  • an increase in interest earned on deferred capacity charges.

Preferred stock dividend requirements increased due to the issuance of $100 million of preferred membership interests by Entergy Louisiana, LLC on December 31, 2005.

Income Taxes

The effective income tax rates for the first quarter of 2006 for Entergy Louisiana Holdings, Inc. and Subsidiaries and Entergy Louisiana, LLC were 54.6% and 39.9%, respectively. The difference in the effective income tax rate for the first quarter 2006 for Entergy Louisiana Holdings versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant, a federal tax reserve adjustment, and state income taxes, partially offset by book and tax differences related to the allowance for funds used during construction and the amortization of investment tax credits. The difference in the effective income tax rate for the first quarter 2006 for Entergy Louisiana, LLC versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant, partially offset by book and tax differences related to the allowance for funds used during construction and the amortization of investment tax credits.

The effective income tax rate for the first quarter of 2005 for Entergy Louisiana Holdings, Inc. and Subsidiaries and Entergy Louisiana, LLC was 32.1%. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to the amortization of investment tax credits and book and tax differences related to the allowance for funds used during construction, partially offset by state income taxes and book and tax differences related to utility plant.

Liquidity and Capital Resources

Cash Flow

Because cash and cash equivalents at the end of period and cash flow provided by operating activities for the three months ended March 31, 2006 for Entergy Louisiana, LLC differ by an immaterial amount from the table below, the discussion below applies to both Entergy Louisiana, LLC and Entergy Louisiana Holdings, except where specifically noted.

Cash flows for the first quarters of 2006 and 2005 for Entergy Louisiana Holdings were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$107,285 

 

$146,049 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

192,480 

 

71,644 

 

Investing activities

 

(218,837)

 

(45,534)

 

Financing activities

 

(72,932)

 

(3,478)

Net increase (decrease) in cash and cash equivalents

 

(99,289)

 

22,632 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$7,996 

 

$168,681 

Operating Activities

Cash flow from operations increased $120.8 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to timing of collections of receivables from customers, partially offset by decreased recovery of deferred fuel.

In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $102 million of the refund to Entergy Louisiana Holdings.

Investing Activities

The increase of $173.3 million in net cash used by investing activities for the first quarter of 2006 compared to the first quarter of 2005 is primarily due to:

  • an increase in distribution and transmission construction expenditures due to Hurricanes Katrina and Rita;
  • an increase of $9.8 million in capacity costs that have been deferred and are expected to be recovered over a period greater than twelve months; and
  • money pool activity.

The increases were offset by decreased spending on certain fossil and nuclear projects.

Financing Activities

The increase of $69.5 million in net cash used for financing activities in the first quarter of 2006 compared to the first quarter of 2005 is primarily due to:

  • payment of $40 million on a credit facility in 2006; and
  • money pool activity.

Capital Structure

Entergy Louisiana's capitalization is balanced between equity and debt, as shown in the following table. The decrease in debt to capital for Entergy Louisiana, LLC is primarily due to an increase in members' equity due to additional equity from its parent because of a revision in the estimate of the tax liabilities allocated to Entergy Louisiana Holdings in the merger-by-division that created Entergy Louisiana, LLC.

Entergy Louisiana Holdings

Entergy Louisiana, LLC

 

 

March 31,
2006

 

December 31,
2005

March 31,
2006

December 31,
2005

 

 

 

 

 

Net debt to net capital

 

49.2%

 

48.4%

48.5%

49.2%

Effect of subtracting cash from debt

 

0.2%

 

2.2%

 0.2%

2.1%

Debt to capital

 

49.4%

 

50.6%

 48.7%

51.3%

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' or members' equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana's financial condition.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Louisiana's uses and sources of capital.

Entergy Louisiana's receivables from or (payables to) the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

($38,871)

 

($68,677)

 

$29,378

 

$40,549

See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.

In April 2006, Entergy Louisiana's $85 million credit facility expired and has not been renewed at this time. Entergy Louisiana's $15 million credit facility will expire in May 2006. Entergy Louisiana does not intend to renew that facility when it expires.

Entergy Louisiana Holdings Preferred Stock Redemption

As discussed in the Form 10-K, Entergy Louisiana Holdings expected to redeem or repurchase and retire its preferred stock within three to nine months of the effective date of the merger-by-division, and thereafter amend its charter to eliminate authority to issue preferred stock. Entergy Louisiana Holdings now expects to redeem the preferred stock before the end of the second quarter 2006.

Any redemption of preferred stock by Entergy Louisiana Holdings will be made at the following respective redemption prices as provided in the Entergy Louisiana Holdings amended and restated articles of incorporation:

Series of Entergy Louisiana Holdings Preferred Stock

 

Redemption Price Per Share

     

4.96% Preferred Stock, Cumulative, $100.00 par value

 

$104.25

4.16% Preferred Stock, Cumulative, $100.00 par value

 

$104.21

4.44% Preferred Stock, Cumulative, $100.00 par value

 

$104.06

5.16% Preferred Stock, Cumulative, $100.00 par value

 

$104.18

5.40% Preferred Stock, Cumulative, $100.00 par value

 

$103.00

6.44% Preferred Stock, Cumulative, $100.00 par value

 

$102.92

7.84% Preferred Stock, Cumulative, $100.00 par value

 

$103.78

7.36% Preferred Stock, Cumulative, $100.00 par value

 

$103.36

8% Preferred Stock, Cumulative, $25.00 par value

 

$ 25.00

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, utility restructuring, market and credit risks, nuclear matters, environmental risks, and litigation risks.

Federal Regulation

System Agreement Proceedings

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.

Independent Coordinator of Transmission (ICT)

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement costs. Following is an update to that discussion.

Unbilled Revenue

Effective January 1, 2006, Entergy Louisiana reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.

 

ENTERGY LOUISIANA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
   
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $552,057    $480,673 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   204,004    137,777 
  Purchased power   176,614    171,306 
  Nuclear refueling outage expenses   4,234    3,424 
  Other operation and maintenance   84,102    88,638 
Decommissioning   4,196    5,717 
Taxes other than income taxes   16,006    18,357 
Depreciation and amortization   42,085    51,808 
Other regulatory credits - net   (16,138)   (13,084)
TOTAL   515,103    463,943 
         
OPERATING INCOME   36,954    16,730 
         
OTHER INCOME        
Allowance for equity funds used during construction   5,587    2,537 
Interest and dividend income   5,715    3,066 
Miscellaneous - net   (798)   (367)
TOTAL   10,504    5,236 
         
INTEREST AND OTHER CHARGES  
Interest on long-term debt   20,378    17,839 
Other interest - net   1,708    3,019 
Allowance for borrowed funds used during construction   (3,851)   (1,499)
TOTAL   18,235    19,359 
         
INCOME BEFORE INCOME TAXES   29,223    2,607 
         
Income taxes   15,959    836 
         
NET INCOME   13,264    1,771 
         
Preferred dividend requirements and other   3,416    1,678 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $9,848    $93 
         
See Notes to Respective Financial Statements.        

 

 

 

 

 

 

 

 

 

 

 

 

 

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ENTERGY LOUISIANA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $13,264    $1,771 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Reserve for regulatory adjustments   (185)   5,287 
  Other regulatory credits - net   (16,138)   (13,084)
  Depreciation, amortization, and decommissioning   46,281    57,525 
  Deferred income taxes and investment tax credits   27,831    (8,913)
  Changes in working capital:        
    Receivables   143,629    (278)
    Accounts payable   (42,366)   (24,415)
    Taxes accrued   (10,454)   21,343 
    Interest accrued   (2,397)   1,783 
    Deferred fuel costs   1,507    27,559 
    Other working capital accounts   27,207    (18,853)
  Provision for estimated losses and reserves   1,067    1,926 
  Changes in other regulatory assets   23,903    (8,651)
  Other   (20,669)   28,644 
Net cash flow provided by operating activities   192,480    71,644 
         
INVESTING ACTIVITIES        
Construction expenditures   (211,398)   (55,368)
Allowance for equity funds used during construction   5,587    2,537 
Nuclear fuel purchases     (40,291)
Proceeds from the sale/leaseback of nuclear fuel     40,291 
Proceeds from nuclear decommissioning trust fund sales   7,187    4,237 
Investment in nuclear decommissioning trust funds   (10,117)   (8,111)
Change in money pool receivable - net   (270)   11,171 
Other regulatory investments   (9,826)   - 
Net cash flow used in investing activities   (218,837)   (45,534)
         
FINANCING ACTIVITIES        
Change in money pool payable - net   (29,806)   - 
Changes in short-term borrowings   (40,000)   - 
Dividends paid:        
  Common stock     (1,800)
  Preferred stock   (3,126)   (1,678)
Net cash flow used in financing activities   (72,932)   (3,478)
         
Net increase (decrease) in cash and cash equivalents   (99,289)   22,632 
         
Cash and cash equivalents at beginning of period   107,285    146,049 
         
Cash and cash equivalents at end of period   $7,996    $168,681 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $23,521    $18,285 
         
See Notes to Respective Financial Statements.        

 

ENTERGY LOUISIANA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents   $7,996    $107,285 
Accounts receivable:        
  Customer   106,873    176,169 
  Allowance for doubtful accounts   (5,342)   (6,141)
  Associated companies   39,177    24,453 
  Other   17,411    12,553 
  Accrued unbilled revenues   55,465    149,908 
     Total accounts receivable   213,584    356,942 
Deferred fuel costs   -    21,885 
Accumulated deferred income taxes   -    3,884 
Materials and supplies - at average cost   94,759    92,275 
Deferred nuclear refueling outage costs   10,567    15,337 
Prepayments and other   183,474    185,416 
TOTAL   510,380    783,024 
         
OTHER PROPERTY AND INVESTMENTS        
Investment in affiliates - at equity   14,230    14,230 
Decommissioning trust funds   193,616    187,101 
Non-utility property - at cost (less accumulated depreciation)   20,973    21,019 
Other   4    4 
TOTAL   228,823    222,354 
         
UTILITY PLANT        
Electric   6,496,314    6,233,711 
Property under capital lease   250,610    250,610 
Construction work in progress   169,114    415,475 
Nuclear fuel under capital lease   49,306    58,492 
TOTAL UTILITY PLANT   6,965,344    6,958,288 
Less - accumulated depreciation and amortization   2,839,380    2,805,944 
UTILITY PLANT - NET   4,125,964    4,152,344 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  SFAS 109 regulatory asset - net   81,957    104,893 
  Other regulatory assets   533,674    498,542 
  Deferred fuel costs   67,998    - 
Long-term receivables   8,222    8,222 
Other   38,357    32,523 
TOTAL   730,208    644,180 
         
TOTAL ASSETS   $5,595,375    $5,801,902 
         
See Notes to Respective Financial Statements.        
 
 
 
ENTERGY LOUISIANA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Notes payable   $-    $40,000 
Accounts payable:        
  Associated companies   101,131    121,382 
  Other   207,071    398,507 
Customer deposits   65,563    66,705 
Accumulated deferred income taxes   12,467    - 
Interest accrued   26,045    28,442 
Deferred fuel costs   47,620    - 
Obligations under capital leases   33,463    22,753 
Other   35,555    8,721 
TOTAL   528,915    686,510 
         
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued   2,030,461    2,055,083 
Accumulated deferred investment tax credits   91,640    92,439 
Obligations under capital leases   15,843    35,740 
Other regulatory liabilities   41,668    58,129 
Decommissioning   225,487    221,291 
Accumulated provisions   94,232    93,165 
Long-term debt   1,169,746    1,172,400 
Other   147,050    146,576 
TOTAL   3,816,127    3,874,823 
         
Commitments and Contingencies        
         
SHAREHOLDERS' EQUITY        
Preferred stock without sinking fund   200,500    200,500 
Common stock, no par value, authorized 250,000,000        
 shares; issued 165,173,180 shares in 2006        
 and 2005   1,088,900    1,088,900 
Capital stock expense and other   (3,820)   (3,736)
Retained earnings   84,753    74,905 
Less - treasury stock, at cost (18,202,573 shares in 2006 and 2005)   120,000    120,000 
TOTAL   1,250,333    1,240,569 
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $5,595,375    $5,801,902 
         
See Notes to Respective Financial Statements.        

 

ENTERGY LOUISIANA HOLDINGS, INC. AND SUBSIDIARIES AND ENTERGY LOUISIANA, LLC
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
                 
        Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars In Millions)    
Electric Operating Revenues:                
  Residential   $161    $165    ($4)   (2)
  Commercial   119    115     
  Industrial   193    189     
  Governmental   11    10      10 
     Total retail   484    479     
  Sales for resale                
     Associated companies   80    16    64    400 
     Non-associated companies        
  Other   (14)   (16)     13 
     Total   $552    $481    $71    15 
                 
Billed Electric Energy                
 Sales (GWh):                
  Residential   1,771    1,929    (158)   (8)
  Commercial   1,246    1,287    (41)   (3)
  Industrial   2,894    3,115    (221)   (7)
  Governmental   111    118    (7)   (6)
     Total retail   6,022    6,449    (427)   (7)
  Sales for resale                
    Associated companies   723    145    578    399 
    Non-associated companies   14    15    (1)   (7)
     Total   6,759    6,609    150   
                 
                 

 

 

 

 

ENTERGY LOUISIANA, LLC
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
   
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $552,057    $480,673 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   204,004    137,777 
  Purchased power   176,614    171,306 
  Nuclear refueling outage expenses   4,234    3,424 
  Other operation and maintenance   84,102    88,638 
Decommissioning   4,196    5,717 
Taxes other than income taxes   16,006    18,357 
Depreciation and amortization   42,085    51,808 
Other regulatory credits - net   (16,138)   (13,084)
TOTAL   515,103    463,943 
         
OPERATING INCOME   36,954    16,730 
         
OTHER INCOME        
Allowance for equity funds used during construction   5,587    2,537 
Interest and dividend income   5,442    3,066 
Miscellaneous - net   (798)   (367)
TOTAL   10,231    5,236 
         
INTEREST AND OTHER CHARGES  
Interest on long-term debt   20,378    17,839 
Other interest - net   1,708    3,019 
Allowance for borrowed funds used during construction   (3,851)   (1,499)
TOTAL   18,235    19,359 
         
INCOME BEFORE INCOME TAXES   28,950    2,607 
         
Income taxes   11,554    836 
         
NET INCOME   17,396    1,771 
         
Preferred dividend requirements and other   1,738   
         
EARNINGS APPLICABLE TO        
COMMON EQUITY   $15,658    $1,771 
         
See Notes to Respective Financial Statements.        
         

 

 

 

 

 

 

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ENTERGY LOUISIANA, LLC
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $17,396    $1,771 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Reserve for regulatory adjustments   (185)   5,287 
  Other regulatory credits - net   (16,138)   (13,084)
  Depreciation, amortization, and decommissioning   46,281    57,525 
  Deferred income taxes and investment tax credits   27,831    (8,913)
  Changes in working capital:        
    Receivables   143,629    (278)
    Accounts payable   (42,366)   (24,415)
    Taxes accrued   (14,859)   21,343 
    Interest accrued   (2,397)   1,783 
    Deferred fuel costs   1,507    27,559 
    Other working capital accounts   27,207    (18,853)
  Provision for estimated losses and reserves   1,067    1,926 
  Changes in other regulatory assets   23,903    (8,651)
  Other   (20,666)   26,966 
Net cash flow provided by operating activities   192,210    69,966 
         
INVESTING ACTIVITIES        
Construction expenditures   (211,398)   (55,368)
Allowance for equity funds used during construction   5,587    2,537 
Nuclear fuel purchases   -    (40,291)
Proceeds from the sale/leaseback of nuclear fuel   -    40,291 
Proceeds from nuclear decommissioning trust fund sales   7,187    4,237 
Investment in nuclear decommissioning trust funds   (10,117)   (8,111)
Change in money pool receivable - net   -    11,171 
Other regulatory investments   (9,826)   - 
Net cash flow used in investing activities   (218,567)   (45,534)
         
FINANCING ACTIVITIES        
Change in money pool payable - net   (29,806)   - 
Changes in short-term borrowings   (40,000)   - 
Distributions paid:        
  Preferred membership interests   (1,448)    - 
  Common equity   -    (1,800)
Net cash flow used in financing activities   (71,254)   (1,800)
         
Net increase (decrease) in cash and cash equivalents   (97,611)   22,632 
         
Cash and cash equivalents at beginning of period   105,285    146,049 
         
Cash and cash equivalents at end of period   $7,674    $168,681 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $23,521    $18,285 
         
See Notes to Respective Financial Statements.        
         

 

ENTERGY LOUISIANA, LLC
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents   $7,674    $105,285 
Accounts receivable:        
  Customer   106,873    176,169 
  Allowance for doubtful accounts   (5,342)   (6,141)
  Associated companies   38,904    24,453 
  Other   17,411    12,553 
  Accrued unbilled revenues   55,465    149,908 
     Total accounts receivable   213,311    356,942 
Deferred fuel costs   -    21,885 
Accumulated deferred income taxes   -    3,884 
Materials and supplies - at average cost   94,759    92,275 
Deferred nuclear refueling outage costs   10,567    15,337 
Prepayments and other   5,834    173,055 
TOTAL   332,145    768,663 
         
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds   193,616    187,101 
Non-utility property - at cost (less accumulated depreciation)   1,806    1,852 
Other   4    4 
TOTAL   195,426    188,957 
         
UTILITY PLANT        
Electric   6,496,314    6,233,711 
Property under capital lease   250,610    250,610 
Construction work in progress   169,114    415,475 
Nuclear fuel under capital lease   49,306    58,492 
TOTAL UTILITY PLANT   6,965,344    6,958,288 
Less - accumulated depreciation and amortization   2,839,380    2,805,944 
UTILITY PLANT - NET   4,125,964    4,152,344 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  SFAS 109 regulatory asset - net   81,957    104,893 
  Other regulatory assets   634,582    599,451 
  Deferred fuel costs   67,998    - 
Long-term receivables   8,222    8,222 
Other   38,357    32,523 
TOTAL   831,116    745,089 
         
TOTAL ASSETS   $5,484,651    $5,855,053 
         
See Notes to Respective Financial Statements.        
 
 
 
ENTERGY LOUISIANA, LLC
BALANCE SHEETS
LIABILITIES AND MEMBERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Notes payable   $-   $40,000
Accounts payable:        
  Associated companies   101,131   121,382
  Other   207,071   398,507
Customer deposits   65,563   66,705
Taxes accrued   35,756   88,548
Accumulated deferred income taxes   12,467   -
Interest accrued   26,045   28,442
Deferred fuel costs   47,620   -
Obligations under capital leases   33,463   22,753
Other   35,555   8,721
TOTAL   564,671   775,058
         
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued   1,847,878   2,055,083
Accumulated deferred investment tax credits   91,640   92,439
Obligations under capital leases   15,843   35,740
Other regulatory liabilities   41,668   58,129
Decommissioning   225,487   221,291
Accumulated provisions   94,232   93,165
Long-term debt   1,169,746   1,172,400
Other   147,050   146,576
TOTAL   3,633,544   3,874,823
         
Commitments and Contingencies        
         
MEMBERS' EQUITY        
Preferred membership interests without sinking fund   100,000   100,000
Members' equity   1,186,436   1,105,172
TOTAL   1,286,436   1,205,172
         
TOTAL LIABILITIES AND MEMBERS' EQUITY   $5,484,651   $5,855,053
         
See Notes to Respective Financial Statements.        

 

ENTERGY LOUISIANA, LLC
STATEMENTS OF MEMBERS' EQUITY
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
         
    2006   2005
    (In Thousands)
MEMBERS' EQUITY        
Members' Equity - Beginning of period   $1,105,172   $1,032,703
         
  Add:        
  Net income   17,396   1,771
  Additional equity from parent   65,703   -
    83,099   1,771
         
  Deduct:        
    Distributions declared:        
      Common equity   -   1,800
      Preferred membership interests   1,738   -
    Other   97   -
    1,835   1,800
         
Members' Equity - End of period   $1,186,436   $1,032,674
         
         
         
See Notes to Respective Financial Statements.        

ENTERGY MISSISSIPPI, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

 

Hurricane Katrina

See the Form 10-K for a discussion of the effects of Hurricane Katrina, which hit Entergy Mississippi's service territory in August 2005 causing power outages and significant infrastructure damage to Entergy Mississippi's distribution and transmission systems. See State and Local Rate Regulation below for an update on activity directed towards recovery of Entergy Mississippi's storm restoration costs.

Results of Operations

Net income decreased $3.9 million for the first quarter of 2006 compared to the first quarter 2005 primarily due to increased taxes other than income taxes, increased interest expense, and decreased net revenue, partially offset by decreased depreciation and amortization expense and lower effective income tax rate.

Net Revenue

Net revenue, which is Entergy Mississippi's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory (credits) or charges. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.

   

Amount

   

(In Millions)

     

2005 net revenue

 

$91.5 

Deferral of Attala costs

 

7.9 

Fuel expenses recovered in base rates

 

(3.6)

Reserve equalization

 

(2.2)

Other

 

(3.3)

2006 net revenue

 

$90.3 

The deferral of Attala costs variance is primarily due to the under-recovery of Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.

Fuel expenses recovered in base rates decreased net revenue primarily due to increases in fuel procurement and storage-related costs.

The reserve equalization variance is primarily due to changes in the Entergy System generation mix compared to the same period in 2005 and a revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.

Gross operating revenues, fuel and purchased power expenses, and other regulatory charges

Gross operating revenues increased primarily due to an increase in fuel cost recovery revenues due to higher fuel rates.

Fuel and purchased power expenses increased primarily due to the over-recovery of fuel and purchased power costs coupled with an increase in the market price of oil and purchased power.

Other regulatory credits increased primarily due to the turnaround of gains recorded on gas hedging contracts, which has no effect on net income, in addition to the under-recovery of Attala costs discussed above.

Other Income Statement Variances

Taxes other than income taxes increased $3.8 million primarily due to higher assessed values for ad valorem tax purposes and higher franchise taxes in 2006.

Interest expense increased primarily due to additional long-term debt issued to finance the Attala power plant purchase.

Income Taxes

The effective income tax rates for the first quarters of 2006 and 2005 were 0.4% and 29.6%, respectively. The difference in the effective tax rate for the first quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to the allowance for funds used during construction, amortization of investment tax credits, and book and tax differences related to utility plant items. The difference in the effective tax rate for the first quarter of 2005 versus the federal statutory rate of 35% is primarily due to amortization of investment tax credits and book and tax differences related to the allowance for funds used during construction, partially offset by state income taxes and tax differences related to utility plant items.

Liquidity and Capital Resources

Cash Flow

Cash flows for the first quarters of 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$4,523 

 

$80,396 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

60,292 

 

32,573 

 

Investing activities

 

(135,611)

 

(30,545)

 

Financing activities

 

80,199 

 

(6,342)

Net increase (decrease) in cash and cash equivalents

 

4,880 

 

(4,314)

 

 

 

 

 

Cash and cash equivalents at end of period

 

$9,403 

 

$76,082 

Operating Activities

Cash flow from operations increased $27.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to increased collection of deferred fuel and purchased power costs, partially offset by the timing of payments to vendors.

In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $66 million of the refund to Entergy Mississippi.

Investing Activities

Net cash used in investing activities increased $105.1 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the purchase of the 480 MW Attala power plant for $88 million in January 2006 and also due to storm-related spending.

Financing Activities

Net cash provided by financing activities increased $86.5 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the net issuance of $99 million of long-term debt during 2006 and a decrease of $5.5 million in common stock dividends paid, partially offset by a decrease in money pool payables of $18.3 million.

Capital Structure

Entergy Mississippi's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage as of March 31, 2006 is primarily due to the issuance of $100 million of First Mortgage Bonds in January 2006.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Net debt to net capital

 

55.7%

 

52.6%

 

Effect of subtracting cash from debt

 

0.2%

 

0.1%

 

Debt to capital

 

55.9%

 

52.7%

 

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi's financial condition.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Mississippi's uses and sources of capital. Following are updates to the information presented in the Form 10-K.

See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYIS - Liquidity and Capital Resources - Uses of Capital" which sets forth the amounts of Entergy Mississippi's planned construction and other capital investments for 2006 through 2008. In January 2006, Entergy Mississippi purchased for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company. Entergy Mississippi plans to invest approximately $20 million in facility upgrades at the Attala plant plus $3 million in other costs, bringing the total capital cost of the project to approximately $111 million. In November 2005, the MPSC issued an order approving the acquisition of the Attala plant. In December 2005, the MPSC issued an order approving the investment cost recovery through the power management rider and limited the recovery through the rider to a period that begins with the closing date of the purchase and ends the earlier of the date costs are incorporated into base rates or December 31, 2006. The planned construction and other capital investments line includes the majority of the estimated cost of the Attala acquisition as a 2006 capital commitment.

Entergy Mississippi's receivables from or (payables to) the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

($65,732)

 

($84,066)

 

$13,111

 

$21,584

See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.

As discussed in the Form 10-K, Entergy Mississippi has a credit facility in the amount of $25 million that expires in May 2006. Borrowings on the credit facility may be secured by a security interest in Entergy Mississippi's receivables. Entergy Mississippi expects to renew its credit facility prior to expiration.

In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant and to repay short-term indebtedness.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of, state and local rate regulation, federal regulation and proceedings and the Energy Policy Act of 2005, and market and credit risks. The following are updates to the information provided in the Form 10-K.

State and Local Rate Regulation

In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing shows that an increase of $3.1 million in electric revenues is warranted.  The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing.  Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006.  A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as securitization).  Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding Community Development Block Grant funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

Federal Regulation

System Agreement Proceedings

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.

Independent Coordinator of Transmission (ICT)

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi's accounting for unbilled revenue and pension and other retirement costs.

ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $373,234    $251,246 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   179,157    43,367 
  Purchased power   124,426    116,058 
  Other operation and maintenance   40,965    40,981 
Taxes other than income taxes   17,516    13,766 
Depreciation and amortization   16,996    17,937 
Other regulatory charges (credits) - net   (20,642)   365 
TOTAL   358,418    232,474 
         
OPERATING INCOME   14,816    18,772 
         
OTHER INCOME        
Allowance for equity funds used during construction   1,241    1,001 
Interest and dividend income   229    638 
Miscellaneous - net   (562)   (369)
TOTAL   908    1,270 
         
INTEREST AND OTHER CHARGES  
Interest on long-term debt   11,115    9,834 
Other interest - net   2,112    617 
Allowance for borrowed funds used during construction   (814)   (663)
TOTAL   12,413    9,788 
         
INCOME BEFORE INCOME TAXES   3,311    10,254 
         
Income taxes   14    3,032 
         
NET INCOME   3,297    7,222 
         
Preferred dividend requirements and other   707    842 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $2,590    $6,380 
         
See Notes to Respective Financial Statements.        

 

ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $3,297    $7,222 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Other regulatory charges (credits) - net   (20,642)   365 
  Depreciation and amortization   16,996    17,937 
  Deferred income taxes and investment tax credits   (32,012)   (695)
  Changes in working capital:        
    Receivables   14,211    20,843 
    Fuel inventory   (3,103)   1,696 
    Accounts payable   (53,206)   (15,008)
    Taxes accrued   6,095    (22,845)
    Interest accrued   1,323    3,940 
    Deferred fuel costs   123,076    17,714 
    Other working capital accounts   17,471    (13,617)
  Provision for estimated losses and reserves   (23)   19 
  Changes in other regulatory assets   (14,621)   2,181 
  Other   1,430    12,821 
Net cash flow provided by operating activities   60,292    32,573 
         
INVESTING ACTIVITIES        
Construction expenditures   (48,653)   (31,546)
Payment for purchase of plant   (88,199)   - 
Allowance for equity funds used during construction   1,241    1,001 
Net cash flow used in investing activities   (135,611)   (30,545)
         
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt   99,240    - 
Change in money pool payable - net   (18,334)   - 
Dividends paid:        
  Common stock   -    (5,500)
  Preferred stock   (707)   (842)
Net cash flow provided by (used in) financing activities   80,199    (6,342)
         
Net increase (decrease) in cash and cash equivalents   4,880    (4,314)
         
Cash and cash equivalents at beginning of period   4,523    80,396 
         
Cash and cash equivalents at end of period   $9,403    $76,082 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $11,390    $5,990 
         
         
         

 

ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
     
  2006   2005
  (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents   $9,403    $4,523 
Accounts receivable:        
  Customer   97,397    102,202 
  Allowance for doubtful accounts   (1,707)   (1,826)
  Associated companies   4,724    5,415 
  Other   9,961    9,254 
  Accrued unbilled revenues   24,171    33,712 
     Total accounts receivable   134,546    148,757 
Deferred fuel costs     113,956 
Accumulated deferred income taxes   23,032   
Fuel inventory - at average cost   6,190    3,087 
Materials and supplies - at average cost   24,536    21,521 
Prepayments and other   63,738    62,759 
TOTAL   261,445    354,603 
          
OTHER PROPERTY AND INVESTMENTS        
Investment in affiliates - at equity   5,531    5,531 
Non-utility property - at cost (less accumulated depreciation)   6,165    6,199 
TOTAL   11,696    11,730 
         
UTILITY PLANT         
Electric   2,626,568    2,473,035 
Property under capital lease   39    50 
Construction work in progress   59,917    119,354 
TOTAL UTILITY PLANT   2,686,524    2,592,439 
Less - accumulated depreciation and amortization   896,869    886,687 
UTILITY PLANT - NET   1,789,655    1,705,752 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  SFAS 109 regulatory asset - net   16,484    17,073 
  Other regulatory assets   218,770    186,197 
Long-term receivable   3,270    3,270 
Other   34,983    32,418 
TOTAL   273,507    238,958 
         
TOTAL ASSETS   $2,336,303    $2,311,043 
         
See Notes to Respective Financial Statements.        
 
 
 
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
     
  2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Accounts payable:        
  Associated companies   $ 114,141    $ 158,579 
  Other   44,045    83,306 
Customer deposits   46,112    44,025 
Taxes accrued     33,121 
Accumulated deferred income taxes     13,233 
Interest accrued   14,974    13,651 
Deferred fuel costs   9,120   
Obligations under capital leases   35    40 
Other   22,117    2,739 
TOTAL   250,544    348,694 
         
NON-CURRENT LIABILITIES         
Accumulated deferred income taxes and taxes accrued   536,094    491,857 
Accumulated deferred investment tax credits   12,030    12,358 
Obligations under capital leases     11 
Other regulatory liabilities   15,670    34,368 
Retirement cost liabilities   4,074    4,016 
Accumulated provisions   9,413    9,436 
Long-term debt   795,131    695,146 
Other   87,192    91,588 
TOTAL   1,459,608    1,338,780 
          
Commitments and Contingencies        
         
SHAREHOLDERS' EQUITY        
Preferred stock without sinking fund   50,381    50,381 
Common stock, no par value, authorized 15,000,000        
 shares; issued and outstanding 8,666,357 shares in 2006 and 2005   199,326    199,326 
Capital stock expense and other   (690)   (682)
Retained earnings   377,134    374,544 
TOTAL   626,151    623,569 
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $2,336,303    $2,311,043 
         
See Notes to Respective Financial Statements.        
         

 

ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
                 
        Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars In Millions)    
Electric Operating Revenues:                
  Residential   $ 146    $ 96    $ 50    52 
  Commercial   130    85    45    53 
  Industrial   68    44    24    55 
  Governmental   13    8    5    63 
     Total retail   357    233    124    53 
  Sales for resale                
    Associated companies   8    6    2    33 
    Non-associated companies   8    10    (2)   (20)
  Other   -    2    (2)   (100)
     Total   $ 373    $ 251    $122    49 
                  
Billed Electric Energy                
 Sales (GWh):                
  Residential   1,185    1,196    (11)   (1)
  Commercial   1,040    1,021    19    2 
  Industrial   701    692    9    1 
  Governmental   93    92    1    1 
     Total retail   3,019    3,001    18    - 
  Sales for resale                
    Associated companies   71    17    54    318 
    Non-associated companies   68    68    -    - 
     Total   3,158    3,086    72    2 
                 
                 

ENTERGY NEW ORLEANS, INC. (Debtor-in-possession)

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

 

Hurricane Katrina

See the Form 10-K for a discussion of the effects of Hurricane Katrina, which in August 2005 caused catastrophic damage to Entergy New Orleans' service territory, including the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area. Following is an update to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy New Orleans is currently preparing an application to seek CDBG funding. In March 2006 Entergy New Orleans provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, includes all the estimated costs of Hurricane Katrina damage, as well as a lost customer base component intended to help offset the need for storm-related rate increases. The statement includes justification for a request for $718 million in CDBG funding.

In the first quarter 2006, Entergy New Orleans reduced its accrued accounts payable for storm restoration costs by $97.4 million, with corresponding reductions of $88.7 million in construction work in progress and $8.7 million in regulatory assets, based on a reassessment of the nature and timing of expected restoration and rebuilding costs and the obligations associated with restoring service. Although Entergy New Orleans reduced its accrual for restoration spending by these amounts, it continues to expect to incur the related costs, beginning in 2007, and Entergy New Orleans still expects its storm restoration and business continuity costs to total approximately $275 million.

Bankruptcy Proceedings

See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following are updates to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.

In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006.

The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.

Results of Operations

Net Income

Net income decreased slightly in the first quarter 2006 compared to the first quarter 2005, with lower net revenue almost entirely offset by lower operation and maintenance expense, interest charges, and taxes other than income taxes.

Net Revenue

Net revenue, which is Entergy New Orleans' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the first quarter of 2006 to the first quarter of 2005.

   

Amount

   

(In Millions)

     

2005 net revenue

 

$52.1 

Volume/weather

 

(22.7)

Price applied to unbilled electric sales

 

(6.0)

Net gas revenue

 

(5.3)

Net wholesale revenue

 

25.2 

Other

 

(3.0)

2006 net revenue

 

$40.3 

The volume/weather variance is due to a decrease in electricity usage in the service territory caused by customer losses following Hurricane Katrina. Billed retail electricity usage decreased a total of 583 GWh compared to the first quarter of 2005, a decline of 45%.

The price applied to unbilled electric sales variance is due to a decrease in the fuel cost component of the price applied to unbilled sales. The decrease in the fuel cost component is due to a decrease in the average cost of generation due to a change in the generation mix from natural gas to solid fuel resources. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K and Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.

The net gas revenue variance is due to a decrease in gas usage in the service territory caused by customer losses following Hurricane Katrina, partially offset by a revised estimate of deferred fuel costs.

The net wholesale revenue variance is due to an increase in energy available for sales for resale due to the decrease in retail usage caused by customer losses following Hurricane Katrina. The increased revenue includes the sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in Entergy New Orleans' retail customer demand caused by Hurricane Katrina and provide revenue support for the costs of Entergy New Orleans' share of Grand Gulf.

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to shifts in costs from normal operations and maintenance work to storm restoration work as a result of Hurricane Katrina.

Taxes other than income taxes decreased primarily due to lower franchise taxes in 2006 due to lower revenues.

Interest and other charges decreased primarily due to the cessation of interest accruals on the first mortgage bonds as a result of the bankruptcy filing, partially offset by interest accrued on the DIP credit facility.

Income Taxes

The effective income tax rates for the first quarters of 2006 and 2005 were 37.5% and 38.1%, respectively.

Preferred Dividends

No preferred dividends were declared during the first quarter of 2006. Due to its bankruptcy, Entergy New Orleans did not pay the preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006. 

Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding.  As discussed more fully in the Form 10-K, if dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors.  If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group.  If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement.

Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.

Liquidity and Capital Resources

Debtor-in-Possession Credit Facility

See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility. Following is an update to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility primarily using the income tax refund discussed below in "Operating Activities," and as of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility. Management currently expects the bankruptcy court-authorized funding level to be sufficient to fund Entergy New Orleans' expected level of operations through 2006.

Cash Flow

Cash flows for the first quarters of 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$48,056 

 

$7,954 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

30,729 

 

63 

 

Investing activities

 

(43,240)

 

(8,546)

 

Financing activities

 

(10,000)

 

3,056 

Net decrease in cash and cash equivalents

 

(22,511)

 

(5,427)

 

 

 

 

 

Cash and cash equivalents at end of period

 

$25,545 

 

$2,527 

Operating Activities

Net cash provided by operating activities increased $30.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to improved timing of collection of receivables, improved collection of deferred fuel costs, and a decrease in interest paid.

In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006, Entergy Corporation distributed $71 million of the refund to Entergy New Orleans. As discussed above, Entergy New Orleans used the income tax refund to repay a portion of the borrowings outstanding under the DIP credit facility.

Investing Activities

Net cash used in investing activities increased $34.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to capital expenditure activity related to Hurricane Katrina.

Financing Activities

Financing activities used $10 million of cash for the first quarter of 2006 because of the net repayment in 2006 of $10 million of previous borrowings under the DIP credit facility. Financing activities provided $3.1 million of cash for the first quarter of 2005 primarily due to money pool borrowing.

Capital Structure

Entergy New Orleans' capitalization is shown in the following table.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Debt to capital

 

64.9%

 

66.4%

 

Debt consists of notes payable and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy New Orleans' uses and sources of capital. The following are updates to the Form 10-K.

Entergy New Orleans' receivables from or (payables to) the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

($35,558)

 

($35,558)

 

($3,897)

 

$1,413

See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool. Entergy New Orleans remains a participant in the money pool, but Entergy New Orleans has not made, and does not expect to make, any additional borrowings from the money pool while it is in bankruptcy proceedings. The money pool borrowings reflected on Entergy New Orleans' Balance Sheet as of March 31, 2006 are classified as a pre-petition obligation subject to compromise.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, market and credit risks, environmental risks, and litigation risks. Following are updates to the discussion in the Form 10-K.

State and Local Rate Regulation

In April 2006, the City Council agreed to delay Entergy New Orleans' 2005 formula rate plan filing to July 2006 from the originally scheduled May 1, 2006 deadline.

Federal Regulation

System Agreement Proceedings

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.

Independent Coordinator of Transmission (ICT)

See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans' accounting for unbilled revenue and pension and other retirement costs.

ENTERGY NEW ORLEANS, INC.
(DEBTOR-IN-POSSESSION)
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
   
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $99,249    $131,172 
Natural gas   37,012    60,095 
TOTAL   136,261    191,267 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   34,668    81,096 
  Purchased power   60,237    56,782 
  Other operation and maintenance   13,810    20,847 
Taxes other than income taxes   8,600    10,680 
Depreciation and amortization   7,464    8,086 
Reorganization items   1,678   
Other regulatory charges - net   1,043    1,255 
TOTAL   127,500    178,746 
          
OPERATING INCOME   8,761    12,521 
         
OTHER INCOME        
Allowance for equity funds used during construction   1,079    282 
Interest and dividend income   803    218 
Miscellaneous - net   (152)   (123)
TOTAL   1,730    377 
         
INTEREST AND OTHER CHARGES      
Interest on long-term debt   184    3,486 
Other interest - net   2,141    384 
Allowance for borrowed funds used during construction   (863)   (232)
TOTAL   1,462    3,638 
         
INCOME BEFORE INCOME TAXES   9,029    9,260 
         
Income taxes   3,386    3,524 
         
NET INCOME   5,643    5,736 
         
Preferred dividend requirements and other     241 
         
EARNINGS APPLICABLE TO        
COMMON STOCK   $5,643    $5,495 
         
See Notes to Respective Financial Statements.        
         

 

ENTERGY NEW ORLEANS, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
OPERATING ACTIVITIES        
Net income   $5,643    $5,736 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Other regulatory charges - net   1,043    1,255 
  Depreciation and amortization   7,464    8,086 
  Deferred income taxes and investment tax credits   50    (1,695)
  Changes in working capital:        
    Receivables   14,565    1,997 
    Fuel inventory   6,820    4,181 
    Accounts payable   (6,995)   (2,012)
    Taxes accrued   1,038    4,779 
    Interest accrued   282    (2,499)
    Deferred fuel costs   4,581    (5,244)
    Other working capital accounts   3,097    (8,539)
  Provision for estimated losses and reserves    -    (556)
  Changes in pension liability   1,465    4,850 
  Changes in other regulatory assets   7,308    2,492 
  Other   (15,632)   (12,768)
Net cash flow provided by operating activities   30,729    63 
         
INVESTING ACTIVITIES        
Construction expenditures   (44,319)   (10,241)
Allowance for equity funds used during construction   1,079    282 
Change in money pool receivable - net   -    1,413 
Net cash flow used in investing activities   (43,240)   (8,546)
         
FINANCING ACTIVITIES        
Repayment of DIP credit facility   (10,000)   - 
Change in money pool payable - net   -    3,897 
Dividends paid:        
  Common stock    -    (600)
  Preferred stock     (241)
Net cash flow provided by (used in) financing activities   (10,000)   3,056 
         
Net decrease in cash and cash equivalents   (22,511)   (5,427)
         
Cash and cash equivalents at beginning of period   48,056    7,954 
         
Cash and cash equivalents at end of period   $25,545    $2,527 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $1,859    $6,171 
         
See Notes to Respective Financial Statements.        

 

ENTERGY NEW ORLEANS, INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
         
CURRENT ASSETS        
Cash and cash equivalents   $25,545    $48,056 
Accounts receivable:        
  Customer   77,233    82,052 
  Allowance for doubtful accounts   (23,637)   (25,422)
  Associated companies   12,894    17,895 
  Other   7,313    6,530 
  Accrued unbilled revenues   16,385    23,698 
     Total accounts receivable   90,188    104,753 
Deferred fuel costs   26,012    30,593 
Fuel inventory - at average cost   1,228    8,048 
Materials and supplies - at average cost   6,769    8,961 
Prepayments and other   70,169    61,581 
TOTAL   219,911    261,992 
         
OTHER PROPERTY AND INVESTMENTS        
Investment in affiliates - at equity   3,259    3,259 
Non-utility property at cost (less accumulated depreciation)   1,107    1,107 
TOTAL   4,366    4,366 
         
UTILITY PLANT        
Electric   745,260    691,045 
Natural gas   191,720    189,207 
Construction work in progress   33,706    202,353 
TOTAL UTILITY PLANT   970,686    1,082,605 
Less - accumulated depreciation and amortization   434,814    428,053 
UTILITY PLANT - NET   535,872    654,552 
         
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
  Other regulatory assets   165,040    166,133 
Long term receivables   1,812    1,812 
Other   34,897    31,266 
TOTAL   201,749    199,211 
         
TOTAL ASSETS   $961,898    $1,120,121 
         
See Notes to Respective Financial Statements.        
 
 
 
ENTERGY NEW ORLEANS, INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
   
  2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
DIP credit facility   $80,000   $90,000
Notes payable   15,000   15,000
Accounts payable:        
  Associated companies   47,189   55,923
  Other   63,151   228,496
Customer deposits   13,343   16,930
Accumulated deferred income taxes   176   1,898
Interest accrued   1,477   1,195
Other   4,424   2,018
TOTAL CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE   224,760   411,460
         
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued   134,727   127,680
Accumulated deferred investment tax credits   3,464   3,570
SFAS 109 regulatory liability - net   58,295   52,229
Other regulatory liabilities   -   591
Retirement cost liability   2,463   2,421
Accumulated provisions   2,119   2,119
Pension liability   37,159   35,694
Other   5,777   5,730
TOTAL NON-CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE   244,004   230,034
         
LIABILITIES SUBJECT TO COMPROMISE   317,781   308,917
         
TOTAL LIABILITIES   786,545   950,411
         
Commitments and Contingencies        
         
SHAREHOLDERS' EQUITY        
Preferred stock without sinking fund   19,780   19,780
Common stock, $4 par value, authorized 10,000,000        
  shares; issued and outstanding 8,435,900 shares in 2006        
  and 2005   33,744   33,744
Paid-in capital   36,294   36,294
Retained earnings   85,535   79,892
TOTAL   175,353   169,710
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $961,898   $1,120,121
         
See Notes to Respective Financial Statements.        

 

ENTERGY NEW ORLEANS, INC.
(DEBTOR-IN-POSSESSION)
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 
                 
            Increase/    
Description   2006   2005   (Decrease)   %
    (Dollars In Millions)    
Electric Operating Revenues:                
  Residential   $17    $29    ($12)   (41)
  Commercial   35    34     
  Industrial         14 
  Governmental   10    13    (3)   (23)
     Total retail   70    83    (13)   (16)
  Sales for resale                
    Associated companies     46    (39)   (85)
    Non-associated companies   27      27   
  Other   (5)     (7)   (350)
     Total   $99    $131    ($32)   (24)
                 
Billed Electric Energy                
 Sales (GWh):                
  Residential   138    400    (262)   (66)
  Commercial   360    519    (159)   (31)
  Industrial   102    144    (42)   (29)
  Governmental   106    226    (120)   (53)
     Total retail   706    1,289    (583)   (45)
  Sales for resale                
    Associated companies   120    606    (486)   (80)
    Non-associated companies   407      403    10,075 
     Total   1,233    1,899    (666)   (35)
                 
                 
                 

SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

System Energy's principal asset consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy's only source of operating revenues. Net income increased by $4.5 million for first quarter of 2006 compared to the first quarter of 2005. The increase is primarily due to higher interest income earned on money pool and temporary cash investments.

Liquidity and Capital Resources

Cash Flow

Cash flows for the first quarters of 2006 and 2005 were as follows:

 

 

2006

 

2005

 

 

(In Thousands)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$75,704 

 

$216,355 

 

 

 

 

 

Cash flow provided by (used in):

 

 

 

 

 

Operating activities

 

59,065 

 

57,136 

 

Investing activities

 

107,623 

 

12,471 

 

Financing activities

 

(57,089)

 

(55,613)

Net increase in cash and cash equivalents

 

109,599 

 

13,994 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$185,303 

 

$230,349 

Operating Activities

Cash flow from operations increased $1.9 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to an increase of $4.5 million in net income, partially offset by an increase of $2.6 million in interest payments.

Investing Activities

The increase of $95.2 million in net cash provided by investing activities for the first quarter of 2006 compared to the first quarter of 2005 was primarily due to money pool activity. Partially offsetting the increase in cash provided was an increase in construction expenditures primarily resulting from capital spending on dry fuel storage.

Financing Activities

The decrease of $1.5 million in net cash used in financing activities for the first quarter of 2006 compared to the first quarter of 2005 was primarily due to an increase of $7.3 million in common stock dividends, partially offset by a decrease of $5.8 million in the January 2006 principal payment made on the Grand Gulf sale-leaseback compared to the January 2005 principal payment.

Capital Structure

System Energy's capitalization is balanced between equity and debt, as shown in the following table.

 

 

March 31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Net debt to net capital

 

44.6%

 

49.0%

 

Effect of subtracting cash from debt

 

5.7%

 

2.1%

 

Debt to capital

 

50.3%

 

51.1%

 

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder's equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy's financial condition.

Uses and Sources of Capital

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of System Energy's uses and sources of capital. The following is an update to the Form 10-K.

System Energy's receivables from the money pool were as follows:

March 31,
2006

 

December 31,
2005

 

March 31,
2005

 

December 31,
2004

(In Thousands)

 

 

 

 

 

 

 

$155,495

 

$277,287

 

$40,965

 

$61,592

See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of market risks, nuclear matters, litigation risks, and environmental risks.

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy's accounting for nuclear decommissioning costs and pension and other retirement benefits.

SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
       
    2006   2005
    (In Thousands)
         
OPERATING REVENUES        
Domestic electric   $131,654    $124,790 
         
OPERATING EXPENSES        
Operation and Maintenance:        
  Fuel, fuel-related expenses, and        
   gas purchased for resale   11,213    9,719 
  Nuclear refueling outage expenses   3,573    2,993 
  Other operation and maintenance   23,252    23,136 
Decommissioning   5,819    6,128 
Taxes other than income taxes   6,189    6,049 
Depreciation and amortization   25,677    26,544 
Other regulatory credits - net   (1,980)   (4,385)
TOTAL   73,743    70,184 
         
OPERATING INCOME   57,911    54,606 
         
OTHER INCOME        
Allowance for equity funds used during construction   683    306 
Interest and dividend income   5,629    2,845 
Miscellaneous - net   (107)   (113)
TOTAL   6,205    3,038 
         
INTEREST AND OTHER CHARGES      
Interest on long-term debt   12,533    12,856 
Other interest - net   28   
Allowance for borrowed funds used during construction   (215)   (97)
TOTAL   12,346    12,761 
         
INCOME BEFORE INCOME TAXES   51,770    44,883 
         
Income taxes   21,022    18,651 
         
NET INCOME   $30,748    $26,232 
         
See Notes to Respective Financial Statements.        

 

 

 

 

 

 

 

 

 

 

 

 

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
     
    2006   2005
    (In Thousands)
         
OPERATING ACTIVITIES        
Net income   $30,748    $26,232 
Adjustments to reconcile net income to net cash flow provided by operating activities:        
  Other regulatory credits - net   (1,980)   (4,385)
  Depreciation, amortization, and decommissioning   31,496    32,672 
  Deferred income taxes and investment tax credits   (4,729)   (6,619)
  Changes in working capital:        
    Receivables   8,979    10,037 
    Accounts payable   1,039    (7,782)
    Taxes accrued   10,939    10,213 
    Interest accrued   (30,412)   (27,541)
    Other working capital accounts   (2,097)   (4,514)
  Provision for estimated losses and reserves   1    51 
  Changes in other regulatory assets   (4,392)   (3,330)
  Other   19,473    32,102 
Net cash flow provided by operating activities   59,065    57,136 
         
INVESTING ACTIVITIES        
Construction expenditures   (8,122)   (3,307)
Allowance for equity funds used during construction   683    306 
Nuclear fuel purchases   (370)   - 
Proceeds from sale/leaseback of nuclear fuel   370    - 
Proceeds from nuclear decommissioning trust fund sales   27,489    30,923 
Investment in nuclear decommissioning trust funds   (34,219)   (36,078)
Change in money pool receivable - net   121,792    20,627 
Net cash flow provided by investing activities   107,623    12,471 
         
FINANCING ACTIVITIES        
Retirement of long-term debt   (22,989)   (28,813)
Dividends paid:        
  Common stock   (34,100)   (26,800)
Net cash flow used in financing activities   (57,089)   (55,613)
         
Net increase in cash and cash equivalents   109,599    13,994 
         
Cash and cash equivalents at beginning of period   75,704    216,355 
         
Cash and cash equivalents at end of period   $185,303    $230,349 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
  Interest - net of amount capitalized   $41,520    $38,948 
         
See Notes to Respective Financial Statements.        
         

 

SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
March 31, 2006 and December 31, 2005
(Unaudited)
             
    2006   2005
  (In Thousands)
             
CURRENT ASSETS            
Cash and cash equivalents:            
  Cash       $269   $204
  Temporary cash investments - at cost,            
   which approximates market       185,034   75,500
     Total cash and cash equivalents       185,303   75,704
Accounts receivable:            
  Associated companies       197,762   327,454
  Other       2,206   3,285
     Total accounts receivable       199,968   330,739
Materials and supplies - at average cost       55,830   55,183
Deferred nuclear refueling outage costs       15,133   17,853
Prepayments and other       5,962   1,878
TOTAL       462,196   481,357
             
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds       248,034   236,003
             
UTILITY PLANT        
Electric       3,217,744   3,212,596
Property under capital lease       467,005   467,005
Construction work in progress       50,066   47,178
Nuclear fuel under capital lease       79,479   87,500
TOTAL UTILITY PLANT       3,814,294   3,814,279
Less - accumulated depreciation and amortization       1,917,175   1,889,886
UTILITY PLANT - NET       1,897,119   1,924,393
             
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:            
  SFAS 109 regulatory asset - net       93,152   92,883
  Other regulatory assets       295,293   292,968
Other       17,615   18,435
TOTAL       406,060   404,286
             
TOTAL ASSETS       $3,013,409   $3,046,039
             
See Notes to Respective Financial Statements.            
 
 
 
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
March 31, 2006 and December 31, 2005
(Unaudited)
             
    2006   2005
  (In Thousands)
 
CURRENT LIABILITIES        
Currently maturing long-term debt       $23,335   $22,989
Accounts payable:            
  Associated companies       2,031   -
  Other       21,778   22,770
Taxes accrued       209,204   228,168
Accumulated deferred income taxes       5,627   6,678
Interest accrued       14,697   45,109
Obligations under capital leases       30,236   27,716
Other       1,725   1,811
TOTAL       308,633   355,241
             
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued       292,496   267,913
Accumulated deferred investment tax credits       71,267   72,136
Obligations under capital leases       49,243   63,307
Other regulatory liabilities       253,225   224,997
Decommissioning       324,745   318,927
Accumulated provisions       2,400   2,399
Long-term debt       799,851   819,642
Other       21,273   27,849
TOTAL       1,814,500   1,797,170
             
Commitments and Contingencies            
             
SHAREHOLDER'S EQUITY        
Common stock, no par value, authorized 1,000,000 shares;            
 issued and outstanding 789,350 shares in 2006 and 2005       789,350   789,350
Retained earnings       100,926   104,278
TOTAL       890,276   893,628
             
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY       $3,013,409   $3,046,039
             
See Notes to Respective Financial Statements.            
             
             

ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS (DEBTOR-IN-POSSESSION), AND SYSTEM ENERGY

NOTES TO RESPECTIVE FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. COMMITMENTS AND CONTINGENCIES

Entergy New Orleans Bankruptcy (Entergy New Orleans)

See Note 6 to the domestic utility companies and System Energy financial statements for information on the Entergy New Orleans bankruptcy proceeding.

Nuclear Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)

See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's, and System Energy's nuclear power plants.

Non-Nuclear Property Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited for any one occurrence will be reduced to $500 million.

Nuclear Decommissioning and Other Asset Retirement Costs (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)

See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.

CashPoint Bankruptcy (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.

City Franchise Ordinances (Entergy New Orleans)

Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans' electric and gas utility properties.

Employment Litigation (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies deny any liability to the plaintiffs.

Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding asbestos and hazardous material litigation at Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.

NOTE 2. RATE AND REGULATORY MATTERS

Regulatory Assets

Other Regulatory Assets

See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding regulatory assets reflected on the balance sheets of the domestic utility companies and System Energy. The following are updates to the Form 10-K.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as securitization).  Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

Deferred Fuel Costs

See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies. The following are updates to the Form 10-K.

Entergy Arkansas

In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh would replace the interim rate of $0.01900 per kWh that has been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.

On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.

Entergy Gulf States

On March 1, 2006, Entergy Gulf States filed with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97 million including interest of eligible fuel costs for the period August 2005 through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States has entered into a unanimous settlement that would reduce the requested surcharge for actual over-collections from the months of February and March 2006, resulting in a surcharge of $78.8 million to be implemented over a twelve-month period beginning in June 2006. Amounts collected through the interim fuel surcharges are subject to final reconciliation in a future fuel reconciliation proceeding.

Entergy Gulf States and Entergy Louisiana

In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities of Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006, the LPSC accepted the LPSC Staff's audit report finding that the prices paid for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and Entergy Gulf States acted reasonably and prudently in response to an extremely difficult environment.

Unbilled Revenue and Deferred Fuel Costs (Entergy Gulf States and Entergy Louisiana)

Effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.

Retail Rate Proceedings

See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.

Filings with the PUCT and Texas Cities (Entergy Gulf States)

As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement in principle on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The settlement agreement has been filed and is expected to be considered by the PUCT in May 2006.

Filings with the LPSC

Retail Rates - Electric (Entergy Gulf States)

In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.

Retail Rates - Gas (Entergy Gulf States)

In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff. The rates are implemented subject to refund pending approval by the LPSC. An LPSC decision is expected during the second quarter of 2006.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan Filings

In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing shows that an increase of $3.1 million in electric revenues is warranted.  The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing.  Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006.  A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.

NOTE 3. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT

The short-term borrowings of the domestic utility companies (other than Entergy New Orleans) and System Energy are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008. In addition to borrowing from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC authorized limits. The following are the FERC-authorized limits for short-term borrowings effective February 2006 and the outstanding short-term borrowings from the money pool for the domestic utility companies (other than Entergy New Orleans) and System Energy as of March 31, 2006:

 

 

Authorized

 

Borrowings

 

 

(In Millions)

 

 

 

 

 

Entergy Arkansas

 

$250

 

-

Entergy Gulf States

 

$350

 

$5.1

Entergy Louisiana

 

$250

 

$38.9

Entergy Mississippi

 

$175

 

$65.7

System Energy

 

$200

 

-

Under a savings provision in PUHCA 2005, which repealed PUHCA 1935, Entergy New Orleans may continue to be a participant in the money pool to the extent authorized by its SEC PUHCA 1935 order. However, Entergy New Orleans has not, and does not expect to make, any additional money pool borrowings while it is in bankruptcy proceedings. Entergy New Orleans had $35.6 million in borrowings outstanding from the money pool as of its bankruptcy filing date, September 23, 2005. The money pool borrowings reflected on Entergy New Orleans' Balance Sheet as of March 31, 2006 are classified as a pre-petition obligation subject to compromise.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, each have credit facilities available as of March 31, 2006 as follows:


Company

 


Expiration Date

 

Amount of
Facility

 

Amount Drawn as of
March 31, 2006

 

 

 

 

 

 

 

Entergy Arkansas

 

April 2006

 

$85 million (a)

 

-

Entergy Gulf States

 

February 2011

 

$25 million (b)

 

-

Entergy Louisiana

 

April 2006

 

$85 million (a)

 

-

Entergy Mississippi

 

May 2006

 

$25 million (c)

 

-

(a)

The combined amount borrowed by Entergy Arkansas and Entergy Louisiana under these facilities at any one time cannot exceed $85 million. Entergy Louisiana granted a security interest in its receivables to secure its $85 million facility.

(b)

The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of March 31, 2006, $1.4 million in letters of credit had been issued.

(c)

Borrowings under the Entergy Mississippi facility may be secured by a security interest in its receivables.

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.

In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.

The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets. In July 2005, Entergy New Orleans granted the lender a security interest in its customer accounts receivables to secure its borrowings under its facility.

Entergy New Orleans Debtor-in-Possession Credit Facility

See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, and as of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility.

The interest rate on borrowings under the DIP credit agreement will be the average interest rate of borrowings outstanding under Entergy Corporation's $2 billion revolving credit facility, which is currently approximately 5.1% per annum.

Long-term Debt

In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.

NOTE 4. PREFERRED STOCK

(Entergy Arkansas)

In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which are outstanding as of March 31, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. The proceeds from this issuance were used in the second quarter of 2006 to redeem all $10 million of Entergy Arkansas' $100 par value 7.32% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.80% Series Preferred Stock, all $20 million of Entergy Arkansas' $100 par value 7.40% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.88% Series Preferred Stock, and all $15 million of Entergy Arkansas' $25 par value $1.96 Series Preferred Stock.

(Entergy New Orleans)

Due to its bankruptcy, Entergy New Orleans did not pay its preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006.  Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock ("4.75% Preferred") issued and outstanding.  As discussed more fully in Note 6 to the domestic utility companies and System Energy financial statements in the Form 10-K, if dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors.  If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group.  If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement.

Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.

NOTE 5. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

Components of Net Pension Cost

The domestic utility companies' and System Energy's qualified pension cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

2006

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Service cost - benefits earned

 

 

 

 

 

 

 

 

 

 

 

 

 during the period

 

$3,626 

 

$2,993 

 

$2,182 

 

$1,077 

 

$501 

 

$1,031 

Interest cost on projected

 

 

 

 

 

 

 

 

 

 

 

 

 benefit obligation

 

9,915 

 

7,914 

 

6,052 

 

3,252 

 

1,282 

 

1,604 

Expected return on assets

 

(9,834)

 

(10,176)

 

(7,114)

 

(3,683)

 

(884)

 

(1,775)

Amortization of prior service cost

 

415 

 

309 

 

141 

 

128 

 

56 

 

12 

Amortization of loss

 

2,438 

 

640 

 

1,509 

 

725 

 

509 

 

167 

Net pension cost

 

$6,560 

 

$1,680 

 

$2,770 

 

$1,499 

 

$1,464 

 

$1,039 

 

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

2005

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Service cost - benefits earned

 

 

 

 

 

 

 

 

 

 

 

 

 during the period

 

$3,329 

 

$2,704 

 

$1,957 

 

$1,005 

 

$436 

 

$944 

Interest cost on projected

 

 

 

 

 

 

 

 

 

 

 

 

 benefit obligation

 

9,115 

 

7,235 

 

5,525 

 

2,998 

 

1,148 

 

1,413 

Expected return on assets

 

(9,009)

 

(9,709)

 

(6,666)

 

(3,566)

 

(731)

 

(1,324)

Amortization of transition asset

 

 

 

 

 

 

(69)

Amortization of prior service cost

 

415 

 

378 

 

163 

 

128 

 

57 

 

17 

Amortization of loss

 

1,613 

 

1,213 

 

730 

 

527 

 

151 

 

229 

Net pension cost

 

$5,463 

 

$1,821 

 

$1,709 

 

$1,092 

 

$1,061 

 

$1,210 

The domestic utility companies recognized the following pension cost for their non-qualified pension plans in the first quarters of 2006 and 2005:

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

 

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

 

 

(In Thousands)

Non-Qualified Pension Cost First
 Quarter 2006

 

$113 

 

$220 

 

$5 

 

$36 

 

$54 

 

Non-Qualified Pension Cost First
 Quarter 2005

 

$101 

 

$296 

 

$6 

 

$37 

 

$51 

 

Components of Net Other Postretirement Benefit Cost

The domestic utility companies' and System Energy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

2006

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Service cost - benefits earned

 

 

 

 

 

 

 

 

 

 

 

 

 during the period

 

$1,337 

 

$1,254 

 

$854 

 

$419 

 

$232 

 

$414 

Interest cost on APBO

 

2,844 

 

2,747 

 

1,856 

 

944 

 

856 

 

407 

Expected return on assets

 

(1,797)

 

(1,489)

 

 

(709)

 

(611)

 

(421)

Amortization of transition obligation

 

205 

 

151 

 

96 

 

88 

 

416 

 

Amortization of prior service cost

 

(408)

 

 

(24)

 

(137)

 

10 

 

(301)

Amortization of loss

 

1,671 

 

1,002 

 

893 

 

644 

 

343 

 

207 

Net other postretirement benefit cost

 

$3,852 

 

$3,665 

 

$3,675 

 

$1,249 

 

$1,246 

 

$308 

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

2005

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Service cost - benefits earned

 

 

 

 

 

 

 

 

 

 

 

 

 during the period

 

$1,157 

 

$1,634 

 

$689 

 

$363 

 

$192 

 

$415 

Interest cost on APBO

 

2,589 

 

2,924 

 

1,673 

 

833 

 

789 

 

394 

Expected return on assets

 

(1,637)

 

(1,366)

 

 

(669)

 

(579)

 

(387)

Amortization of transition obligation

 

205 

 

947 

 

95 

 

88 

 

435 

 

Amortization of prior service cost

 

(173)

 

 

18 

 

(46)

 

10 

 

(139)

Amortization of loss

 

1,276 

 

770 

 

691 

 

471 

 

211 

 

146 

Net other postretirement benefit cost

 

$3,417 

 

$4,909 

 

$3,166 

 

$1,040 

 

$1,058 

 

$433 

Employer Contributions

The domestic utility companies and System Energy expect to contribute the following to pension plans in 2006. A portion of these contributions were planned to be made in 2005, but were delayed until January 2006 in accordance with the Katrina Emergency Tax Relief Act. For further information on pension funding refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

 

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Expected 2006 pension contributions
  disclosed in Form 10-K

 


$114,544

 


$22,102

 


$54,048

 


$16,357

 


$ -

 


$13,037

Pension contributions made through
  April 2006

 

$34,171

 

$11,132

 


$11,514

 

$5,179

 

$ -

 

$7,614

Remaining estimated pension
  contributions to be made in 2006

 

$80,373

 

$10,970

 


$42,534

 

$11,178

 

$ -

 

$5,423

Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)

Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation (APBO) and the first quarters 2006 and 2005 other postretirement benefit cost for the domestic utility companies and System Energy as follows:

 

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

Entergy

 

System

 

 

Arkansas

 

Gulf States

 

Louisiana

 

Mississippi

 

New Orleans

 

Energy

 

 

(In Thousands)

Reduction in 12/31/2005 APBO

 

($42,337)

 

($36,740)

 

($23,640)

 

($14,407)

 

($11,206)

 

($5,972)

Reduction in first quarter 2006

 

 

 

 

 

 

 

 

 

 

 

 

  other postretirement benefit cost

 

($1,562)

 

($1,332)

 

($865)

 

($512)

 

($376)

 

($268)

Reduction in first quarter 2005

 

 

 

 

 

 

 

 

 

 

 

 

  other postretirement benefit cost

 

($1,446)

 

($1,269)

 

($790)

 

($476)

 

($350)

 

($245)

For further information on the Medicare Act refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.

NOTE 6. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING

See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following are updates to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession (DIP) credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.

In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006.

The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.

Certain pre-petition liabilities have been classified as liabilities subject to compromise in Entergy New Orleans' Balance Sheet as of March 31, 2006 and December 31, 2005. The following table summarizes the components of liabilities subject to compromise as of March 31, 2006 and December 31, 2005:

   

March 31, 2006

 

December 31, 2005

   

(In Thousands)

         

Accounts payable - Associated companies

 

$55,660

 

$46,815

Accounts payable - Other

 

25,000

 

25,000

Interest accrued

 

1,473

 

1,473

Accumulated provisions

 

5,785

 

5,770

Long-term debt

 

229,863

 

229,859

Total Liabilities Subject to Compromise

 

$317,781

 

$308,917

Payment terms for the amount classified as subject to compromise will be established in connection with a plan of reorganization.

The accompanying financial statements have been prepared on the basis that Entergy New Orleans will continue as a going concern. Entergy New Orleans' filing for protection under Chapter 11 of the United States Bankruptcy Code as a result of the liquidity issues caused by Hurricane Katrina give rise to substantial doubt regarding Entergy New Orleans' ability to continue as a going concern for a reasonable period of time, primarily because of the loss of control inherent in the bankruptcy process. The financial statements do not include any adjustments that might result from the outcome of this uncertainty including adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary if Entergy New Orleans is unable to continue as a going concern. The financial statements also do not attempt to reflect liabilities at the priority or status of any claims that the holders of such liabilities will have.

Entergy continues to work with the federal, state, and local authorities to resolve the bankruptcy in a manner that allows Entergy New Orleans' customers to be served by a financially viable entity as required by law. Key factors that will influence the timing and outcome of the Entergy New Orleans bankruptcy include:

  • The amount of insurance recovery, if any, and the timing of receipt of proceeds;
  • The amount of assistance, if any, from federal and state government, and the timing of that funding, including Entergy's intended application for Community Development Block Grant funding;
  • The level of economic recovery of New Orleans;
  • The number of customers that return to New Orleans, and the timing of their return; and
  • the amount and timing of any regulatory recovery approved by the City Council.

__________________________________

In the opinion of the management of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana Holdings, Entergy Louisiana, LLC, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the domestic utility companies and System Energy is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.

 

Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of March 31, 2006, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana Holdings, Entergy Louisiana, LLC, 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 Registrant's or 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; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.

 

ENTERGY CORPORATION AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See "PART I, Item 1, Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Following is an update to that discussion.

Texas Power Price Lawsuit

See "Texas Power Price Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class apparently of the Texas retail customers of Entergy Gulf States who were billed and paid for electric power from January 1, 1994 to the present. In April 2006, the Court of Appeals denied a motion for rehearing of the decision to remand the case to the district court.  Entergy intends to file a petition for review with the Texas Supreme Court.

Entergy New Orleans Rate of Return Lawsuit

See "Entergy New Orleans Rate of Return Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed by a group of residential and business ratepayers against Entergy New Orleans in state court in Orleans Parish purportedly on behalf of all ratepayers in New Orleans.  In accordance with the procedural schedule, the evidentiary record and post-hearing briefs of the parties were submitted to the City Council in March 2006. On April 20, 2006, the City Council unanimously approved a resolution dismissing with prejudice the plaintiffs' claims.

Additionally, in the Entergy New Orleans bankruptcy proceeding, the complaint filed by the named plaintiffs in the Entergy New Orleans rate of return lawsuit, together with the named plaintiffs in the Entergy New Orleans fuel clause lawsuit, asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans rate of return lawsuit and the Entergy New Orleans fuel clause lawsuit, and alternatively, that the automatic stay be lifted to permit the movants to pursue the same relief in state court, was dismissed on April 26, 2006. Proofs of Claim were subsequently filed by the plaintiffs in the Entergy New Orleans rate of return lawsuit and by the plaintiffs in the Entergy New Orleans fuel adjustment clause litigation relating to both the City Council and class action proceedings. Objections to the Proofs of Claim are due on May 11, 2006. The plaintiffs in the Entergy New Orleans fuel adjustment clause litigation have also filed for certification of the class. A hearing in the bankruptcy court on class certification is scheduled for July 31, 2006.

Environmental Regulation and Proceedings

On April 19, 2006, an environmental advocacy organization served a notice of intent to bring an environmental citizen's suit pursuant to the federal Resource Conservation and Recovery Act (RCRA) against Entergy.  Notice of suit is required by RCRA sixty days before actual filing.  The suit, if filed, will allege that Entergy violated an EPA regulation by failing formally to report a discovered release of radioactive material into the environment at Indian Point.  These allegations relate to the ongoing site investigation of radionuclides found in groundwater wells at the site.  It is expected that the environmental advocacy organization will ask the court to require Entergy formally to notify EPA of the site condition, will seek to have EPA formally involved in the ongoing site investigation and any required remediation, will seek attorney's fees under the statute, and may seek to have the judge impose statutory penalties. Entergy continues to investigate the matter.

Item 1A. Risk Factors

There have been no material changes to the risk factors discussed in "PART I, Item 1A, Risk Factors" in the Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to its employees that may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. See Note 7 to the consolidated financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. Entergy's management has been authorized to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans, and this authorization does not have an expiration date. In August 2004, Entergy announced a program under which Entergy Corporation will repurchase up to $1.5 billion of its common stock. The program extended originally through the end of 2006, but, due to the effects of Hurricanes Katrina and Rita, the program was suspended, and the Board has authorized the extension of the program through 2008. This repurchase program is incremental to the existing authority to repurchase shares to fund the exercise of employee stock options. The amount of repurchases under the program may vary as a result of material changes in business results or capital spending, or as a result of material new investment opportunities.

During the first quarter of 2006, Entergy Corporation did not repurchase any shares of its common stock. The amount of authorization remaining under the Entergy Corporation plan to repurchase up to $1.5 billion of its common stock was $400 million as of March 31, 2006.

Item 5. Other Information

Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:

 

Ratios of Earnings to Fixed Charges

 

Twelve Months Ended

 

December 31,

 

March 31,

 

2001

2002

 

2003

 

2004

 

2005

 

2006

                     

Entergy Arkansas

3.29

2.79

 

3.17

 

3.37

 

3.75

 

3.81

Entergy Gulf States

2.36

2.49

 

1.51

 

3.04

 

3.34

 

3.48

Entergy Louisiana Holdings

2.76

3.14

 

3.93

 

3.60

 

3.50

 

3.75

Entergy Louisiana, LLC

2.76

3.14

 

3.93

 

3.60

 

3.50

 

3.75

Entergy Mississippi

2.14

2.48

 

3.06

 

3.41

 

3.16

 

2.88

Entergy New Orleans

(a)

(b)

 

1.73

 

3.60

 

1.22

 

1.22

System Energy

2.12

3.25

 

3.66

 

3.95

 

3.85

 

3.96

 

Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions

 

Twelve Months Ended

 

December 31,

 

March 31,

 

2001

 

2002

 

2003

 

2004

 

2005

 

2006

                       

Entergy Arkansas

2.99

 

2.53

 

2.79

 

2.98

 

3.34

 

3.37

Entergy Gulf States

2.21

 

2.40

 

1.45

 

2.90

 

3.18

 

3.32

Entergy Louisiana Holdings

2.51

 

2.86

 

3.46

 

3.16

 

3.09

 

3.17

Entergy Louisiana, LLC

2.76

 

3.14

 

3.93

 

3.60

 

3.50

 

3.63

Entergy Mississippi

1.96

 

2.27

 

2.77

 

3.07

 

2.83

 

2.62

Entergy New Orleans

(a)

 

(b)

 

1.59

 

3.31

 

1.12

 

1.15

(a)

Earnings for the twelve months ended December 31, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively.

(b)

Earnings for the twelve months ended December 31, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively.

Item 6. Exhibits *

**

3(a)

Amended and Restated Articles of Incorporation of Entergy Arkansas, as amended, effective March 22, 2006 (3(ii) to Form 8-K dated March 28, 2006 in 1-10764).

     
 

4(a)

Seventy-fourth Supplemental Indenture, dated as of February 1, 2006, to Entergy Gulf States' Indenture of Mortgage, dated as of September 1, 1926.

     
 

31(a) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.

     
 

31(b) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.

     
 

31(c) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.

     
 

31(d) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States.

     
 

31(e)

Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana Holdings, Inc.

     
 

31(f) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States.

     
 

31(g) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana, LLC.

     
 

31(h) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.

     
 

31(i) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.

     
 

31(j) -

Rule 13a-14(a)/15d-14(a) Certification for System Energy.

     
 

31(k) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.

     
 

31(l) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States.

     
 

31(m) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana, LLC.

     
 

31(n) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.

     
 

31(o) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.

     
 

31(p) -

Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana Holdings, Inc.

     
 

31(q) -

Rule 13a-14(a)/15d-14(a) Certification for System Energy.

     
 

32(a) -

Section 1350 Certification for Entergy Corporation.

     
 

32(b) -

Section 1350 Certification for Entergy Corporation.

     
 

32(c) -

Section 1350 Certification for Entergy Arkansas.

     
 

32(d) -

Section 1350 Certification for Entergy Gulf States.

     
 

32(e) -

Section 1350 Certification for Entergy Louisiana Holdings, Inc.

     
 

32(f) -

Section 1350 Certification for Entergy Gulf States.

     
 

32(g) -

Section 1350 Certification for Entergy Louisiana, LLC.

     
 

32(h) -

Section 1350 Certification for Entergy Mississippi.

     
 

32(i) -

Section 1350 Certification for Entergy New Orleans.

     
 

32(j) -

Section 1350 Certification for System Energy.

     
 

32(k) -

Section 1350 Certification for Entergy Arkansas.

     
 

32(l) -

Section 1350 Certification for Entergy Gulf States.

     
 

32(m) -

Section 1350 Certification for Entergy Louisiana, LLC.

     
 

32(n) -

Section 1350 Certification for Entergy Mississippi.

     
 

32(o) -

Section 1350 Certification for Entergy New Orleans.

     
 

32(p) -

Section 1350 Certification for Entergy Louisiana Holdings, Inc.

     
 

32(q) -

Section 1350 Certification for System Energy.

     
 

99(a) -

Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.

     
 

99(b) -

Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.

     
 

99(c) -

Entergy Louisiana Holdings, Inc.'s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.

     

99(d) -

Entergy Louisiana, LLC's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.

   
 

99(e) -

Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.

     
 

99(f) -

Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.

     
 

99(g) -

System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined.

___________________________

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.

*

Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended March 31, 2006, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended March 31, 2006.

**

Incorporated herein by reference as indicated.

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA HOLDINGS, INC.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.

 

/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: May 9, 2006