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ENTERGY NEW ORLEANS, LLC - Quarter Report: 2011 March (Form 10-Q)

a02411.htm

__________________________________________________________________________________________
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, 2011
 
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 or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
 
 
Commission
File Number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
         
         
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
 
0-05807
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
         
         
0-20371
ENTERGY GULF STATES LOUISIANA, L.L.C.
(a Louisiana limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
74-0662730
 
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 981-2000
61-1435798
         
         
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
75-3206126
 
1-09067
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 þ No o

Indicate by check mark whether Entergy Corporation has submitted electronically and posted on Entergy's corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark whether Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy Resources have submitted electronically and posted on Entergy's corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).  Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.

 
Large
accelerated
filer
 
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
Entergy Corporation
Ö
           
Entergy Arkansas, Inc.
       
Ö
   
Entergy Gulf States Louisiana, L.L.C.
       
Ö
   
Entergy Louisiana, LLC
       
Ö
   
Entergy Mississippi, Inc.
       
Ö
   
Entergy New Orleans, Inc.
       
Ö
   
Entergy Texas, 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 o  No þ

Common Stock Outstanding
 
Outstanding at April 29, 2011
Entergy Corporation
($0.01 par value)
177,967,942

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, 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, 2010, 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, 2011

 
Page Number
   
iv
vi
Entergy Corporation and Subsidiaries
 
Management's Financial Discussion and Analysis
 
1
4
8
9
11
11
11
13
14
16
18
19
20
54
Entergy Arkansas, Inc. and Subsidiaries
 
Management's Financial Discussion and Analysis
 
55
56
58
58
58
58
58
59
61
62
64
65
Entergy Gulf States Louisiana, L.L.C.
 
Management's Financial Discussion and Analysis
 
66
67
68
69
69
69
69
70
71
72
74
75
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2011

 
Page Number
   
Entergy Louisiana, LLC
 
Management's Financial Discussion and Analysis
 
76
77
80
80
80
80
80
81
83
84
86
87
Entergy Mississippi, Inc.
 
Management's Financial Discussion and Analysis
 
88
89
91
91
91
92
93
94
96
97
Entergy New Orleans, Inc.
 
Management's Financial Discussion and Analysis
 
98
99
100
100
100
100
101
103
104
106
107
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2011

 
Page Number
   
Entergy Texas, Inc. and Subsidiaries
 
Management's Financial Discussion and Analysis
 
108
109
111
111
111
111
112
113
114
116
117
System Energy Resources, Inc.
 
Management's Financial Discussion and Analysis
 
118
118
120
120
120
121
123
124
126
Part II.  Other Information
 
127
127
127
128
131
133




FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant 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.  Words such as "may," "will," "could," "project," "believe," "anticipate," "intend," "expect," "estimate," "continue," "potential," "plan," "predict," "forecast," and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake 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.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management's Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):

·  
resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, and other regulatory proceedings, including those related to Entergy's System Agreement or any successor agreement or arrangement, Entergy's utility supply plan, recovery of storm costs, and recovery of fuel and purchased power costs
·  
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 operations of the independent coordinator of transmission for Entergy's utility service territory and transition to a successor or alternative arrangement, including possible participation in a regional transmission organization, and the application of more stringent transmission reliability requirements or 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 owned or operated by the Entergy Wholesale Commodities business, and the effects of new or existing safety concerns regarding nuclear power plants and nuclear fuel
·  
resolution of pending or future applications for license renewals or modifications of nuclear generating facilities
·  
the performance of and deliverability of power from Entergy's generation resources, including the capacity factors at its nuclear generating facilities
·  
Entergy's ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities
·  
prices for power generated by Entergy's merchant generating facilities, the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants,
·  
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy's ability to meet credit support requirements for fuel and power supply contracts
·  
volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
·  
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation
·  
changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances, and changes in costs of compliance with environmental and other laws and regulations




FORWARD-LOOKING INFORMATION (Concluded)

·  
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal
·  
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes and ice storms and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance
·  
effects of climate change
·  
Entergy's ability to manage its capital projects and operation and maintenance costs
·  
Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
·  
the economic climate, and particularly economic conditions in Entergy's Utility service territory and the Northeast United States and events that could influence economic conditions in those areas
·  
the effects of Entergy's strategies to reduce tax payments
·  
changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute share repurchase programs, 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 and interest rates
·  
the effect of litigation and government investigations or proceedings
·  
advances in technology
·  
the potential effects of threatened or actual terrorism and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion
·  
Entergy's ability to attract and retain talented management and directors
·  
changes in accounting standards and corporate governance
·  
declines in the market prices of marketable securities and resulting funding requirements for Entergy's defined benefit pension and other postretirement benefit plans
·  
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites
·  
factors that could lead to impairment of long-lived assets
·  
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture



DEFINITIONS

Certain abbreviations or acronyms used in the text and notes 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 (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
Board
Board of Directors of Entergy Corporation
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
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Texas
Entergy Texas, Inc., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale
Commodities
Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers
 
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
firm LD
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2010 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear 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
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service


DEFINITIONS (Continued)

Abbreviation or Acronym
 
Term
ISO
Independent System Operator
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
MISO
Midwest Independent Transmission System Operator, Inc.
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Offsetting positions
Transactions for the purchase of energy, generally to offset a firm LD transaction
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
SPP
Southwest Power Pool
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources
System Energy
System Energy Resources, 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 asset is not operating, the seller is generally not liable to the buyer for any damages
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
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather



ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS


Entergy operates primarily through its two, reportable, operating segments: Utility and Entergy Wholesale Commodities.

·  
Utility generates, transmits, distributes, and sells electric power in service territories in four states that include portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
·  
The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  This business also provides services to other nuclear power plant owners.  Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers while it focuses on improving operating and financial performance of these plants, consistent with Entergy’s market-based point-of-view.

In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization.  The prior period financial information in this Form 10-Q has been restated to reflect the change in reportable segments.

Results of Operations

Income Statement Variances

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2011 to the first quarter 2010 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
 
Entergy
Wholesale Commodities
 
 
Parent &
Other (1)
 
 
 
Entergy
   
(In Thousands)
                 
1st Qtr 2010 Consolidated Net Income
 
$142,971 
 
$90,542 
 
($14,699)
 
$218,814 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
 
 
 
18,241 
 
 
 
(40,141)
 
 
 
224 
 
 
 
(21,676)
Other operation and maintenance expenses
 
13,033 
 
(50,554)
 
(9,220)
 
(46,741)
Taxes other than income taxes
 
(6,239)
 
(3,454)
 
(485)
 
(10,178)
Depreciation and amortization
 
(6,942)
 
2,718 
 
(95)
 
(4,319)
Other income
 
(747)
 
(23,487)
 
(2,112)
 
(26,346)
Interest expense
 
(8,892)
 
(47,198)
 
12,492 
 
(43,598)
Other expenses
 
618 
 
4,768 
 
(1)
 
5,385 
Income taxes
 
234 
 
(2,599)
 
18,930 
 
16,565 
                 
1st Qtr 2011 Consolidated Net Income
 
$168,653 
 
$123,233 
 
($38,208)
 
$253,678 

(1)
Parent & Other includes eliminations, which are primarily intersegment activity.
 

 
1

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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 comparing the first quarter 2011 to the first quarter 2010.

  
 
Amount
  
 
(In Millions)
     
2010 net revenue
 
$1,130 
Retail electric price
 
18 
Volume/weather
 
11 
Net gas revenue
 
(6)
Other
 
(5)
2011 net revenue
 
$1,148 

The retail electric price variance is primarily due to a base rate increase at Entergy Arkansas effective July 2010 and rate actions at Entergy Texas, including a base rate increase effective August 2010.  This was partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K for further discussion of these proceedings.

The volume/weather variance is primarily due to an increase of 911 GWh in weather-adjusted usage in the residential and industrial sectors.  Despite favorable weather in first quarter 2011, the weather effect declined compared to the near-record-setting cold weather experienced in the first quarter 2010.  Weather-adjusted residential retail sales growth reflected both an increase in the number of customers as well as higher usage per customer.  Industrial sales have realized sustained growth since the beginning of 2010 and the first quarter 2011 continued the trend.  Entergy’s service territory has benefitted from the national manufacturing economy as well as industrial facility expansions.  Industrial customers in Entergy’s service territory also have benefitted from the need to re-stock inventory and export trends.

The net gas revenue variance is primarily due to milder weather as compared to last year.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2011 to the first quarter 2010.

  
 
Amount
  
 
(In Millions)
     
2010 net revenue
 
$565 
Volume
 
(19)
Realized price changes
 
(13)
Other
 
(8)
2011 net revenue
 
$525 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $40 million, or 7%, in the first quarter 2011 compared to the first quarter 2010 primarily due to lower volume resulting from an increase in forced outages for Entergy Wholesale Commodities’ nuclear fleet in 2011 and lower pricing in its contracts to sell power.  Included in net revenue is $11 million and $12 million of amortization of the Palisades purchased power agreement in the first quarters 2011 and 2010, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements in the Form 10-K.  Included in Other in the table above is a decrease of $5 million in net revenue from the Harrison County plant, which was sold in December 2010.
 
 
2

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the first quarter 2011 and 2010:

   
2011
 
2010
         
Net MW in operation at March 31
 
4,998
 
4,998
Average realized revenue per MWh
 
$57.46
 
$58.72
GWh billed
 
9,913
 
10,255
Capacity factor
 
91%
 
94%
Refueling Outage Days:
       
Indian Point 2
 
-
 
22
Indian Point 3
 
23
 
-

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 10,519 GWh in the first quarter 2011 and 11,128 GWh in the first quarter 2010, with average realized revenue per MWh of $56.98 in the first quarter 2011 and $58.31 in the first quarter 2010.

Realized Price per MWh

See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $59.16 in 2010 from $61.07 for 2009.  Entergy Wholesale Commodities’ nuclear business is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 96% of its planned nuclear energy output for the remainder of 2011 for an average contracted energy price of $53 per MWh.  In addition, Entergy Wholesale Commodities has sold forward 87% of its planned nuclear energy output for 2012 for an average contracted energy price of $49 per MWh.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $435 million for the first quarter 2010 to $448 million for the first quarter 2011 primarily due to:

·  
an increase of $6 million in transmission and distribution expenses primarily due to vegetation and maintenance expenses;
·  
an increase of $4 million in nuclear expenses primarily due to higher labor costs;
·  
an increase of $3 million in legal expenses primarily resulting from the U.S. Department of Justice investigation that is discussed in “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K; and
·  
several individually insignificant items.

These increases were partially offset by a decrease of $7 million in fossil expenses resulting from more outages in first quarter 2010 and an increase of $6 million in nuclear insurance refunds received in 2011 as compared to the same period in 2010.


 
3

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Depreciation and amortization expenses decreased primarily due to a decrease in depreciation rates at Entergy Arkansas as a result of the rate case settlement agreement approved by the APSC in June 2010.

Entergy Wholesale Commodities

           Other operation and maintenance expenses decreased from $260 million for the first quarter 2010 to $209 million for the first quarter 2011 primarily due to:

·  
the write-off of $32 million of capital costs in first quarter 2010, primarily for software that will not be utilized, in connection with Entergy's decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and
·  
a decrease of $6 million due to the absence of expenses from the Harrison County plant which was sold in the fourth quarter 2010.

Other income decreased primarily due to a decrease of $11 million in realized earnings on decommissioning trust fund investments and a decrease in interest income earned on loans to the parent company, Entergy Corporation.

Interest expense decreased primarily due to the write-off of $37 million of debt financing costs in the first quarter 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy's decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.

Parent & Other

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.

Income Taxes

The effective income tax rates for the first quarters 2011 and 2010 were 39.3% and 40.3%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2011 is primarily due to state income taxes and certain book and tax differences for utility plant items.  The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2010 is primarily due to:

·  
a charge of $16 million recorded in first quarter 2010 resulting from a change in tax law associated with the federal healthcare legislation enacted in March 2010.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K for a discussion of the federal healthcare legislation; and
·  
state income taxes and certain book and tax differences for utility plant items.

These factors were partially offset by:

·  
a $19 million tax benefit recorded first quarter 2010 in connection with Entergy's decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and
·  
book and tax differences related to the allowance for equity funds used during construction.

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.


 
4

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Capital Structure

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

   
March 31,
2011
 
December 31,
2010
         
Debt to capital
 
57.6%
 
57.3%
Effect of excluding the Arkansas and Texas securitization bonds
 
(1.9)%
 
(2.0)%
Debt to capital, excluding securitization bonds (1)
 
55.7%
 
55.3%
Effect of subtracting cash
 
(1.7)%
 
(3.2)%
Net debt to net capital, excluding securitization bonds (1)
 
54.0%
 
52.1%

  (1)
Calculation excludes the Arkansas and Texas securitization bonds, which are non-recourse to Entergy Arkansas and Entergy Texas, respectively.

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, common shareholders' equity, and subsidiaries' 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 a revolving credit facility that expires in August 2012.  Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of the facility.  As of March 31, 2011, the capacity and amounts outstanding under the credit facility are:

 
Capacity
 
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
             
$3,465 
 
$1,727 
 
$25 
 
$1,713

Entergy Corporation's credit facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation's credit facility and in one of the indentures governing the Entergy Corporation senior notes is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility's maturity date may occur, and there may be an acceleration of amounts due under certain Entergy Corporation senior notes.

See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries' credit facilities.

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," that sets forth the amounts of planned construction and other capital investments by operating segment for 2011 through 2013.  Following are updates to the discussion in the Form 10-K.


 
5

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Acadia Unit 2 Purchase Agreement

See the Form 10-K for a discussion of the agreement Entergy Louisiana signed to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer.  Entergy Louisiana acquired the plant on April 29, 2011.

Summer 2009 Long-Term Request for Proposal

As discussed in the Form 10-K, the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal were included in the 2011-2013 capital expenditure estimates in the Form 10-K.  In addition to the self-build option at Entergy Louisiana’s Ninemile site noted in the Form 10-K, in April 2011 two Entergy Utility operating companies announced that they have signed agreements to acquire the other two resources, the 620 MW Hot Spring Energy facility and the 450 MW Hinds Energy Facility.

Hot Spring Energy Facility Purchase Agreement

In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation.  The purchase price is approximately $253 million.  Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million.  The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Because Hot Spring represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hot Spring facility.  KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011.  Closing is expected to occur in mid-2012.  Entergy Arkansas expects to initiate its request for approval for the acquisition and cost recovery from the APSC in June 2011.

Hinds Energy Facility Purchase Agreement

In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation.  The purchase price is approximately $206 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million.  The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Because Hinds represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hinds facility.  KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011.  Closing is expected to occur in mid-2012.  Entergy Mississippi expects to initiate its request for approval for the acquisition and cost recovery from the MPSC in Summer 2011.

Waterford 3 Steam Generator Replacement Project

See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project.  With regard to the delay in the delivery of the steam generators, Entergy Louisiana is working with the manufacturer to fully develop and evaluate repair options.  Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011.  The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators.  Entergy Louisiana is required to report its findings to the NRC through a report made 180
 
 
6

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

days after plant start up.  At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated.  Entergy Louisiana expects to file a special LPSC monitoring report in second quarter 2011 that will reflect the updated project cost and schedule.  Entergy Louisiana also expects to resume the revenue requirement proceeding before the LPSC in Fall 2012.  Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.

Dividends and Stock Repurchases

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities.  At its January and April 2011 meetings, the Board declared dividends of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.

Cash Flow Activity

As shown in Entergy's Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Millions)
         
Cash and cash equivalents at beginning of period
 
$1,294 
 
$1,710 
         
Cash flow provided by (used in):
       
Operating activities
 
323 
 
674 
Investing activities
 
(897)
 
(515)
Financing activities
 
 
(212)
Net decrease in cash and cash equivalents
 
(568)
 
(53)
         
Cash and cash equivalents at end of period
 
$726 
 
$1,657 

Operating Activities

Entergy's cash flow provided by operating activities decreased by $351 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, primarily due to an increase of $147 million in pension contributions.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.  A decrease in deferred fuel cost collections, a $42 million increase in incentive compensation payments, which occur annually in the first quarter, and the decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed to the decrease, as well as several other individually insignificant factors.

Investing Activities

Net cash used in investing activities increased by $381 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, primarily due to:

·  
an increase in nuclear fuel purchases, as more plants were preparing for refueling outages in the spring 2011 than in the spring 2010;
·  
a change in collateral deposit activity, as Entergy received deposits from Entergy Wholesale Commodities’ counterparties during 2010 and made a small amount of collateral deposits in 2011.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the Market and Credit Risk Sensitive Instruments section below; and
·  
an increase in construction expenditures, primarily in the Utility business.  Entergy's construction spending plans for 2011 through 2013 are discussed in the Form 10-K.
 
 
7

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Financing Activities

Financing activities provided $6 million of cash for the three months ended March 31, 2011 compared to using $212 million of cash for the three months ended March 31, 2010 primarily because long-term debt activity provided approximately $133 million of cash in 2011 and used approximately $58 million of cash in 2010. For details of Entergy's long-term debt activity in 2011 see Note 4 to the financial statements herein.  In addition the Entergy Gulf States Louisiana and Entergy Louisiana nuclear fuel company variable interest entities borrowed on their credit facilities to finance nuclear fuel acquisitions in the first quarter 2011.  Offsetting these increases in sources of cash, Entergy repurchased $54 million of its common stock in the first quarter 2011 and none in the first quarter 2010.  Entergy’s share repurchase programs are discussed in the Form 10-K.

Rate, Cost-recovery, and Other Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Rate, Cost-recovery, and Other Regulation" in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.

State and Local Rate Regulation and Fuel-Cost Recovery

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.

On May 2, 2011, Entergy Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $43.1 million net rate increase to reflect adjustments in accordance with a previous LPSC order relating to acquisition of Unit 2 of the Acadia Energy Center.  The net rate increase represents the decrease in the additional capacity revenue requirement resulting from the termination of the power purchase agreement with Acadia and the increase in the revenue requirement resulting from the ownership of the Acadia facility.

Federal Regulation

See the Form 10-K for a discussion of federal regulatory proceedings.  Following are updates to that discussion.

System Agreement and Independent Coordinator of Transmission (ICT)

As discussed in the Form 10-K, in November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures.  In addition, in December 2010 the FERC issued an order that granted the Entergy Regional State Committee (E-RSC) additional authority over transmission upgrades and cost allocation.  The E-RSC, comprised of one representative from each of the Utility operating company retail regulators, was formed in 2009 to consider several of the issues related to the Entergy transmission system.  The Utility operating companies expect that the E-RSC will review the cost-benefit analysis the Utility operating companies will submit in May 2011 to each of their respective retail regulators comparing the ICT arrangement to joining the SPP RTO or MISO.
 
 
8

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


Also as discussed in the Form 10-K, in February 2010 the APSC issued a show cause order opening an inquiry to conduct an investigation regarding the prudence of Entergy Arkansas’s entering a successor pooling agreement with the other Entergy Utility operating companies, as opposed to becoming a standalone entity upon exit from the System Agreement in December 2013, and whether Entergy Arkansas, as a standalone utility, should join the SPP RTO.  The APSC subsequently added evaluation of Entergy Arkansas joining MISO on a standalone basis as an alternative to be considered.  In August 2010, the APSC directed Entergy Arkansas and all parties to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of MISO.
 
On April 25, 2011, Entergy announced that it proposes joining a regional transmission organization.  After comprehensive review and analysis, Entergy concluded that joining the Midwest Independent Transmission System Operator (MISO) will provide meaningful long-term benefits for the customers of the Utility operating companies.  The Utility operating companies will provide analysis in May 2011 to their retail regulators supporting these conclusions.  Entergy Arkansas’s analysis filing is due May 12, 2011, and the APSC’s procedural schedule includes an evidentiary hearing scheduled for September 7, 2011.  The Utility operating companies also expect to make filings in the third quarter 2011 with their retail regulators regarding the transfer of control of their transmission assets to MISO.  The target implementation date for joining MISO is December 2013.

Market and Credit Risk Sensitive Instruments

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 Wholesale Commodities, unless otherwise contracted, is subject to the fluctuation of market power prices.  Following is an updated summary of the amount of Entergy Wholesale Commodities nuclear power plants’ planned energy output that is sold forward as of March 31, 2011 under physical or financial contracts (2011 represents the remainder of the year):

   
2011
 
2012
 
2013
 
2014
 
2015
 
                       
Percent of planned generation sold forward:
                     
Unit-contingent
 
78%
 
59%
 
36%
 
14%
 
12%
 
     Unit-contingent with guarantee of availability (1)
 
18%
 
14%
 
6%
 
 3%
 
 3%
 
Firm LD
 
3%
 
24%
 
3%
 
8%
 
-%
 
Offsetting positions
 
(3)%
 
(10)%
 
-%
 
-%
 
-%
 
Total energy sold forward
 
96%
 
87%
 
45%
 
25%
 
15%
 
Planned generation (TWh) (2)
 
31
 
41
 
40
 
41
 
41
 
Average revenue under contract per MWh (3) (4)
 
$53
 
$49
 
$45
 
$51
 
$51
 

(1)
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.
(2)
Assumes license renewal for plants whose current licenses expire within five years and the continued operation of all six plants.  License renewal applications are in process for three units, as follows (with current license expirations in parentheses): Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015).
(3)
The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant through March 21, 2012.  The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far.
(4)
Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs.  Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA.
 
 
9

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2011 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $13 million in 2011.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2011, based on power prices at that time, Entergy had liquidity exposure of $26 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commodities segment) transactions, $20 million of guarantees that support letters of credit, and $6 million of posted cash collateral to the ISOs.  As of March 31, 2011, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $97 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.   In the event of a decrease in Entergy Corporation's credit rating to below investment grade, based on power prices as of March 31, 2011, Entergy would have been required to provide approximately $70 million of additional cash or letters of credit under some of the agreements.

As of March 31, 2011, the counterparties or their guarantors for 99.8% of the planned energy output under contract for Entergy Wholesale Commodities through 2015 have public investment grade credit ratings and 0.2% is with load-serving entities without public credit ratings.

In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced 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 Entergy Wholesale Commodities nuclear plants’ installed capacity that is currently sold forward, and the blended amount of Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward as of March 31, 2011 (2011 represents the remainder of the year):

   
2011
 
2012
 
2013
 
2014
 
2015
 
                       
Percent of capacity sold forward:
                     
Bundled capacity and energy contracts
 
25%
 
18%
 
16%
 
16%
 
16%
 
Capacity contracts
 
31%
 
30%
 
26%
 
10%
 
 -%
 
Total capacity sold forward
 
56%
 
48%
 
42%
 
26%
 
16%
 
Planned net MW in operation
 
4,998
 
4,998
 
4,998
 
4,998
 
4,998
 
Average revenue under contract per kW per month
(applies to capacity contracts only)
 
$2.7
 
$2.9
 
$3.1
 
$3.5
 
N/A
 
 
Blended Capacity and Energy Recap (based on revenues)
                     
% of planned generation and capacity sold forward
 
96%
 
87%
 
43%
 
25%
 
14%
 
Average revenue under contract per MWh
 
$54
 
$51
 
$48
 
$53
 
$52
 



 
10

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
 
Nuclear Matters

After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC has established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States.  The lessons learned from the events in Japan and the NRC review may affect future operations of U.S. nuclear facilities, including Entergy's, and could, among other things, result in increased costs and capital requirements associated with operating Entergy's nuclear plants.

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 and trust fund investments, qualified pension and other postretirement benefits, and other contingencies.  Following is an update to that discussion.  For updates regarding the impairment of long-lived assets discussion concerning Vermont Yankee see Note 11 to the financial statements herein.

Nuclear Decommissioning Costs

In the first quarter 2011, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study.  The revised estimate resulted in a $38.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset. 

New Accounting Pronouncements

The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.  Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.


 
 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)
 

 

 
CONSOLIDATED STATEMENTS OF INCOME
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
   
2011
   
2010
 
   
(In Thousands, Except Share Data)
 
             
OPERATING REVENUES
           
Electric
  $ 1,865,899     $ 2,006,931  
Natural gas
    71,123       96,027  
Competitive businesses
    604,186       656,389  
TOTAL
    2,541,208       2,759,347  
                 
OPERATING EXPENSES
               
Operating and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    507,693       558,668  
   Purchased power
    362,618       474,903  
   Nuclear refueling outage expenses
    63,985       62,289  
   Other operation and maintenance
    655,748       702,489  
Decommissioning
    55,265       51,576  
Taxes other than income taxes
    125,234       135,412  
Depreciation and amortization
    264,885       269,204  
Other regulatory charges (credits) - net
    (5,111 )     28,092  
TOTAL
    2,030,317       2,282,633  
                 
OPERATING INCOME
    510,891       476,714  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    17,289       13,296  
Interest and investment income
    26,747       48,209  
Miscellaneous - net
    (9,399 )     (522 )
TOTAL
    34,637       60,983  
                 
INTEREST EXPENSE
               
Interest expense
    136,134       179,199  
Allowance for borrowed funds used during construction
    (8,534 )     (8,001 )
TOTAL
    127,600       171,198  
                 
INCOME BEFORE INCOME TAXES
    417,928       366,499  
                 
Income taxes
    164,250       147,685  
                 
CONSOLIDATED NET INCOME
    253,678       218,814  
                 
Preferred dividend requirements of subsidiaries
    5,015       5,015  
                 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
  $ 248,663     $ 213,799  
                 
                 
Earnings per average common share:
               
    Basic
  $ 1.39     $ 1.13  
    Diluted
  $ 1.38     $ 1.12  
Dividends declared per common share
  $ 0.83     $ 0.75  
                 
Basic average number of common shares outstanding
    178,834,342       189,202,684  
Diluted average number of common shares outstanding
    180,083,830       191,283,703  
                 
See Notes to Financial Statements.
               
 

 

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Consolidated net income
  $ 253,678     $ 218,814  
Adjustments to reconcile consolidated net income to net cash flow
               
 provided by operating activities:
               
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    422,411       423,432  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    173,784       133,533  
  Changes in working capital:
               
     Receivables
    102,711       43,830  
     Fuel inventory
    (12,508 )     (6,324 )
     Accounts payable
    (154,398 )     (79,250 )
     Prepaid taxes and taxes accrued
    (63,918 )     (15,038 )
     Interest accrued
    (67,978 )     (36,676 )
     Deferred fuel
    (66,548 )     964  
     Other working capital accounts
    (102,294 )     34,565  
  Changes in provisions for estimated losses
    (779 )     (35,870 )
  Changes in other regulatory assets
    48,889       (66,248 )
  Changes in pensions and other postretirement liabilities
    (190,958 )     (40,884 )
  Other
    (18,991 )     99,417  
Net cash flow provided by operating activities
    323,101       674,265  
                 
  INVESTING ACTIVITIES
               
Construction/capital expenditures
    (486,561 )     (447,476 )
Allowance for equity funds used during construction
    17,289       13,296  
Nuclear fuel purchases
    (300,975 )     (65,336 )
Proceeds from sale of assets and businesses
    -       9,675  
Changes in securitization account
    6,360       (21,940 )
NYPA value sharing payment
    (72,000 )     (72,000 )
Payments to storm reserve escrow account
    (1,736 )     (1,609 )
Receipts from storm reserve escrow account
    -       9,925  
Decrease (increase) in other investments
    (21,212 )     88,100  
Proceeds from nuclear decommissioning trust fund sales
    492,682       770,781  
Investment in nuclear decommissioning trust funds
    (530,672 )     (798,864 )
Net cash flow used in investing activities
    (896,825 )     (515,448 )
                 
See Notes to Financial Statements.
               


 

ENTERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
   
2011
   
2010
 
   
(In Thousands)
 
             
FINANCING ACTIVITIES
           
Proceeds from the issuance of:
           
  Long-term debt
    411,444       42,545  
  Common stock and treasury stock
    12,280       6,078  
Retirement of long-term debt
    (278,084 )     (100,289 )
Repurchase of common stock
    (54,404 )     -  
Changes in credit borrowings - net
    68,244       (13,368 )
Dividends paid:
               
  Common stock
    (148,678 )     (141,892 )
  Preferred stock
    (5,015 )     (5,015 )
Net cash flow provided by (used in) financing activities
    5,787       (211,941 )
                 
Effect of exchange rates on cash and cash equivalents
    (298 )     607  
                 
Net decrease in cash and cash equivalents
    (568,235 )     (52,517 )
                 
Cash and cash equivalents at beginning of period
    1,294,472       1,709,551  
                 
Cash and cash equivalents at end of period
  $ 726,237     $ 1,657,034  
                 
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
  Cash paid (received) during the period for:
               
    Interest - net of amount capitalized
  $ 164,563     $ 130,371  
    Income taxes
  $ (4,380 )   $ (1,385 )
                 
                 
See Notes to Financial Statements.
               
 

 

 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 103,797     $ 76,290  
  Temporary cash investments
    622,440       1,218,182  
     Total cash and cash equivalents
    726,237       1,294,472  
Securitization recovery trust account
    36,684       43,044  
Accounts receivable:
               
  Customer
    557,102       602,796  
  Allowance for doubtful accounts
    (30,754 )     (31,777 )
  Other
    141,294       161,662  
  Accrued unbilled revenues
    264,495       302,901  
     Total accounts receivable
    932,137       1,035,582  
Deferred fuel costs
    52,150       64,659  
Accumulated deferred income taxes
    9,301       8,472  
Fuel inventory - at average cost
    220,028       207,520  
Materials and supplies - at average cost
    866,598       866,908  
Deferred nuclear refueling outage costs
    263,301       218,423  
System agreement cost equalization
    52,160       52,160  
Prepaid taxes
    365,725       301,807  
Prepayments and other
    253,265       246,036  
TOTAL
    3,777,586       4,339,083  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliates - at equity
    40,171       40,697  
Decommissioning trust funds
    3,733,078       3,595,716  
Non-utility property - at cost (less accumulated depreciation)
    260,133       257,847  
Other
    408,933       405,946  
TOTAL
    4,442,315       4,300,206  
                 
PROPERTY, PLANT AND EQUIPMENT
               
Electric
    37,449,490       37,153,061  
Property under capital lease
    796,566       800,078  
Natural gas
    334,766       330,608  
Construction work in progress
    1,764,437       1,661,560  
Nuclear fuel
    1,532,579       1,377,962  
TOTAL PROPERTY, PLANT AND EQUIPMENT
    41,877,838       41,323,269  
Less - accumulated depreciation and amortization
    17,682,149       17,474,914  
PROPERTY, PLANT AND EQUIPMENT - NET
    24,195,689       23,848,355  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    839,752       845,725  
  Other regulatory assets (includes securitization property of
               
     $867,105 as of March 31, 2011 and $882,346 as of
               
     December 31, 2010)
    3,768,072       3,838,237  
  Deferred fuel costs
    172,202       172,202  
Goodwill
    377,172       377,172  
Accumulated deferred income taxes
    74,271       54,523  
Other
    951,507       909,773  
TOTAL
    6,182,976       6,197,632  
                 
TOTAL ASSETS
  $ 38,598,566     $ 38,685,276  
                 
See Notes to Financial Statements.
               
 


 
ENTERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 208,655     $ 299,548  
Notes payable
    183,079       154,135  
Accounts payable
    986,307       1,181,099  
Customer deposits
    340,279       335,058  
Accumulated deferred income taxes
    68,570       49,307  
Interest accrued
    149,707       217,685  
Deferred fuel costs
    87,351       166,409  
Obligations under capital leases
    3,461       3,388  
Pension and other postretirement liabilities
    39,897       39,862  
System agreement cost equalization
    52,160       52,160  
Other
    191,278       277,598  
TOTAL
    2,310,744       2,776,249  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    8,759,164       8,573,646  
Accumulated deferred investment tax credits
    288,591       292,330  
Obligations under capital leases
    41,187       42,078  
Other regulatory liabilities
    605,940       539,026  
Decommissioning and asset retirement cost liabilities
    3,164,406       3,148,479  
Accumulated provisions
    394,985       395,250  
Pension and other postretirement liabilities
    1,984,371       2,175,364  
Long-term debt (includes securitization bonds of $910,053 as of
               
   March 31, 2011 and $931,131 as of December 31, 2010)
    11,581,318       11,317,157  
Other
    621,980       618,559  
TOTAL
    27,441,942       27,101,889  
                 
Commitments and Contingencies
               
                 
Subsidiaries' preferred stock without sinking fund
    216,742       216,738  
                 
EQUITY
               
Common Shareholders' Equity:
               
Common stock, $.01 par value, authorized 500,000,000 shares;
               
  issued 254,752,788 shares in 2011 and in 2010
    2,548       2,548  
Paid-in capital
    5,366,518       5,367,474  
Retained earnings
    8,789,534       8,689,401  
Accumulated other comprehensive loss
    (67,177 )     (38,212 )
Less - treasury stock, at cost (76,484,580 shares in 2011 and
               
  76,006,920 shares in 2010)
    5,556,285       5,524,811  
Total common shareholders' equity
    8,535,138       8,496,400  
Subsidiaries' preferred stock without sinking fund
    94,000       94,000  
TOTAL
    8,629,138       8,590,400  
                 
TOTAL LIABILITIES AND EQUITY
  $ 38,598,566     $ 38,685,276  
                 
See Notes to Financial Statements.
               
 


 
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                                           
         
Common Shareholders' Equity
       
   
Subsidiaries' Preferred Stock
   
Common Stock
   
Treasury Stock
   
Paid-in Capital
   
Retained Earnings
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
Balance at December 31, 2009
  $ 94,000     $ 2,548     $ (4,727,167 )   $ 5,370,042     $ 8,043,122     $ (75,185 )   $ 8,707,360  
                                                         
Consolidated net income (a)
    5,015       -       -       -       213,799       -       218,814  
Other comprehensive income:
                                                       
    Cash flow hedges net unrealized
     gain (net of tax expense of
     $87,259)
    -       -       -       -       -       142,538       142,538  
    Pension and other postretirement
     liabilities (net of tax expense of
     $891)
    -       -       -       -       -       1,805       1,805  
    Net unrealized investment gains
     (net of tax expense of $17,813)
    -       -       -       -       -       16,841       16,841  
    Foreign currency translation (net
     of tax benefit of $327)
    -       -       -       -       -       (607 )     (607 )
        Total comprehensive income
                                                    379,391  
                                                         
Common stock issuances related to
  stock plans
    -       -       10,872       3,382       -       -       14,254  
Common stock dividends declared
    -       -       -       -       (141,911 )     -       (141,911 )
Preferred dividend requirements of
  subsidiaries (a)
    (5,015 )     -       -       -       -       -       (5,015 )
                                                         
Balance at March 31, 2010
  $ 94,000     $ 2,548     $ (4,716,295 )   $ 5,373,424     $ 8,115,010     $ 85,392     $ 8,954,079  
                                                         
                                                         
Balance at December 31, 2010
  $ 94,000     $ 2,548     $ (5,524,811 )   $ 5,367,474     $ 8,689,401     $ (38,212 )   $ 8,590,400  
                                                         
Consolidated net income (a)
    5,015       -       -       -       248,663       -       253,678  
Other comprehensive income:
                                                       
    Cash flow hedges net unrealized
     loss (net of tax benefit of $34,635)
    -       -       -       -       -       (58,208 )     (58,208 )
    Pension and other postretirement
     liabilities (net of tax expense of
     $1,093)
    -       -       -       -       -       4,259       4,259  
    Net unrealized investment gains
     (net of tax expense of $25,340)
    -       -       -       -       -       24,685       24,685  
    Foreign currency translation (net
     of tax expense of $161)
    -       -       -       -       -       299       299  
        Total comprehensive income
                                                    224,713  
                                                         
Common stock repurchases
    -       -       (54,404 )     -       -       -       (54,404 )
Common stock issuances related to 
  stock plans
    -       -       22,930       (956 )     -       -       21,974  
Common stock dividends declared
    -       -       -       -       (148,530 )     -       (148,530 )
Preferred dividend requirements of
  subsidiaries (a)
    (5,015 )     -       -       -       -       -       (5,015 )
                                                         
Balance at March 31, 2011
  $ 94,000     $ 2,548     $ (5,556,285 )   $ 5,366,518     $ 8,789,534     $ (67,177 )   $ 8,629,138  
                                                         
See Notes to Financial Statements.
                                                       
                                                         
(a) Consolidated net income and preferred dividend requirements of subsidiaries for both 2010 and 2011 include $3.3 million of preferred dividends on subsidiaries' preferred stock without sinking fund that is not presented as equity.
 
                                                         
                                                         
 
 

 
 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars in Millions)
       
Utility Electric Operating Revenues:
                       
  Residential
  $ 748     $ 818     $ (70 )     (9 )
  Commercial
    501       526       (25 )     (5 )
  Industrial
    479       521       (42 )     (8 )
  Governmental
    47       50       (3 )     (6 )
    Total retail
    1,775       1,915       (140 )     (7 )
  Sales for resale
    64       83       (19 )     (23 )
  Other
    27       9       18       200  
    Total
  $ 1,866     $ 2,007     $ (141 )     (7 )
                                 
Utility Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    9,042       9,645       (603 )     (6 )
  Commercial
    6,449       6,472       (23 )     -  
  Industrial
    9,516       8,733       783       9  
  Governmental
    583       592       (9 )     (2 )
    Total retail
    25,590       25,442       148       1  
  Sales for resale
    947       1,317       (370 )     (28 )
    Total
    26,537       26,759       (222 )     (1 )
                                 
                                 
Competitive Business:
                               
Operating Revenues
  $ 604     $ 656     $ (52 )     (8 )
Billed Electric Energy Sales (GWh)
    10,519       11,128       (609 )     (5 )
                                 
                                 
                                 
                                 
 
 
 

ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.  COMMITMENTS AND CONTINGENCIES  (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business.  While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy's results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report.  Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein, discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein, and discusses a judicial proceeding involving Vermont Yankee in Note 11 to the financial statements herein.

Nuclear Insurance

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

Conventional Property Insurance

See Note 8 to the financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program.

Employment Litigation

The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees and third parties not selected for open positions.  These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans.  Entergy and the Registrant Subsidiaries are responding to these lawsuits and proceedings and deny liability to the claimants.

Asbestos Litigation  (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas.



 
20

Entergy Corporation and Subsidiaries
Notes to Financial Statements


 NOTE 2.  RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Regulatory Assets

See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries.  Following is an update to that information.

Fuel and Purchased Power Cost Recovery

Entergy Gulf States Louisiana

In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates.  The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004.  The LPSC Staff issued its audit report in December 2010.  The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million.  $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs.  Entergy Gulf States Louisiana filed comments disputing the findings in the report.  A hearing on the merits is scheduled to begin in November 2011.  Entergy Gulf States Louisiana has recorded provisions for the estimated effect of this proceeding.

Entergy Texas

In December 2010, Entergy Texas filed with the PUCT a request to refund fuel cost recovery over-collections through October 2010.  Pursuant to a stipulation among the parties that was approved by the PUCT in March 2011, Entergy Texas will refund over-collections through November 2010 of approximately $72.7 million, including interest through the refund period.  The refund will be made for most customers over a three-month period that began with the February 2011 billing cycle.

Little Gypsy Repowering Project  (Entergy and Entergy Louisiana)

See the Form 10-K for a discussion of the Little Gypsy repowering project.  As of March 2011, $207.6 million of costs, including carrying costs, had been incurred by Entergy Louisiana for the project.  As discussed in the Form 10-K, in January 2011 all parties conducted a mediation on the disputed issues, and thereafter, reached agreement on a settlement of all disputed issues, including cost recovery and cost allocation.  The proposed settlement, which provides for Entergy Louisiana to recover $200 million as of March 31, 2011, and carrying costs on that amount on specified terms thereafter, is expected to be presented to the LPSC for approval at its May 2011 meeting.  The proposed settlement also provides for Entergy Louisiana to recover the approved project costs by securitization.  In April 2011, Entergy Louisiana filed an application with the LPSC to recover the project costs by securitization.  The LPSC is expected to consider Entergy Louisiana’s application for securitization during the second quarter 2011.

Retail Rate Proceedings

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


 
21

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Filings with the LPSC

(Entergy Gulf States Louisiana)

In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010.  The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million.  In March 2011, the LPSC staff filed its findings, suggesting an adjustment that will produce an 11.76% earned return on common equity for the test year and a $0.2 million rate reduction.  Entergy Gulf States Louisiana will implement the $0.2 million rate reduction effective with the May 2011 billing cycle.

Filings with the MPSC

In March 2011, Entergy Mississippi submitted its formula rate plan 2010 test year filing.  The filing shows an earned return on common equity of 10.65% for the test year, which is within the earnings bandwidth and results in no change in rates. The filing is currently subject to MPSC review.

System Agreement Cost Equalization Proceedings

See Note 2 to the financial statements in the Form 10-K for detailed information regarding the System Agreement Cost Equalization Proceedings.  The following are updates to the Form 10-K.

Rough Production Cost Equalization Rates

2010 Rate Filing Based on Calendar Year 2009 Production Costs

In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010.  Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests.  In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures.  Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in March 2011.  Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to show cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review.  In March 2011 the ALJ issued an order placing this proceeding in abeyance.  The LPSC’s requests for rehearing and interlocutory appeal of the abeyance order have been denied.

Interruptible Load Proceeding

See the Form 10-K for a discussion of the interruptible load proceeding.  In September 2010, the FERC set for hearing and settlement judge procedures the Utility operating companies' calculation of the refunds for the 15-month refund period of May 14, 1995 through August 13, 1996, as contained in the November 2007 refund report.  The purpose of the hearing is to determine whether the refund amounts for such period were calculated in a just and reasonable manner.  The settlement proceedings are ongoing.  In the first quarter 2011 the Utility operating companies recorded regulatory assets or liabilities for the potential outcome of this proceeding.  The Utility operating companies recorded regulatory assets because under the Federal Power Act the FERC can order the refunds among the companies only if they are recoverable from customers.

Entergy Arkansas filed a request with the APSC for recovery of the refund that it paid and the APSC staff has filed a motion to dismiss the request.  A procedural schedule has not been set in the proceeding.



 
22

Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 3.  EQUITY  (Entergy Corporation, Entergy Gulf States Louisiana, and Entergy Louisiana)

Common Stock

Earnings per Share

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

   
For the Three Months Ended March 31,
   
2011
 
2010
   
(In Millions, Except Per Share Data)
                         
Basic earnings per share
 
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
                         
Net income attributable to
Entergy Corporation
 
 
$248.7
 
 
178.8
 
 
$1.39 
 
 
$213.8
 
 
189.2
 
 
$1.13 
Average dilutive effect of:
                       
Stock options
 
 -
 
1.1
 
(0.01)
 
 -
 
2.1
 
(0.01)
Restricted stock
 
 -
 
 0.2
 
 -
 
 -
 
-
 
-
                         
Diluted earnings per share
 
$248.7
 
180.1
 
$1.38 
 
$213.8
 
191.3
 
$1.12 


Entergy's stock options and other equity compensation plans are discussed in Note 5 herein, and in Note 12 to the financial statements in the Form 10-K.

Treasury Stock

During the first quarter 2011, Entergy Corporation issued 314,340 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards.  Also during the first quarter 2011, Entergy Corporation repurchased 792,000 shares of its common stock for a total purchase price of $54.4 million.

Retained Earnings

On April 6, 2011 Entergy Corporation's Board of Directors declared a common stock dividend of $0.83 per share, payable on June 1, 2011 to holders of record as of May 12, 2011.

Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana.  Accumulated other comprehensive income (loss) in the balance sheets included the following components:

 
23

Entergy Corporation and Subsidiaries
Notes to Financial Statements



   
 
Entergy
 
Entergy
Gulf States Louisiana
 
Entergy
Louisiana
   
March 31,
2011
 
December 31,
2010
 
March 31,
2011
 
December 31,
2010
 
March 31,
2011
 
December 31,
2010
   
(In Thousands)
                         
Cash flow hedges net
 unrealized gain
 
 
$48,050 
 
 
$106,258
 
 
$- 
 
 
$- 
 
 
$- 
 
 
$- 
Pension and other
 postretirement liabilities
 
 
(272,207)
 
 
(276,466)
 
 
(39,561)
 
 
(40,304)
 
 
(24,228)
 
 
(24,962)
Net unrealized investment
 gains
 
 
154,370 
 
 
129,685 
 
 
 
 
 
 
 
 
Foreign currency translation
 
2,610 
 
2,311 
 
 
 
 
Total
 
($67,177) 
 
($38,212)
 
($39,561)
 
($40,304)
 
($24,228)
 
($24,962)


NOTE 4.  REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation has in place a credit facility that expires in August 2012 and has a borrowing capacity of approximately $3.5 billion.  Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of the credit facility.  The facility fee is currently 0.125% of the commitment amount.  Facility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2011 was 0.752% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2011.

 
Capacity
 
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
             
$3,465 
 
$1,727
 
$25 
 
$1,713

Entergy Corporation's facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization.  Entergy is in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.



 
24

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas each had credit facilities available as of March 31, 2011 as follows:

 
 
 
Company
 
 
 
 
Expiration Date
 
 
 
Amount of
Facility
 
 
 
 
Interest Rate (a)
 
Amount Drawn
as of
March 31,
2011
                 
Entergy Arkansas
 
April 2011
 
$75.125 million (b)
 
3.25%
 
-
Entergy Gulf States Louisiana
 
August 2012
 
$100 million (c)
 
0.66%
 
-
Entergy Louisiana
 
August 2012
 
$200 million (d)
 
0.66%
 
-
Entergy Mississippi
 
May 2011
 
$35 million (e)
 
1.99%
 
-
Entergy Mississippi
 
May 2011
 
$25 million (e)
 
1.99%
 
-
Entergy Mississippi
 
May 2011
 
$10 million (e)
 
1.99%
 
-
Entergy Texas
 
August 2012
 
$100 million (f)
 
0.72%
 
-

(a)
The interest rate is the rate as of March 31, 2011 that would be applied to outstanding borrowings under the facility.
(b)
The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization.  Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable.  In April 2011, at the expiration of this facility, Entergy Arkansas entered into a new $78 million credit facility that expires in April 2012.
(c)
The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility.  As of March 31, 2011, no letters of credit were outstanding.  The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(d)
The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility.  As of March 31, 2011, no letters of credit were outstanding.  The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(e)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.  Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization.  Prior to expiration on May 31, 2011, Entergy Mississippi expects to renew all of its credit facilities.
(f)
The credit facility allows Entergy Texas to issue letters of credit against the borrowing capacity of the facility.  As of March 31, 2011, no letters of credit were outstanding.  The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization.  Pursuant to the terms of the credit agreement securitization bonds are excluded from debt and capitalization in calculating the debt ratio.

The facility fees on the credit facilities range from 0.09% to 0.15% of the commitment amount.

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits are effective through October 31, 2011 under a FERC order dated October 14, 2009. In addition to borrowings 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 the Utility 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 and the outstanding short-term borrowings as of March 31, 2011 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:


 
25

Entergy Corporation and Subsidiaries
Notes to Financial Statements



   
Authorized
 
Borrowings
   
(In Millions)
         
Entergy Arkansas
 
$250
 
-
Entergy Gulf States Louisiana
 
$200
 
-
Entergy Louisiana
 
$250
 
-
Entergy Mississippi
 
$175
 
$126
Entergy New Orleans
 
$100
 
-
Entergy Texas
 
$200
 
$6
System Energy
 
$200
 
-

Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)

See Note 18 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE).  The variable interest entities have credit facilities and also issue commercial paper to finance the acquisition and ownership of nuclear fuel as follows as of March 31, 2011:

 
 
 
 
Company
 
 
 
 
Expiration
Date
 
 
 
Amount
of
Facility
 
Weighted
Average
Interest
Rate on
Borrowings (a)
 
Amount
Outstanding
as of
March 31,
2011
 
   
(Dollars in Millions)
 
                   
Entergy Arkansas VIE
 
July 2013
 
$85
 
2.44%
 
$54.8
 
Entergy Gulf States Louisiana VIE
 
July 2013
 
$85
 
2.13%
 
64.6
 
Entergy Louisiana VIE
 
July 2013
 
$90
 
2.45%
 
84.3
 
System Energy VIE
 
July 2013
 
$100
 
2.33%
 
16.0
 

(a) Includes letter of credit fees and bank fronting fees on commercial paper issuances by the VIEs for Entergy Arkansas, Entergy Louisiana, and System Energy.  The VIE for Entergy Gulf States Louisiana does not issue commercial paper, but borrows directly on its bank credit facility.

The amount outstanding on Entergy Gulf States Louisiana’s credit facility is included in long-term debt on its balance sheet and the commercial paper outstanding for the other VIEs is classified as a current liability on the respective balance sheets.  The commitment fees on the credit facilities are 0.20% of the commitment amount.  Each credit facility requires the respective lessee (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or Entergy Corporation as Guarantor for System Energy) to maintain a consolidated debt ratio of 70% or less of its total capitalization.


 
26

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The variable interest entities had long-term notes payable that are included in long-term debt on the respective balance sheets as of March 31, 2011 as follows:

Company
 
Description
 
Amount
         
Entergy Arkansas VIE
 
5.60% Series G due September 2011
 
$35 million
Entergy Arkansas VIE
 
9% Series H due June 2013
 
$30 million
Entergy Arkansas VIE
 
5.69% Series I due July 2014
 
$70 million
Entergy Gulf States Louisiana VIE
 
5.56% Series N due May 2013
 
$75 million
Entergy Gulf States Louisiana VIE
 
5.41% Series O due July 2012
 
$60 million
Entergy Louisiana VIE
 
5.69% Series E due July 2014
 
$50 million
Entergy Louisiana VIE
 
3.30% Series F, due March 2016
 
$20 million
System Energy VIE
 
6.29% Series F due September 2013
 
$70 million
System Energy VIE
 
5.33% Series G due April 2015
 
$60 million

In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities' credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.

Debt Issuances

(Entergy Louisiana)

In March 2011, Entergy Louisiana issued $200 million of 4.80% Series first mortgage bonds due May 2021.  Entergy Louisiana used the proceeds, together with other available funds, to purchase Unit 2 of the Acadia Energy Center, a 580MW generating unit located near Eunice, Louisiana.

(Entergy Mississippi)

In April 2011, Entergy Mississippi issued $150 million of 6.0% Series first mortgage bonds due May 2051. Entergy Mississippi used a portion of the proceeds to pay at maturity its $80 million 4.65% Series first mortgage bonds due May 2011.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 2011 are as follows:

   
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
   
(In Thousands)
         
Entergy
 
$11,789,973
 
$11,295,166
Entergy Arkansas
 
$1,863,998
 
$1,702,252
Entergy Gulf States Louisiana
 
$1,624,691
 
$1,596,238
Entergy Louisiana
 
$1,996,520
 
$1,851,238
Entergy Mississippi
 
$825,396
 
$859,892
Entergy New Orleans
 
$167,218
 
$171,083
Entergy Texas
 
$1,638,253
 
$1,787,626
System Energy
 
$786,992
 
$618,077

(a)
The values exclude lease obligations of $194 million at Entergy Louisiana and $179 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $157 million at Entergy, and include debt due within one year.
(b)
Fair values are based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.

 
27

Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

Entergy grants stock awards, which are described more fully in Note 12 to the financial statements in the Form 10-K.  Awards under Entergy's plans generally vest over three years.

Stock Options

Entergy granted 388,200 stock options during the first quarter 2011 with a weighted-average fair value of $11.48.  At March 31, 2011, there were 11,270,653 stock options outstanding with a weighted-average exercise price of $73.35.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the difference in the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2011.  Because Entergy’s stock price at March 31, 2011 is less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of March 31, was zero.  The intrinsic value of “in the money” stock options is $62 million as of March 31, 2011.

The following table includes financial information for stock options for the first quarter for each of the years presented:
 
2011
 
2010
 
(In Millions)
       
Compensation expense included in Entergy's net income for the first quarter
$3.0
 
$3.9
Tax benefit recognized in Entergy's net income for the first quarter
$1.2
 
$1.5
Compensation cost capitalized as part of fixed assets and inventory as of March 31,
$0.6
 
$0.7

Restricted Stock Awards

In January 2011, the Board approved and Entergy granted 166,800 restricted stock awards under the 2007 Equity Ownership and Long-term Cash Incentive Plan.  The grants were made effective as of January 27, 2011 and were valued at $72.79 per share, which was the closing price of Entergy’s common stock on that date.  One-third of the restricted stock awards will vest upon each anniversary of the grant date and are expensed ratably over the three year vesting period.  Shares of restricted stock have the same dividend and voting rights as other common stock and are considered issued and outstanding shares of Entergy upon vesting.

The following table includes financial information for restricted stock for the first quarter for each of the years presented:
 
 
2011
 
2010
 
(In Millions)
       
Compensation expense included in Entergy's net income for the first quarter
$1.0
 
$-
Tax benefit recognized in Entergy's net income for the first quarter
$0.4
 
$-
Compensation cost capitalized as part of fixed assets and inventory as of March 31,
$0.2
 
$-



 
28

Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 6.  RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Components of Net Pension Cost

Entergy's qualified pension cost, including amounts capitalized, for the first quarters of 2011 and 2010, included the following components:

   
2011
 
2010
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$30,490 
 
$26,239 
Interest cost on projected benefit obligation
 
59,248 
 
57,802 
Expected return on assets
 
(75,319)
 
(64,902)
Amortization of prior service cost
 
838 
 
1,164 
Amortization of loss
 
23,244 
 
16,475 
Net pension costs
 
$38,501 
 
$36,778 

The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the first quarters of 2011 and 2010, included the following components:

 
 
2011
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$4,518 
 
$2,462 
 
$2,886 
 
$1,327 
 
$561 
 
$1,197 
 
$1,235 
Interest cost on projected
                           
  benefit obligation
 
12,991 
 
5,928 
 
8,159 
 
3,909 
 
1,762
 
3,993 
 
2,939 
Expected return on assets
 
(15,609)
 
(8,339)
 
(9,716)
 
(5,038)
 
(2,114)
 
(5,501)
 
(3,784)
Amortization of prior service
                           
  cost
 
115 
 
20 
 
70 
 
38 
 
 
16 
 
Amortization of loss
 
6,421 
 
2,279 
 
4,497 
 
1,680 
 
1,166 
 
1,394 
 
1,321 
Net pension cost
 
$8,436 
 
$2,350 
 
$5,896 
 
$1,916 
 
$1,384 
 
$1,099 
 
$1,715 


 
 
2010
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$3,944 
 
$2,116 
 
$2,443 
 
$1,163 
 
$516 
 
$1,067 
 
$1,033 
Interest cost on projected
                           
  benefit obligation
 
12,319 
 
6,094 
 
7,135 
 
3,807 
 
1,510
 
3,967 
 
2,252 
Expected return on assets
 
(12,659)
 
(7,688)
 
(8,194)
 
(4,313)
 
(1,809)
 
(5,137)
 
(2,952)
Amortization of prior service
                           
  cost
 
196 
 
75 
 
119 
 
79 
 
44 
 
59 
 
Amortization of loss
 
4,126 
 
1,906 
 
2,151 
 
1,091 
 
636 
 
802 
 
132 
Net pension cost
 
$7,926 
 
$2,503 
 
$3,654 
 
$1,827 
 
$897 
 
$758 
 
$473 

 
29

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy recognized $4.9 million and $4.7 million in pension cost for its non-qualified pension plans in the first quarters of 2011 and 2010, respectively.

The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the first quarters of 2011 and 2010:

   
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
   
(In Thousands)
Non-qualified pension cost
  first quarter 2011
 
 
$115 
 
 
$42 
 
 
$4 
 
 
$48 
 
 
$16 
 
 
$192 
Non-qualified pension cost
  first quarter 2010
 
 
$101 
 
 
$41 
 
 
$6 
 
 
$50 
 
 
$6 
 
 
$170 

Components of Net Other Postretirement Benefit Cost

Entergy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2011 and 2010, included the following components:

   
2011
 
2010
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$14,835 
 
$13,078 
Interest cost on APBO
 
18,631 
 
19,020 
Expected return on assets
 
(7,369)
 
(6,553)
Amortization of transition obligation
 
796 
 
932 
Amortization of prior service cost
 
(3,518)
 
(3,015)
Amortization of loss
 
5,298 
 
4,317 
Net other postretirement benefit cost
 
$28,673 
 
$27,779 
 
 
The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the first quarters of 2011 and 2010, included the following components:

 
 
2011
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$2,013 
 
$1,540 
 
$1,635 
 
$658 
 
$362 
 
$769 
 
$661 
Interest cost on APBO
 
3,436 
 
2,075 
 
2,192 
 
1,093 
 
806 
 
1,486 
 
667 
Expected return on assets
 
(2,882)
 
 
 
(977)
 
(800)
 
(1,874)
 
(529)
Amortization of transition
                           
  obligation
 
205 
 
60 
 
96 
 
88 
 
298 
 
47 
 
Amortization of prior service
                           
  cost
 
(133)
 
(206)
 
(62)
 
(35)
 
10 
 
(107)
 
(147)
Amortization of loss
 
1,610 
 
723 
 
698 
 
540 
 
241 
 
700 
 
369 
Net other postretirement
                           
  benefit cost
 
$4,249 
 
$4,192 
 
$4,559 
 
$1,367 
 
$917 
 
$1,021 
 
$1,023 

 
30

Entergy Corporation and Subsidiaries
Notes to Financial Statements


 
 
2010
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$1,843 
 
$1,370 
 
$1,371 
 
$550 
 
$347 
 
$697 
 
$563 
Interest cost on APBO
 
3,629 
 
2,144 
 
2,269 
 
1,093 
 
900 
 
1,582 
 
641 
Expected return on assets
 
(2,445)
 
 
 
(888)
 
(725)
 
(1,718)
 
(468)
Amortization of transition
                           
  obligation
 
205 
 
60 
 
96 
 
88 
 
415 
 
66 
 
Amortization of prior service
                           
  cost
 
(197)
 
(77)
 
117 
 
(62)
 
90 
 
19 
 
(191)
Amortization of loss
 
1,690 
 
663 
 
609 
 
476 
 
274 
 
752 
 
325 
Net other postretirement
                           
  benefit cost
 
$4,725 
 
$4,160 
 
$4,462 
 
$1,257 
 
$1,301 
 
$1,398 
 
$872 

Employer Contributions

Based on current assumptions, Entergy expects to contribute $400.5 million to its qualified pension plans in 2011.   As of the end of April 2011, Entergy had contributed $275.1 million to its pension plans.  Therefore, Entergy presently anticipates contributing an additional $125.4 million to fund its qualified pension plans in 2011.

Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans in 2011:

   
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Expected 2011 pension
  contributions
 
 
$120,400
 
 
$27,318
 
 
$60,597
 
 
$29,169
 
 
$12,160
 
 
$18,235
 
 
$28,351
Pension contributions made
  through April 2011
 
 
$88,004
 
 
$17,912
 
 
$42,207
 
 
$21,169
 
 
$8,419
 
 
$11,651
 
 
$20,546
Remaining estimated pension
  contributions to be made in 2011
 
 
$32,396
 
 
$9,406
 
 
$18,390
 
 
$8,000
 
 
$3,741
 
 
$6,584
 
 
$7,805

 
 


 
31

Entergy Corporation and Subsidiaries
Notes to Financial Statements



NOTE 7.  BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation

Entergy's reportable segments as of March 31, 2011 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity, including the earnings on the proceeds of sales of previously-owned businesses.

In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization. The 2010 information in the tables below has been restated to reflect the change in reportable segments.

Entergy's segment financial information for the first quarters of 2011 and 2010 is as follows:

 
 
 
Utility
 
Entergy
Wholesale Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Consolidated
 
(In Thousands)
2011
                 
Operating revenues
$1,937,618 
 
$610,146
 
$1,101 
 
($7,657)
 
$2,541,208 
Income taxes (benefit)
$90,204 
 
$84,941
 
($10,895)
 
$- 
 
$164,250 
Consolidated net income (loss)
$168,653 
 
$123,233
 
($10,563)
 
($27,645)
 
$253,678 
                   
2010
                 
Operating revenues
$2,103,829 
 
$660,399
 
$1,958 
 
($6,839)
 
$2,759,347 
Income taxes (benefit)
$89,970 
 
$87,540
 
($29,825)
 
$- 
 
$147,685 
Consolidated net income (loss)
$142,971 
 
$90,542
 
$3,660 
 
($18,359)
 
$218,814 

Businesses marked with * are sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity.  Almost all of Entergy’s goodwill is related to the Utility segment.

Registrant Subsidiaries

Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business.  Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.



 
32

Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 8.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Market and Commodity Risks

In the normal course of business, Entergy is exposed to a number of market and commodity risks.  Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular instrument or commodity.  All financial and commodity-related instruments, including derivatives, are subject to market risk.  Entergy is subject to a number of commodity and market risks, including:

Type of Risk
 
Affected Businesses
     
Power price risk
 
Utility, Entergy Wholesale Commodities
Fuel price risk
 
Utility, Entergy Wholesale Commodities
Foreign currency exchange rate risk
 
Utility, Entergy Wholesale Commodities
Equity price and interest rate risk - investments
 
Utility, Entergy Wholesale Commodities

Entergy manages a portion of these risks using derivative instruments, some of which are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sales transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include natural gas and electricity futures, forwards, swaps, and options; foreign currency forwards; and interest rate swaps.  Entergy will occasionally enter into financially settled option contracts to manage market risk under certain hedging transactions, which may or may not be designated as hedging instruments.  Entergy enters into derivatives only to manage natural risks inherent in its physical or financial assets or liabilities.

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi primarily through the purchase of short-term natural gas swaps.  These swaps are marked-to-market with offsetting regulatory assets or liabilities.  The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.

Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity.  For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk.  A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk.  Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies.  Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods.  These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.


 
33

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Derivatives

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2011 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (a)
 
Business
                 
Derivatives designated as hedging instruments
               
                 
Assets:
               
Electricity futures, forwards, swaps, and options
 
Prepayments and other (current portion)
 
$123 million
 
($17) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other deferred debits and other assets (non-current portion)
 
$50 million
 
($27) million
 
Entergy Wholesale Commodities
                 
Liabilities:
               
Electricity futures, forwards, swaps, and options
 
Other current liabilities (current portion)
 
$28 million
 
($25) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other non-current liabilities (non-current portion)
 
$57 million
 
($29) million
 
Entergy Wholesale Commodities
                 
Derivatives not designated as hedging instruments
               
                 
Assets:
               
Electricity futures, forwards, swaps, and options
 
Prepayments and other (current portion)
 
$26 million
 
($19) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other deferred debits and other assets (non-current portion)
 
$7 million
 
($7) million
 
Entergy Wholesale Commodities
Natural gas swaps
 
Prepayments and other
 
$10 million
 
($-)
 
Utility
                 
Liabilities:
               
Electricity futures, forwards, swaps, and options
 
Other current liabilities (current portion)
 
$11 million
 
($10) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other non-current liabilities (non-current portion)
 
$5 million
 
($5) million
 
Entergy Wholesale Commodities



 
34

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2010 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (a)
 
Business
                 
Derivatives designated as hedging instruments
               
                 
Assets:
               
Electricity futures, forwards, swaps, and options
 
Prepayments and other (current portion)
 
$160 million
 
($7) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other deferred debits and other assets (non-current portion)
 
$82 million
 
($29) million
 
Entergy Wholesale Commodities
                 
Liabilities:
               
Electricity futures, forwards, swaps, and options
 
Other current liabilities (current portion)
 
$5 million
 
($5) million
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other non-current liabilities (non-current portion)
 
$47 million
 
($30) million
 
Entergy Wholesale Commodities
                 
Derivatives not designated as hedging instruments
               
                 
Assets:
               
Electricity futures, forwards, swaps, and options
 
Prepayments and other (current portion)
 
$2 million
 
($-)
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other deferred debits and other assets (non-current portion)
 
$14 million
 
($8) million
 
Entergy Wholesale Commodities
                 
Liabilities:
               
Electricity futures, forwards, swaps, and options
 
Other current liabilities (current portion)
 
$2 million
 
($2 million)
 
Entergy Wholesale Commodities
Electricity futures, forwards, swaps, and options
 
Other non-current liabilities (non-current portion)
 
$7 million
 
($7) million
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$2 million
 
($-)
 
Utility

(a)
The balances of derivative assets and liabilities in this table are presented gross.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented on the Entergy Consolidated Balance Sheets on a net basis in accordance with accounting guidance for Derivatives and Hedging.



 
35

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended March 31, 2011 and 2010 are as follows:

 
 
 
Instrument
 
 
Amount of gain (loss)
recognized in OCI
(effective portion)
 
 
 
 
Income Statement location
 
Amount of gain (loss)
 reclassified from
accumulated OCI into
income (effective portion)
             
2011
           
Electricity futures, forwards, swaps, and options
 
($74) million
 
Competitive businesses operating revenues
 
$29 million
             
2010
           
Electricity futures, forwards, swaps, and options
 
$268 million
 
Competitive businesses operating revenues
 
$38 million

Electricity over-the-counter swaps that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  Based on market prices as of March 31, 2011, cash flow hedges relating to power sales totaled $77 million of net unrealized gains. Approximately $86 million are expected to be reclassified from accumulated other comprehensive income (OCI) to operating revenues in the next twelve months.  The actual amount reclassified from accumulated OCI could vary, however, due to future changes in market prices.  Gains totaling approximately $29 million and $38 million were realized on the maturity of cash flow hedges, before taxes of $10 million and $13 million, for the three months ended March 31, 2011 and 2010, respectively. Unrealized gains or losses recorded in OCI result from hedging power output at the Entergy Wholesale Commodities power plants.  The related gains or losses from hedging power are included in operating revenues when realized.  The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at March 31, 2011 is approximately 3.75 years.  Planned generation currently sold forward from Entergy Wholesale Commodities power plants is 96% for the remaining three quarters of 2011, of which approximately 45% is sold under financial derivatives and the remainder under normal purchase/sale contracts.  The change in the value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended March 31, 2011 and 2010 was insignificant.  Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations when the current market prices exceed the contracted power prices.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  As of March 31, 2011, hedge contracts with five counterparties were in a liability position (approximately $27 million total), but were significantly below the amount of the guarantee provided under the contract and no cash collateral was required.  If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.  From time to time, Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge.  Gains or losses accumulated in OCI prior to de-designation continue to be deferred in OCI until they are included in income as the original hedged transaction occurs.  From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.

Natural gas over-the-counter swaps that financially settle against NYMEX futures are used to manage fuel price volatility for the Utility’s Louisiana and Mississippi customers.  All benefits or costs of the program are recorded in fuel costs.  The total volume of natural gas swaps outstanding as of March 31, 2011 is 54,370,000 MMBtu for Entergy, 12,960,000 MMBtu for Entergy Gulf States Louisiana, 25,010,000 MMBtu for Entergy Louisiana, and 16,400,000 MMBtu for Entergy Mississippi.  Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.

 
36

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31, 2011 and 2010 is as follows:

 
Instrument
 
Amount of gain (loss)
recognized in OCI
 
 
Income Statement location
 
Amount of gain (loss)
recorded in income
             
2011
           
Natural gas swaps
 
$ -
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($3) million
Electricity futures, forwards, swaps, and options de-designated as hedged items
 
$10 million
 
Competitive business operating revenues
 
$2 million
             
2010
           
Natural gas swaps
 
$ -
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($86) million

Due to regulatory treatment, the natural gas swaps are marked to market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as offsetting regulatory assets or liabilities.  The gains or losses recorded as fuel expenses when the swaps are settled are recovered through fuel cost recovery mechanisms.

The fair values of the Registrant Subsidiaries’ derivative instruments on their balance sheets as of March 31, 2011 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value
 
Registrant
             
Derivatives not designated as hedging instruments
       
             
Assets:
           
Natural gas swaps
 
Prepayments and other
 
$2.4 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Gas hedge contracts
 
$4.6 million
 
Entergy Louisiana
Natural gas swaps
 
Prepayments and other
 
$3.1 million
 
Entergy Mississippi

The fair values of the Registrant Subsidiaries’ derivative instruments on their balance sheets as of December 31, 2010 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value
 
Registrant
             
Derivatives not designated as hedging instruments
       
             
Assets:
           
Natural gas swaps
 
Prepayments and other
 
$0.3 million
 
Entergy Mississippi
             
Liabilities:
           
Natural gas swaps
 
Other current liabilities
 
$1.0 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.4 million
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.5 million
 
Entergy New Orleans

 
37

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their statements of income for the three months ended March 31, 2011 and 2010 are as follows:

 
 
Instrument
 
 
 
Statement of Income Location
 
Amount of gain
(loss) recorded
in income
 
 
 
Registrant
             
2011
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.9) million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.1) million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.3 million
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.8) million
 
Entergy New Orleans
             
2010
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($21.2) million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($36.2) million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($27.8) million
 
Entergy Mississippi

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments other than forward energy contracts held by competitive businesses are reflected in future rates and therefore do not accrue to the benefit or detriment of shareholders.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement.  Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value.  The inputs can be readily observable, corroborated by market data, or generally unobservable.  Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.

Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.  The three levels of the fair value hierarchy are:

·  
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  Level 1 primarily consists of individually owned common stocks, cash equivalents, debt instruments, and gas hedge contracts.
 
 
38

Entergy Corporation and Subsidiaries
Notes to Financial Statements


·  
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date.  Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.  Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value.  Level 2 inputs include the following:

-  
quoted prices for similar assets or liabilities in active markets;
-  
quoted prices for identical assets or liabilities in inactive markets;
-  
inputs other than quoted prices that are observable for the asset or liability; or
-  
inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 2 consists primarily of individually owned debt instruments or shares in common trusts.  Common trust funds are stated at estimated fair value based on the fair market value of the underlying investments.

·  
Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources.  These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability.  Level 3 consists primarily of derivative power contracts used as cash flow hedges of power sales at merchant power plants.

The values for the cash flow hedges that are recorded as derivative contract assets or liabilities are based on both observable inputs including public market prices and unobservable inputs such as model-generated prices for longer-term markets and are classified as Level 3 assets and liabilities.  The amounts reflected as the fair value of derivative assets or liabilities are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable or payable by Entergy if the contracts were settled at that date.  These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from Entergy’s Entergy Wholesale Commodities business.  The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from a combination of quoted forward power market prices for the period for which such curves are available, and model-generated prices using quoted forward gas market curves and estimates regarding heat rates to convert gas to power and the costs associated with the transportation of the power from the plants’ bus bar to the contract’s point of delivery, generally a power market hub, for the period thereafter.  The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities.  As of March 31, 2011, Entergy had in-the-money derivative contracts with a fair value of $136 million with counterparties or their guarantor who are all currently investment grade.  $32 million of the derivative contracts as of March 31, 2011 are out-of-the-money contracts supported by corporate guarantees, which would require additional cash or letters of credit in the event of a decrease in Entergy Corporation’s credit rating to below investment grade.

The following table sets forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2011 and December 31, 2010.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.

 
39

Entergy Corporation and Subsidiaries
Notes to Financial Statements



2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$622
 
$-
 
$-
 
$622
Decommissioning trust funds (a):
               
Equity securities
 
409
 
1,799
 
-
 
2,208
Debt securities
 
497
 
1,028
 
-
 
1,525
Power contracts
 
-
 
-
 
136
 
136
Securitization recovery trust account
 
37
 
-
 
-
 
37
Gas hedge contracts
 
10
 
-
 
-
 
10
Storm reserve escrow account
 
331
 
-
 
-
 
331
   
$1,906
 
$2,827
 
$136
 
$4,869
                 
Liabilities:
               
Power contracts
 
$-
 
$-
 
$32
 
$32
   
$-
 
$-
 
$32
 
$32

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$1,218
 
$-
 
$-
 
$1,218
Decommissioning trust funds (a):
               
Equity securities
 
387
 
1,689
 
-
 
2,076
Debt securities
 
497
 
1,023
 
-
 
1,520
Power contracts
 
-
 
-
 
214
 
214
Securitization recovery trust account
 
43
 
-
 
-
 
43
Storm reserve escrow account
 
329
 
-
 
-
 
329
   
$2,474
 
$2,712
 
$214
 
$5,400
                 
Liabilities:
               
Power contracts
 
$-
 
$-
 
$17
 
$17
Gas hedge contracts
 
2
 
-
 
-
 
2
   
$2
 
$-
 
$17
 
$19

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2011 and 2010:

   
2011
 
2010
   
(In Millions)
         
Balance as of January 1,
 
$197 
 
$200 
         
Unrealized gains/(losses) from price changes
 
(62)
 
263 
Unrealized gains/(losses) on originations
 
(2)
 
Realized gains/(losses) on settlements
 
(29)
 
(38)
         
Balance as of March 31,
 
$ 104
 
$432 

 
40

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of March 31, 2011 and December 31, 2010.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.

Entergy Arkansas

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$22.2
 
$-
 
$-
 
$22.2
Decommissioning trust funds (a):
               
Equity securities
 
1.6
 
342.6
 
-
 
344.2
Debt securities
 
17.2
 
186.2
 
-
 
203.4
Securitization recovery trust account
 
6.1
 
-
 
-
 
6.1
   
$47.1
 
$528.8
 
$-
 
$575.9

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$101.9
 
$-
 
$-
 
$101.9
Decommissioning trust funds (a):
               
Equity securities
 
3.4
 
316.3
 
-
 
319.7
Debt securities
 
41.4
 
159.7
 
-
 
201.1
Securitization recovery trust account
 
2.4
 
-
 
-
 
2.4
   
$149.1
 
$476.0
 
$-
 
$625.1

Entergy Gulf States Louisiana

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$56.4
 
$-
 
$-
 
$56.4
Decommissioning trust funds (a):
               
Equity securities
 
2.4
 
248.7
 
-
 
251.1
Debt securities
 
31.3
 
128.4
 
-
 
159.7
Gas hedge contracts
 
2.4
 
-
 
-
 
2.4
Storm reserve escrow account
 
90.2
 
-
 
-
 
90.2
   
$182.7
 
$377.1
 
$-
 
$559.8

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$154.9
 
$-
 
$-
 
$154.9
Decommissioning trust funds (a):
               
Equity securities
 
3.8
 
231.1
 
-
 
234.9
Debt securities
 
32.2
 
126.5
 
-
 
158.7
Storm reserve escrow account
 
90.1
 
-
 
-
 
90.1
   
$281.0
 
$357.6
 
$-
 
$638.6
                 
Liabilities:
               
Gas hedge contracts
 
$1.0
 
$-
 
$-
 
$1.0


 
41

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Louisiana

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$98.2
 
$-
 
$-
 
$98.2
Decommissioning trust funds (a):
               
Equity securities
 
2.9
 
152.7
 
-
 
155.6
Debt securities
 
44.4
 
51.5
 
-
 
95.9
Gas hedge contracts
 
4.6
 
-
 
-
 
4.6
Storm reserve escrow account
 
201.1
 
-
 
-
 
201.1
   
$351.2
 
$204.2
 
$-
 
$555.4

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$122.5
 
$-
 
$-
 
$122.5
Decommissioning trust funds (a):
               
Equity securities
 
1.3
 
142.6
 
-
 
143.9
Debt securities
 
45.7
 
50.9
 
-
 
96.6
Storm reserve escrow account
 
201.0
 
-
 
-
 
201.0
   
$370.5
 
$193.5
 
$-
 
$564.0
                 
Liabilities:
               
Gas hedge contracts
 
$0.4
 
$-
 
$-
 
$0.4

Entergy Mississippi

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Gas hedge contracts
 
$3.1
 
$-
 
$-
 
$3.1
Storm reserve escrow account
 
31.9
 
-
 
-
 
31.9
   
$35.0
 
$-
 
$-
 
$35.0

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Gas hedge contracts
 
$0.3
 
$-
 
$-
 
$0.3
Storm reserve escrow account
 
31.9
 
-
 
-
 
31.9
   
$32.2
 
$-
 
$-
 
$32.2
                 
Entergy New Orleans

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$28.6
 
$-
 
$-
 
$28.6
Storm reserve escrow account
 
7.5
 
-
 
-
 
7.5
   
$36.1
 
$-
 
$-
 
$36.1

 
42

Entergy Corporation and Subsidiaries
Notes to Financial Statements



2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$53.6
 
$-
 
$-
 
$53.6
Storm reserve escrow account
 
6.0
 
-
 
-
 
6.0
   
$59.6
 
$-
 
$-
 
$59.6
                 
Liabilities:
               
Gas hedge contracts
 
$0.5
 
$-
 
$-
 
$0.5

Entergy Texas

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Securitization recovery trust account
 
$30.6
 
$-
 
$-
 
$30.6

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$33.6
 
$-
 
$-
 
$33.6
Securitization recovery trust account
 
40.6
 
-
 
-
 
40.6
   
$74.2
 
$-
 
$-
 
$74.2

System Energy

2011
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$124.0
 
$-
 
$-
 
$124.0
Decommissioning trust funds (a):
               
Equity securities
 
3.9
 
238.2
 
-
 
242.1
Debt securities
 
98.6
 
68.3
 
-
 
166.9
   
$226.5
 
$306.5
 
$-
 
$533.0

2010
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$262.9
 
$-
 
$-
 
$262.9
Decommissioning trust funds (a):
               
Equity securities
 
3.1
 
220.9
 
-
 
224.0
Debt securities
 
95.7
 
68.2
 
-
 
163.9
   
$361.7
 
$289.1
 
$-
 
$650.8

(a)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indexes.  Fixed income securities are held in various governmental and corporate securities with an average coupon rate of 4.24%.  See Note 9 for additional information on the investment portfolios.
 
 
43

Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 9.  DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)

Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick).  The funds are invested primarily in equity securities; fixed-rate, fixed-income securities; and cash and cash equivalents.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits.  Decommissioning trust funds for Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale.  Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The securities held as of March 31, 2011 and December 31, 2010 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2011
           
Equity Securities
 
$2,208
 
$538
 
$5
Debt Securities
 
1,525
 
60
 
9
  Total
 
$3,733
 
$598
 
$14
             
             
2010
           
Equity Securities
 
$2,076
 
$436
 
$9
Debt Securities
 
1,520
 
67
 
12
  Total
 
$3,596
 
$503
 
$21

Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $155 million and $130 million as of March 31, 2011 and December 31, 2010, respectively.  The amortized cost of debt securities was $1,488 million as of March 31, 2011 and $1,475 million as of December 31, 2010.  As of March 31, 2011, the debt securities have an average coupon rate of approximately 4.24%, an average duration of approximately 5.14 years, and an average maturity of approximately 8.67 years.  The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.


 
44

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2011:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$18
 
$1
 
$461
 
$9
More than 12 months
 
70
 
4
 
2
 
-
  Total
 
$88
 
$5
 
$463
 
$9

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$15
 
$1
 
$474
 
$11
More than 12 months
 
105
 
8
 
4
 
1
  Total
 
$120
 
$9
 
$478
 
$12

The unrealized losses in excess of twelve months on equity securities above relate to Entergy’s Utility operating companies and System Energy.

The fair value of debt securities, summarized by contractual maturities, as of March 31, 2011 and December 31, 2010 are as follows:

   
2011
 
2010
   
(In Millions)
Less than 1 year
 
$49
 
$37
1 year - 5 years
 
579
 
557
5 years - 10 years
 
498
 
512
10 years - 15 years
 
156
 
163
15 years - 20 years
 
46
 
47
20 years+
 
197
 
204
  Total
 
$1,525
 
$1,520

During the three months ended March 31, 2011 and 2010, proceeds from the dispositions of securities amounted to $493 million and $771 million, respectively.  During the three months ended March 31, 2011 and 2010, gross gains of $4 million and $15 million, respectively, and gross losses of $5 million and $2 million, respectively, were reclassified out of other comprehensive income into earnings.


 
45

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2011 and December 31, 2010 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2011
           
Equity Securities
 
$344.2
 
$93.3
 
$0.1
Debt Securities
 
203.4
 
9.4
 
1.3
Total
 
$547.6
 
$102.7
 
$1.4
             
2010
           
Equity Securities
 
$319.7
 
$74.2
 
$0.3
Debt Securities
 
201.1
 
11.0
 
1.0
Total
 
$520.8
 
$85.2
 
$1.3

The amortized cost of debt securities was $195.3 million as of March 31, 2011 and $191.2 million as of December 31, 2010.  As of March 31, 2011, the debt securities have an average coupon rate of approximately 4.08%, an average duration of approximately 4.74 years, and an average maturity of approximately 5.66 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2011:
   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.6
 
$-
 
$49.8
 
$1.3
More than 12 months
 
2.0
 
0.1
 
-
 
-
Total
 
$2.6
 
$0.1
 
$49.8
 
$1.3

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$-
 
$-
 
$44.3
 
$1.0
More than 12 months
 
6.6
 
0.3
 
-
 
-
Total
 
$6.6
 
$0.3
 
$44.3
 
$1.0
 
 
46

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value of debt securities, summarized by contractual maturities, as of March 31, 2011 and December 31, 2010 are as follows:

   
2011
 
2010
   
(In Millions)
         
Less than 1 year
 
$3.7
 
$5.3
1 year - 5 years
 
104.1
 
100.1
5 years - 10 years
 
85.1
 
85.2
10 years - 15 years
 
3.5
 
4.5
15 years - 20 years
 
-
 
-
20 years+
 
7.0
 
6.0
Total
 
$203.4
 
$201.1

During the three months ended March 31, 2011 and 2010, proceeds from the dispositions of securities amounted to $31.0 million and $99.0 million, respectively.  During the three months ended March 31, 2011 and 2010, gross gains of $0.6 million and $2.0 million, respectively, and gross losses of $0 million and $0.3 million, respectively, were recorded in earnings.

Entergy Gulf States Louisiana

Entergy Gulf States Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2011 and December 31, 2010 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2011
           
Equity Securities
 
$251.1
 
$54.6
 
$0.6
Debt Securities
 
159.7
 
8.2
 
0.9
Total
 
$410.8
 
$62.8
 
$1.5
             
2010
           
Equity Securities
 
$234.9
 
$41.7
 
$1.4
Debt Securities
 
158.7
 
8.8
 
0.8
Total
 
$393.6
 
$50.5
 
$2.2

The amortized cost of debt securities was $151.6 million as of March 31, 2011 and $150.0 million as of December 31, 2010.  As of March 31, 2011, the debt securities have an average coupon rate of approximately 4.50%, an average duration of approximately 5.97 years, and an average maturity of approximately 9.26 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


 
47

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2011:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$1.3
 
$-
 
$27.1
 
$0.7
More than 12 months
 
10.5
 
0.6
 
0.9
 
0.2
  Total
 
$11.8
 
$0.6
 
$28.0
 
$0.9

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$-
 
$-
 
$22.6
 
$0.6
More than 12 months
 
18.6
 
1.4
 
0.9
 
0.2
  Total
 
$18.6
 
$1.4
 
$23.5
 
$0.8

The fair value of debt securities, summarized by contractual maturities, as of March 31, 2011 and December 31, 2010 are as follows:

   
2011
 
2010
   
(In Millions)
         
Less than 1 year
 
$5.5
 
$4.7
1 year - 5 years
 
34.5
 
35.0
5 years - 10 years
 
54.8
 
54.2
10 years - 15 years
 
47.3
 
48.1
15 years - 20 years
 
4.0
 
3.7
20 years+
 
13.6
 
13.0
  Total
 
$159.7
 
$158.7

During the three months ended March 31, 2011 and 2010, proceeds from the dispositions of securities amounted to $11.9 million and $42.3 million, respectively.  During the three months ended March 31, 2011 and 2010, gross gains of $0.02 million and $0.9 million, respectively, and gross losses of $0.04 million and $0.05 million, respectively, were recorded in earnings.


 
48

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Louisiana

Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2011 and December 31, 2010 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2011
           
Equity Securities
 
$155.6
 
$38.9
 
$0.8
Debt Securities
 
95.9
 
4.6
 
0.1
Total
 
$251.5
 
$43.5
 
$0.9
             
2010
           
Equity Securities
 
$143.9
 
$31.0
 
$1.7
Debt Securities
 
96.6
 
5.3
 
0.1
Total
 
$240.5
 
$36.3
 
$1.8

The amortized cost of debt securities was $90.8 million as of March 31, 2011 and $91.0 million as of December 31, 2010.  As of March 31, 2011, the debt securities have an average coupon rate of approximately 4.01%, an average duration of approximately 4.55 years, and an average maturity of approximately 8.76 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2011:
   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.3
 
$-
 
$9.7
 
$0.1
More than 12 months
 
12.2
 
0.8
 
0.2
 
-
  Total
 
$12.5
 
$0.8
 
$9.9
 
$0.1

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$-
 
$-
 
$4.8
 
$0.1
More than 12 months
 
18.9
 
1.7
 
0.2
 
-
  Total
 
$18.9
 
$1.7
 
$5.0
 
$0.1
 
 
49

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value of debt securities, summarized by contractual maturities, as of March 31, 2011 and December 31, 2010 are as follows:

   
2011
 
2010
   
(In Millions)
         
Less than 1 year
 
$3.7
 
$5.3
1 year - 5 years
 
28.2
 
28.1
5 years - 10 years
 
30.8
 
31.5
10 years - 15 years
 
17.0
 
14.1
15 years - 20 years
 
1.9
 
2.9
20 years+
 
14.3
 
14.7
  Total
 
$95.9
 
$96.6

During the three months ended March 31, 2011 and 2010, proceeds from the dispositions of securities amounted to $6.1 million and $20.5 million, respectively.  During the three months ended March 31, 2011 and 2010, gross gains of $0.06 million and $0.6 million, respectively, and gross losses of $0.01 million and $0.01 million, respectively, were recorded in earnings.

System Energy

System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2011 and December 31, 2010 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2011
           
Equity Securities
 
$242.1
 
$47.6
 
$2.2
Debt Securities
 
166.9
 
3.5
 
0.9
Total
 
$409.0
 
$51.1
 
$3.1
             
2010
           
Equity Securities
 
$224.0
 
$37.3
 
$5.2
Debt Securities
 
163.9
 
4.4
 
1.5
Total
 
$387.9
 
$41.7
 
$6.7

The amortized cost of debt securities was $162.4 million as of March 31, 2011 and $159.3 million as of December 31, 2010.  As of March 31, 2011, the debt securities have an average coupon rate of approximately 3.69%, an average duration of approximately 4.38 years, and an average maturity of approximately 7.05 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


 
50

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2011:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$1.2
 
$-
 
$64.5
 
$0.9
More than 12 months
 
44.7
 
2.2
 
-
 
-
  Total
 
$45.9
 
$2.2
 
$64.5
 
$0.9

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$-
 
$-
 
$63.0
 
$1.5
More than 12 months
 
61.1
 
5.2
 
-
 
-
  Total
 
$61.1
 
$5.2
 
$63.0
 
$1.5
 
 
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2011 and 2010 are as follows:

   
2011
 
2010
   
(In Millions)
         
Less than 1 year
 
$6.3
 
$1.8
1 year - 5 years
 
87.1
 
79.8
5 years - 10 years
 
47.8
 
52.3
10 years - 15 years
 
0.5
 
2.5
15 years - 20 years
 
4.8
 
3.8
20 years+
 
20.4
 
23.7
  Total
 
$166.9
 
$163.9

During the three months ended March 31, 2011 and 2010, proceeds from the dispositions of securities amounted to $88.6 million and $81.4 million, respectively.  During the three months ended March 31, 2011 and 2010, gross gains of $0.4 million and $1.0 million, respectively, and gross losses of $0.9 million and $0.1 million, respectively, were recorded in earnings.


 
51

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Other-than-temporary impairments and unrealized gains and losses

Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy evaluate unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three months ended March 31, 2011 and 2010.  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time.  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Entergy Wholesale Commodities did not record material charges to other income in the three months ended March 31, 2011 and 2010, respectively, resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.


NOTE 10.  INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 3 to the financial statements in the Form 10-K for a discussion of tax proceedings.


NOTE 11.  PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at March 31, 2011 are $131.3 million for Entergy, $8.5 million for Entergy Arkansas, $11.1 million for Entergy Gulf States Louisiana, $25.3 million for Entergy Louisiana, $3.9 million for Entergy Mississippi, $0.3 million for Entergy New Orleans, $4.4 million for Entergy Texas, and $26.0 million for System Energy.

Vermont Yankee

See Impairment of Long-Lived Assets in Note 1 to the financial statements in the Form 10-K, including a discussion of the Vermont Yankee nuclear power plant.  Following are updates to that discussion.

In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032.

On April 18, 2011, Entergy Nuclear Vermont Yankee, the owner of Vermont Yankee, and Entergy Nuclear Operations, the operator of Vermont Yankee, filed a complaint in the United States District Court for the District of Vermont seeking a declaratory judgment and injunctive relief to prevent the state of Vermont from forcing Vermont Yankee to cease operation on March 21, 2012.  Specifically the complaint asserts, in part, the following:

 
52

Entergy Corporation and Subsidiaries
Notes to Financial Statements



·  
Atomic Energy Act Preemption.  Under the Supremacy Clause of the U.S. Constitution, the U.S. Supreme Court held in 1983 that a state has no authority over (1) nuclear power plant licensing and operations or (2) the radiological safety of a nuclear power plant.  In violation of these legal principles, Vermont has asserted that it can shut down a federally licensed and operating nuclear power plant, and that it can regulate the plant based upon Vermont’s safety concerns.

·  
Federal Power Act Preemption and the Commerce Clause of the U.S. Constitution.  Vermont is prohibited from conditioning post-March 2012 operation of Vermont Yankee on the plant’s agreement to provide power to Vermont utilities at preferential wholesale rates.  The Federal Power Act preempts any state interference with the FERC’s exclusive regulation of rates in the wholesale power market.  The Commerce Clause of the U.S. Constitution bars a state from discriminatory regulation of private markets that favors in-state over out-of-state residents.

In addition to seeking a declaratory judgment, the complaint also requests a preliminary and permanent injunction enjoining the enforcement of Vermont statutes, regulations, or other laws purporting to regulate the operation and licensing and/or the radiological safety of Vermont Yankee; enjoining Vermont and its officials from undertaking any steps, based on denial of a certificate of public good, to shutdown Vermont Yankee, to prevent Vermont Yankee from delivering power to the interstate grid, or to prohibit the storage at Vermont Yankee of spent nuclear fuel; and enjoining Vermont and its officials from conditioning Vermont Yankee’s continued operation upon Entergy Nuclear Vermont Yankee’s agreement to provide below-market wholesale electricity rates to Vermont retail utilities.  On April 22, 2011, Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations filed in the proceeding a motion for a preliminary injunction.  The defendants' response to the motion for preliminary injunction is due by May 23, 2011, and the judge scheduled a hearing on the motion for a preliminary injunction for June 23 and 24, 2011.

As discussed further in the Form 10-K, after evaluating various factors if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its original license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant.  In preparing its first quarter 2011 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of March 31, 2011.  As of March 31, 2011, the net carrying value of the plant, including nuclear fuel, is $420 million.

NOTE 12.  VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, System Energy)

See Note 18 to the financial statements in the Form 10-K for a discussion of variable interest entities.

Entergy Louisiana and System Energy are each considered to each hold a variable interest in the lessors from which they lease, respectively, undivided interests representing approximately 9.3% of the Waterford 3 and 11.5% of the Grand Gulf nuclear plants.  Entergy Louisiana and System Energy are the lessees under these arrangements, which are described in more detail in Note 10 to the consolidated financial statements in the Form 10-K.  Entergy Louisiana made payments on its lease, including interest, of $37.6 million and $25.3 million in the three months ended March 31, 2011 and 2010, respectively.  System Energy made payments on its lease, including interest, of $47.4 million and $45.7 million in the three months ended March 31, 2011 and 2010, respectively.

__________________________________

In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas 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 Registrant Subsidiaries 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, 2011, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually "Registrant" and collectively the "Registrants") management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO).  The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures.  Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, 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 PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of the Registrants' management, including their respective PEOs and PFOs, the Registrants evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 2011 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.



ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $10.4 million primarily due to higher net revenue, lower depreciation and amortization expenses, lower taxes other than income taxes, and a lower effective income tax rate, partially offset by lower other income, and higher other operation and maintenance expenses.

Net Revenue

Net revenue 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 2011 to the first quarter 2010.

  
 
Amount
   
(In Millions)
     
2010 net revenue
 
$ 260.4 
Retail electric price
 
11.8 
Volume/weather
 
3.5 
Deferral of refunds for future recovery
 
3.1 
Capacity acquisition recovery
 
(4.1)
Net wholesale revenue
 
(3.6)
Other
 
0.9 
2011 net revenue
 
$272.0 

The retail electric price variance is primarily due to a base rate increase effective July 2010.  See Note 2 to the financial statements in the Form 10-K for discussion of the rate case settlement.

The volume/weather variance is primarily due to more favorable volume during the unbilled sales period compared to the same period in 2010, offset by a decrease of 143 GWh, or 3%, in billed electricity usage primarily in the residential sector due to less favorable weather.

The deferral of refunds for future recovery is due to the deferral of fuel expenses originally recorded in 2008 for the payment of refunds made in connection with the interruptible load proceeding as discussed further in Note 2 to the financial statements.

The capacity acquisition recovery variance is due to a credit to customers for an over-recovery of Ouachita plant costs.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues decreased primarily due to a decrease of $95 million in rider revenues primarily due to lower System Agreement production cost equalization payments.

Fuel and purchased power expenses decreased $98.8 million primarily due to a change from an over to under-recovery primarily due to higher fuel and purchased power costs.

 
55

Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion ana Analysis
 

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $3.4 million in transmission and distribution expenses primarily due to vegetation and maintenance expenses; and
·  
an increase of $2.3 million in nuclear expenses primarily due to higher labor and contract costs.

This increase was partially offset by an increase of $2.4 million in nuclear insurance refunds received in 2011 as compared to the same period in 2010.

Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes as a result of lower residential and commercial gross revenues.

Depreciation and amortization expenses decreased primarily due to a decrease in depreciation rates as a result of the rate case settlement agreement approved by the APSC in June 2010.

Other income decreased primarily due to lower earnings on decommissioning trust fund investments.

Income Taxes

The effective income tax rates for the first quarters of 2011 and 2010 were 42.3% and 48.8%, respectively.  The differences in the effective income tax rates for the first quarters of 2011 and 2010 versus the federal statutory rate of 35.0% were primarily due to certain book and tax differences related to utility plant items and state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$106,102 
 
$86,233 
         
Cash flow provided by (used in):
       
 
Operating activities
 
56,330 
 
222,382 
 
Investing activities
 
(110,123)
 
(111,499)
 
Financing activities
 
(24,924)
 
(32,873)
Net increase (decrease) in cash and cash equivalents
 
(78,717)
 
78,010 
         
Cash and cash equivalents at end of period
 
$27,385 
 
$164,243 

Operating Activities

           Cash flow from operations decreased $166.1 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a change of $90 million in deferred fuel costs primarily due to a reduction in the production cost equalization recovery rate because Entergy Arkansas's obligation for 2011 has decreased, along with an increase of $54.2 million in pension contributions.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
 
 
56

Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion ana Analysis
 

Investing Activities

Net cash flow used in investing activities decreased $1.4 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to money pool activity and the repayment by System Fuels of Entergy Arkansas’s $11 million investment in System Fuels.  This activity was almost entirely offset by an increase of $59.9 million in nuclear fuel purchases primarily due to the purchase of nuclear fuel from System Fuels because the Utility companies will now purchase nuclear fuel as System Fuels procures it, rather than primarily at the time of refueling.

Decreases in Entergy Arkansas’s receivable from the money pool are a source of cash flow, and Entergy Arkansas’s receivable from the money pool decreased $22.4 million in the three months ended March 31, 2011 compared to increasing $46.1 million in the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities decreased $7.9 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a decrease in net borrowings from the nuclear fuel company variable interest entity credit facility in the three months ended March 31, 2011 compared to the same period in 2010.  See Note 4 to the financial statements for a discussion of the credit facility.

Capital Structure

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

   
March 31,
 2011
 
December 31,
2010
         
Debt to capital
 
55.6%
 
55.9%
Effect of excluding the securitization bonds
 
(1.6)%
 
(1.6)%
Debt to capital, excluding securitization bonds (1)
 
54.0%
 
54.3%
Effect of subtracting cash
 
(0.4)%
 
(1.5)%
Net debt to net capital, excluding securitization bonds (1)
 
53.6%
 
52.8%

  (1)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas.

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, preferred stock without sinking fund, 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'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 Arkansas's uses and sources of capital.  Following are additional updates to the information provided in the Form 10-K.

Entergy Arkansas's receivables from the money pool were as follows:

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
$19,015
 
$41,463
 
$74,917
 
$28,859

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
 
 
57

Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion ana Analysis
 


  No borrowings were outstanding under Entergy Arkansas’s credit facility as of March 31, 2011.  In April 2011, at the expiration of this facility, Entergy Arkansas entered into a new $78 million credit facility that expires in April 2012.

Hot Spring Energy Facility Purchase Agreement

In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation.  The purchase price is approximately $253 million.  Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million.  The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Because Hot Spring represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hot Spring facility.  KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011.  Closing is expected to occur in mid-2012.  Entergy Arkansas expects to initiate its request for approval for the acquisition and cost recovery from the APSC in June 2011.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation" in the Form 10-K for a discussion of state and local rate regulation.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

Nuclear Matters

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters" in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks" in the Form 10-K for a discussion of 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 Entergy Arkansas's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.


 
CONSOLIDATED INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 443,498     $ 531,894  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    82,231       165,730  
   Purchased power
    92,854       108,150  
   Nuclear refueling outage expenses
    9,961       11,111  
   Other operation and maintenance
    116,984       112,140  
Decommissioning
    9,297       8,742  
Taxes other than income taxes
    19,579       22,524  
Depreciation and amortization
    55,258       63,998  
Other regulatory credits - net
    (3,571 )     (2,418 )
TOTAL
    382,593       489,977  
                 
OPERATING INCOME
    60,905       41,917  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    1,065       1,454  
Interest and investment income
    3,780       7,688  
Miscellaneous - net
    (749 )     238  
TOTAL
    4,096       9,380  
                 
INTEREST EXPENSE
               
Interest expense
    21,063       22,336  
Allowance for borrowed funds used during construction
    (479 )     (849 )
TOTAL
    20,584       21,487  
                 
INCOME BEFORE INCOME TAXES
    44,417       29,810  
                 
Income taxes
    18,809       14,557  
                 
NET INCOME
    25,608       15,253  
                 
Preferred dividend requirements and other
    1,718       1,718  
                 
EARNINGS APPLICABLE TO
               
COMMON STOCK
  $ 23,890     $ 13,535  
                 
See Notes to Financial Statements.
               
 

 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)
 
 


 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 25,608     $ 15,253  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    81,884       91,235  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    23,272       (64,921 )
  Changes in working capital:
               
    Receivables
    21,567       38,352  
    Fuel inventory
    (15,702 )     (11,737 )
    Accounts payable
    36,504       (13,464 )
    Prepaid taxes and taxes accrued
    (1,190 )     63,837  
    Interest accrued
    (6,930 )     (2,735 )
    Deferred fuel costs
    9,352       98,976  
    Other working capital accounts
    (21,721 )     30,362  
  Changes in provisions for estimated losses
    2,149       (8,191 )
  Changes in other regulatory assets
    10,319       (30,940 )
  Changes in pension and other postretirement liabilities
    (73,531 )     (15,774 )
  Other
    (35,251 )     32,129  
Net cash flow provided by operating activities
    56,330       222,382  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (70,379 )     (64,856 )
Allowance for equity funds used during construction
    1,065       1,454  
Nuclear fuel purchases
    (61,561 )     (1,619 )
Proceeds from sale of equipment
    -       2,489  
Proceeds from nuclear decommissioning trust fund sales
    31,042       98,992  
Investment in nuclear decommissioning trust funds
    (40,021 )     (101,901 )
Change in money pool receivable - net
    22,448       (46,058 )
Investment in affiliates
    10,994       -  
Remittances to securitization account
    (3,711 )     -  
Net cash flow used in investing activities
    (110,123 )     (111,499 )
                 
FINANCING ACTIVITIES
               
Changes in short-term borrowings - net
    (10,016 )     (17,531 )
Dividends paid:
               
  Common stock
    (13,100 )     (13,400 )
  Preferred stock
    (1,718 )     (1,718 )
Other
    (90 )     (224 )
Net cash flow used in financing activities
    (24,924 )     (32,873 )
                 
Net increase (decrease) in cash and cash equivalents
    (78,717 )     78,010  
                 
Cash and cash equivalents at beginning of period
    106,102       86,233  
                 
Cash and cash equivalents at end of period
  $ 27,385     $ 164,243  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 26,694     $ 20,770  
                 
See Notes to Financial Statements.
               
 

 
 
 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 5,224     $ 4,250  
  Temporary cash investments
    22,161       101,852  
    Total cash and cash equivalents
    27,385       106,102  
Securitization recovery trust account
    6,123       2,412  
Accounts receivable:
               
  Customer
    74,552       79,905  
  Allowance for doubtful accounts
    (24,036 )     (24,402 )
  Associated companies
    56,432       82,583  
  Other
    61,244       61,135  
  Accrued unbilled revenues
    61,241       74,227  
    Total accounts receivable
    229,433       273,448  
Deferred fuel costs
    52,150       61,502  
Fuel inventory - at average cost
    53,401       37,699  
Materials and supplies - at average cost
    139,920       140,095  
Deferred nuclear refueling outage costs
    45,804       23,099  
System agreement cost equalization
    52,160       52,160  
Prepaid taxes
    87,883       86,693  
Prepayments and other
    10,440       7,877  
TOTAL
    704,699       791,087  
                 
OTHER PROPERTY AND INVESTMENTS
               
Decommissioning trust funds
    547,628       520,841  
Non-utility property - at cost (less accumulated depreciation)
    1,682       1,684  
Other
    3,182       14,176  
TOTAL
    552,492       536,701  
                 
UTILITY PLANT
               
Electric
    7,798,187       7,787,348  
Property under capital lease
    1,287       1,303  
Construction work in progress
    158,683       114,324  
Nuclear fuel
    247,572       188,611  
TOTAL UTILITY PLANT
    8,205,729       8,091,586  
Less - accumulated depreciation and amortization
    3,730,491       3,683,001  
UTILITY PLANT - NET
    4,475,238       4,408,585  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    95,572       98,836  
  Other regulatory assets (includes securitization property of
         
     $115,170 as of March 31, 2011 and $118,505 as of
         
     December 31, 2010)
    887,427       892,449  
Other
    29,570       23,710  
TOTAL
    1,012,569       1,014,995  
                 
TOTAL ASSETS
  $ 6,744,998     $ 6,751,368  
                 
See Notes to Financial Statements.
               


 
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 35,000     $ 35,000  
Short-term borrowings
    52,761       62,777  
Accounts payable:
               
  Associated companies
    91,022       92,627  
  Other
    145,130       114,454  
Customer deposits
    76,025       72,535  
Accumulated deferred income taxes
    88,237       82,820  
Interest accrued
    20,090       27,020  
Other
    20,997       21,115  
TOTAL
    529,262       508,348  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    1,676,747       1,661,365  
Accumulated deferred investment tax credits
    44,430       44,928  
Other regulatory liabilities
    157,772       140,801  
Decommissioning
    611,461       602,164  
Accumulated provisions
    10,119       7,970  
Pension and other postretirement liabilities
    342,394       415,925  
Long-term debt (includes securitization bonds
               
   of $124,066 as of March 31, 2011 and December 31, 2010)
    1,828,998       1,828,910  
Other
    12,769       20,701  
TOTAL
    4,684,690       4,722,764  
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    116,350       116,350  
                 
COMMON EQUITY
               
Common stock, $0.01 par value, authorized 325,000,000
         
  shares; issued and outstanding 46,980,196 shares in 2011
         
  and 2010
    470       470  
Paid-in capital
    588,444       588,444  
Retained earnings
    825,782       814,992  
TOTAL
    1,414,696       1,403,906  
                 
TOTAL LIABILITIES AND EQUITY
  $ 6,744,998     $ 6,751,368  
                 
See Notes to Financial Statements.
               
 
 

 
 
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
Balance at December 31, 2009
  $ 470     $ 588,444     $ 822,647     $ 1,411,561  
                                 
Net income
    -       -       15,253       15,253  
Common stock dividends
    -       -       (13,400 )     (13,400 )
Preferred stock dividends
    -       -       (1,718 )     (1,718 )
                                 
Balance at March 31, 2010
  $ 470     $ 588,444     $ 822,782     $ 1,411,696  
                                 
                                 
Balance at December 31, 2010
  $ 470     $ 588,444     $ 814,992     $ 1,403,906  
                                 
Net income
    -       -       25,608       25,608  
Common stock dividends
    -       -       (13,100 )     (13,100 )
Preferred stock dividends
    -       -       (1,718 )     (1,718 )
                                 
Balance at March 31, 2011
  $ 470     $ 588,444     $ 825,782     $ 1,414,696  
                                 
See Notes to Financial Statements.
                               
                                 
                                 
 



 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 175     $ 219     $ ( 44 )     (20 )
  Commercial
    92       109       (17 )     (16 )
  Industrial
    83       101       (18 )     (18 )
  Governmental
    4       5       (1 )     (20 )
    Total retail
    354       434       (80 )     (18 )
  Sales for resale:
                               
     Associated companies
    64       79       (15 )     (19 )
     Non-associated companies
    24       24       -       -  
  Other
    1       (5 )     6       120  
    Total
  $ 443     $ 532     $ ( 89 )     (17 )
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    2,251       2,401       (150 )     (6 )
  Commercial
    1,360       1,380       (20 )     (1 )
  Industrial
    1,613       1,586       27       2  
  Governmental
    64       64       -       -  
    Total retail
    5,288       5,431       (143 )     (3 )
  Sales for resale:
                               
     Associated companies
    1,658       1,986       (328 )     (17 )
     Non-associated companies
    324       248       76       31  
    Total
    7,270       7,665       (395 )     (5 )
                                 
                                 
                                 
 

 

 
ENTERGY GULF STATES LOUISIANA, L.L.C.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations

Net Income

Net income increased $7.6 million primarily due to higher net revenue, lower interest expense, and a lower effective income tax rate, partially offset by lower other income.

Net Revenue

Net revenue 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 2011 to the first quarter 2010.

   
Amount
   
(In Millions)
     
2010 net revenue
 
$218.0 
Fuel recovery
 
6.9 
Other
 
0.2 
2011 net revenue
 
$225.1 

The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the first quarter 2010.

Other Income Statement Variances

Other income decreased primarily due to:

·  
a decrease of $2.4 million in interest and dividend income related to the debt assumption agreement with Entergy Texas.  In June 2010, Entergy Texas repaid the outstanding assumed debt and the debt assumption agreement was terminated; and
·  
a decrease of $1.5 million in investment income earned on decommissioning trust funds.

The decrease was offset by an increase of $3.4 million in distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financings. See Note 2 to the financial statements in the Form 10-K for a discussion of the Act 55 storm cost financing.

Interest expense decreased primarily due to a decrease in long-term debt outstanding as a result of the redemptions of first mortgage bonds of $68 million in June 2010 and $304 million in November 2010, partially offset by the issuance of first mortgage bonds of $250 million in October 2010.  See Note 4 to the financial statements in the Form 10-K for details of long-term debt.

Income Taxes

The effective income tax rate was 36.1% for the first quarter 2011 and 38.2% for the first quarter 2010.  The differences in the effective income tax rate for the first quarter 2011 and the first quarter 2010 versus the federal statutory rate of 35% are primarily due to state income taxes and certain book and tax differences related to utility plant items and flow-through tax accounting, partially offset by book and tax differences related to non-taxable distributions earned on the preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financings and the amortization of investment tax credits.

 
66

Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion ana Analysis
 

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$155,173 
 
$144,460 
         
Cash flow provided by (used in):
       
 
Operating activities
 
50,088 
 
90,288 
 
Investing activities
 
(110,165)
 
(77,992)
 
Financing activities
 
(38,510)
 
(47,934)
Net decrease in cash and cash equivalents
 
(98,587)
 
(35,638)
         
Cash and cash equivalents at end of period
 
$56,586 
 
$108,822 

Operating Activities

Net cash flow provided by operating activities decreased $40.2 million for three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to higher nuclear refueling outage spending at River Bend and an increase of $9.3 million in pension contributions.  River Bend had a refueling outage in the first quarter 2011 and did not have one in the first quarter 2010.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits.

Investing Activities

Net cash flow used in investing activities increased $32.2 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to an increase of $53.1 million in nuclear fuel purchases and an increase of $9.9 million in nuclear construction expenditures primarily as a result of projects completed during the River Bend refueling outage mentioned above.  These increased uses were partially offset by money pool activity and a decrease in construction expenditures resulting from $24.9 million in costs associated with the development of new nuclear generation at River Bend in 2010.

Decreases in Entergy Gulf States Louisiana's receivable from the money pool are a source of cash flow, and Entergy Gulf States Louisiana's receivable from the money pool decreased by $14.8 million for the three months ended March 31, 2011 compared to decreasing by $0.8 million for the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility operating companies’ need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities decreased $9.4 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to net borrowings of $40.3 million against the nuclear fuel company variable interest entity credit facility in 2011, offset by an increase of $37.4 million in common equity distributions. See Note 4 to the financial statements for a discussion of the credit facility.

 
67

Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion ana Analysis
 

Capital Structure

Entergy Gulf States Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.

   
March 31,
2011
 
December 31,
2010
         
Debt to capital
 
52.4% 
 
51.2% 
Effect of subtracting cash
 
(0.9)%
 
(2.6)%
Net debt to net capital
 
51.5% 
 
48.6% 

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 member’s equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Gulf States 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 Gulf States 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 Gulf States Louisiana's uses and sources of capital.  Following are additional updates to the information provided in the Form 10-K.

Entergy Gulf States Louisiana's receivables from the money pool were as follows:

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
$48,200
 
$63,003
 
$49,346
 
$50,131

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

As discussed in the Form 10-K, Entergy Gulf States Louisiana has a credit facility in the amount of $100 million scheduled to expire in August 2012.  No borrowings were outstanding under the facility as of March 31, 2011.

New Nuclear Development

See the Form 10-K for a discussion of the project option being developed by Entergy Gulf States Louisiana and Entergy Louisiana for new nuclear generation at River Bend.  In March 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the development activities.  On April 15, 2011, the procedural schedule was suspended to allow for further settlement discussions among the parties.  Entergy Gulf States Louisiana and Entergy Louisiana expect a new hearing date will be established.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation" in the Form 10-K for a discussion of state and local rate regulation.  Following are updates to that discussion.

In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates.  The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004.  The LPSC Staff issued its audit report in December 2010.  The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million.  $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs.  Entergy Gulf States Louisiana filed comments disputing the findings in the report.  A hearing on the merits is scheduled to begin in November 2011.  Entergy Gulf States Louisiana has recorded provisions for the estimated effect of this proceeding.
 
 
68

Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion ana Analysis
 


In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010.  The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million.  In March 2011, the LPSC staff filed its findings, suggesting an adjustment that will produce an 11.76% earned return on common equity for the test year and a $0.2 million rate reduction.  Entergy Gulf States Louisiana will implement the $0.2 million rate reduction effective with the May 2011 billing cycle.

On May 2, 2011, Entergy Gulf States Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $5.1 million rate decrease to reflect adjustments in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center by Entergy Louisiana.  As a result of this acquisition, Entergy Gulf States Louisiana’s allocation of capacity related to this unit terminated, resulting in a reduction in the additional capacity revenue requirement.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

Nuclear Matters

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters" in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks" in the Form 10-K for a discussion of 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 Entergy Gulf States Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.


 
INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 467,041     $ 457,781  
Natural gas
    28,857       40,894  
TOTAL
    495,898       498,675  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    80,635       64,136  
   Purchased power
    191,108       218,610  
   Nuclear refueling outage expenses
    5,018       5,718  
   Other operation and maintenance
    79,014       79,639  
Decommissioning
    3,471       3,279  
Taxes other than income taxes
    18,801       18,456  
Depreciation and amortization
    35,724       35,189  
Other regulatory credits - net
    (942 )     (2,054 )
TOTAL
    412,829       422,973  
                 
OPERATING INCOME
    83,069       75,702  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    1,740       1,286  
Interest and investment income
    9,358       10,598  
Miscellaneous - net
    (2,161 )     (1,579 )
TOTAL
    8,937       10,305  
                 
INTEREST EXPENSE
               
Interest expense
    21,349       25,182  
Allowance for borrowed funds used during construction
    (865 )     (817 )
TOTAL
    20,484       24,365  
                 
INCOME BEFORE INCOME TAXES
    71,522       61,642  
                 
Income taxes
    25,852       23,559  
                 
NET INCOME
    45,670       38,083  
                 
Preferred distribution requirements and other
    206       206  
                 
EARNINGS APPLICABLE TO
               
COMMON EQUITY
  $ 45,464     $ 37,877  
                 
See Notes to Financial Statements.
               
 
 

 
 
STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 45,670     $ 38,083  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    48,769       50,324  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    (25,336 )     (36,921 )
  Changes in working capital:
               
    Receivables
    (14,666 )     (53,135 )
    Fuel inventory
    785       1,207  
    Accounts payable
    (51,411 )     11,157  
    Prepaid taxes and taxes accrued
    62,194       38,089  
    Interest accrued
    4,965       9,319  
    Deferred fuel costs
    (13,181 )     (13,273 )
    Other working capital accounts
    (28,764 )     58,154  
  Changes in provisions for estimated losses
    155       (5,562 )
  Changes in other regulatory assets
    (15,701 )     (27,947 )
  Changes in pension and other postretirement liabilities
    (11,665 )     (2,169 )
  Other
    48,274       22,962  
Net cash flow provided by operating activities
    50,088       90,288  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (59,880 )     (68,284 )
Allowance for equity funds used during construction
    1,740       1,286  
Nuclear fuel purchases
    (62,237 )     (9,141 )
Proceeds from nuclear decommissioning trust fund sales
    11,902       42,324  
Investment in nuclear decommissioning trust funds
    (16,450 )     (44,962 )
Change in money pool receivable - net
    14,803       785  
Changes in other investments - net
    (43 )     -  
Net cash flow used in investing activities
    (110,165 )     (77,992 )
                 
FINANCING ACTIVITIES
               
Changes in credit borrowings - net
    40,300       (6,600 )
Dividends/distributions paid:
               
  Common equity
    (78,400 )     (41,000 )
  Preferred membership interests
    (206 )     (206 )
Other
    (204 )     (128 )
Net cash flow used in financing activities
    (38,510 )     (47,934 )
                 
Net decrease in cash and cash equivalents
    (98,587 )     (35,638 )
                 
Cash and cash equivalents at beginning of period
    155,173       144,460  
                 
Cash and cash equivalents at end of period
  $ 56,586     $ 108,822  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         
Cash paid/(received) during the period for:
               
  Interest - net of amount capitalized
  $ 15,596     $ 15,128  
  Income taxes
  $ (7 )   $ (6 )
                 
Noncash financing activities:
               
  Repayment by Entergy Texas of assumed long-term debt
  $ -     $ 9,160  
                 
See Notes to Financial Statements.
               
 



 
BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 219     $ 231  
  Temporary cash investments
    56,367       154,942  
        Total cash and cash equivalents
    56,586       155,173  
Accounts receivable:
               
  Customer
    76,603       60,369  
  Allowance for doubtful accounts
    (1,299 )     (1,306 )
  Associated companies
    120,165       119,252  
  Other
    14,917       27,728  
  Accrued unbilled revenues
    52,136       56,616  
    Total accounts receivable
    262,522       262,659  
Fuel inventory - at average cost
    25,042       25,827  
Materials and supplies - at average cost
    110,913       113,302  
Deferred nuclear refueling outage costs
    33,753       7,372  
Prepaid taxes
    -       40,946  
Prepayments and other
    9,842       5,127  
TOTAL
    498,658       610,406  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliate preferred membership interests
    339,664       339,664  
Decommissioning trust funds
    410,805       393,580  
Non-utility property - at cost (less accumulated depreciation)
    160,953       156,845  
Storm reserve escrow account
    90,168       90,125  
Other
    12,428       12,011  
TOTAL
    1,014,018       992,225  
                 
UTILITY PLANT
               
Electric
    6,956,654       6,907,268  
Natural gas
    125,708       124,020  
Construction work in progress
    108,376       119,017  
Nuclear fuel
    227,956       202,609  
TOTAL UTILITY PLANT
    7,418,694       7,352,914  
Less - accumulated depreciation and amortization
    3,833,396       3,812,394  
UTILITY PLANT - NET
    3,585,298       3,540,520  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    231,414       234,406  
  Other regulatory assets
    265,835       270,883  
  Deferred fuel costs
    100,124       100,124  
Other
    17,827       14,832  
TOTAL
    615,200       620,245  
                 
TOTAL ASSETS
  $ 5,713,174     $ 5,763,396  
                 
See Notes to Financial Statements.
               
 


 
ENTERGY GULF STATES LOUISIANA, L.L.C.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Accounts payable:
           
  Associated companies
  $ 74,113     $ 71,601  
  Other
    103,150       160,246  
Customer deposits
    49,327       48,631  
Taxes accrued
    21,248       -  
Accumulated deferred income taxes
    11,183       1,749  
Interest accrued
    32,226       27,261  
Deferred fuel costs
    9,120       22,301  
Pension and other postretirement liabilities
    7,511       7,415  
Other
    14,200       15,049  
TOTAL
    322,078       354,253  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    1,369,003       1,405,374  
Accumulated deferred investment tax credits
    84,024       84,858  
Other regulatory liabilities
    94,569       83,479  
Decommissioning and asset retirement cost liabilities
    344,786       339,925  
Accumulated provisions
    97,835       97,680  
Pension and other postretirement liabilities
    208,767       220,432  
Long-term debt
    1,624,691       1,584,332  
Long-term payables - associated companies
    32,193       32,596  
Other
    58,213       51,254  
TOTAL
    3,914,081       3,899,930  
                 
Commitments and Contingencies
               
                 
EQUITY
               
Preferred membership interests without sinking fund
    10,000       10,000  
Member's equity
    1,506,576       1,539,517  
Accumulated other comprehensive loss
    (39,561 )     (40,304 )
TOTAL
    1,477,015       1,509,213  
                 
TOTAL LIABILITIES AND EQUITY
  $ 5,713,174     $ 5,763,396  
                 
See Notes to Financial Statements.
               
 
 

 
 
STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
         
Common Equity
       
   
Preferred Membership Interests
   
Member's Equity
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
Balance at December 31, 2009
  $ 10,000     $ 1,473,930     $ (42,171 )   $ 1,441,759  
                                 
Net income
    -       38,083       -       38,083  
Other comprehensive income:
                               
    Pension and other postretirement liabilities (net of tax expense of $543)
    -       -       579       579  
        Total comprehensive income
                            38,662  
                                 
Dividends/distributions declared on common equity
    -       (41,000 )     -       (41,000 )
Dividends/distributions declared on preferred membership interests
    -       (206 )     -       (206 )
Other
    -       (5 )     -       (5 )
                                 
Balance at March 31, 2010
  $ 10,000     $ 1,470,802     $ (41,592 )   $ 1,439,210  
                                 
                                 
Balance at December 31, 2010
  $ 10,000     $ 1,539,517     $ (40,304 )   $ 1,509,213  
                                 
Net income
    -       45,670       -       45,670  
Other comprehensive income:
                               
    Pension and other postretirement liabilities (net of tax expense of $507)
    -       -       743       743  
        Total comprehensive income
                            46,413  
                                 
Dividends/distributions declared on common equity
    -       (78,400 )     -       (78,400 )
Dividends/distributions declared on preferred membership interests
    -       (206 )     -       (206 )
Other
    -       (5 )     -       (5 )
                                 
Balance at March 31, 2011
  $ 10,000     $ 1,506,576     $ (39,561 )   $ 1,477,015  
                                 
See Notes to Financial Statements.
                               

 
 
 
 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 110     $ 119     $ (9 )     (8 )
  Commercial
    97       98       (1 )     (1 )
  Industrial
    115       113       2       2  
  Governmental
    5       5       -       -  
    Total retail
    327       335       (8 )     (2 )
  Sales for resale:
                               
     Associated companies
    119       93       26       28  
     Non-associated companies
    13       24       (11 )     (46 )
  Other
    8       6       2       33  
    Total
  $ 467     $ 458     $ 9       2  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,247       1,325       (78 )     (6 )
  Commercial
    1,213       1,199       14       1  
  Industrial
    2,175       2,010       165       8  
  Governmental
    53       56       (3 )     (5 )
    Total retail
    4,688       4,590       98       2  
  Sales for resale:
                               
     Associated companies
    1,874       1,690       184       11  
     Non-associated companies
    204       477       (273 )     (57 )
    Total
    6,766       6,757       9       -  
                                 
                                 
 


ENTERGY LOUISIANA, LLC

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $3.5 million primarily due to higher other income and a lower effective income tax rate, partially offset by lower net revenue.

Net Revenue

Net revenue 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 2011 to the first quarter 2010.

   
Amount
   
(In Millions)
     
2010 net revenue
 
$238.2 
Retail electric price
 
(6.7)
Other
 
2.3 
2011 net revenue
 
$233.8 

The retail electric price variance is primarily due to more credits passed on to customers in 2011 compared to 2010 related to the Act 55 storm cost financing, offset by formula rate plan increases effective May 2010 and September 2010.  See Note 2 to the financial statements in the Form 10-K for discussions of the formula rate plan increases and the Act 55 storm cost financing.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues decreased primarily due to a decrease of $91.8 million in fuel costs recovery revenues due to lower fuel rates.

Fuel and purchased power expenses decreased primarily due to a decrease in the recovery from customers of deferred fuel costs and a decrease in the average market price of purchased power.

Other Income Statement Variances

Other income increased primarily due to an increase of $5.9 million in distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financing.  See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike” and Note 2 to the financial statements in the Form 10-K for a discussion of the Act 55 storm cost financing.



 
76

Entergy Louisiana, LLC 
Management's Financial Discussion ana Analysis
 

Income Taxes

The effective income tax rates for the first quarters of 2011 and 2010 were 19.9% and 28.8%, respectively.  The difference in the effective income tax rate for the first quarter of 2011 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to non-taxable distributions earned on the preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financings and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes.   The difference in the effective income tax rate for the first quarter of 2010 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to non-taxable distributions earned on the preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financings and book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items and state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$123,254 
 
$151,849 
         
Cash flow provided by (used in):
       
 
Operating activities
 
6,602 
 
100,579 
 
Investing activities
 
(257,500)
 
(121,451)
 
Financing activities
 
234,593 
 
(29,163)
Net decrease in cash and cash equivalents
 
(16,305) 
 
(50,035)
         
Cash and cash equivalents at end of period
 
$106,949 
 
$101,814 

Operating Activities

Cash flow provided by operating activities decreased $94 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to decreased recovery of fuel costs due to a decrease in the amount of deferred fuel to be recovered compared to last year, an increase of $29.8 million in pension contributions, and the purchase of $28.1 million of fuel oil from System Fuels because System Fuels will no longer procure fuel oil for the Utility companies.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits.

Investing Activities

Net cash flow used in investing activities increased $136 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to an increase of $119.4 million in nuclear fuel purchases due to the timing of refueling outages and the purchase of nuclear fuel from System Fuels because the Utility companies will now purchase nuclear fuel as System Fuels procures it, rather than primarily at the time of refueling.  Money pool activity also used cash.  The increase was partially offset by a decrease in construction expenditures as a result of a $24.9 million payment in 2010 for costs associated with the development of new nuclear generation at River Bend, offset by increased transmission construction expenditures primarily due to additional reliability work.

 
77

Entergy Louisiana, LLC 
Management's Financial Discussion ana Analysis
 

Increases in Entergy Louisiana's receivable from the money pool are a use of cash flow, and Entergy Louisiana's receivable from the money pool increased by $34.4 million for the three months ended March 31, 2011 compared to decreasing by $6.4 million for the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries' need for external short-term borrowings.

Financing Activities

Entergy Louisiana's financing activities provided $234.6 million of cash for the three months ended March 31, 2011 compared to using $29.2 million for the three months ended March 31, 2010 primarily due to the following cash flow activity:

·  
the issuance of $200 million of 4.8% Series first mortgage bonds in March 2011;
·  
the issuance of the $20 million Series F note by the nuclear fuel company variable interest entity in March 2011;
·  
an increase in borrowings on the nuclear fuel company variable interest entity’s credit facility and
·  
the retirement of the $30 million Series D note by the nuclear fuel company variable interest entity in January 2010.

These increases were offset by the following:

·  
a principal payment of $30.3 million in 2011 for the Waterford 3 sale-leaseback obligation compared to a principal payment of $17.3 million in 2010; and
·  
$12.4 million in common equity dividends paid in 2011.

Capital Structure

Entergy Louisiana's capitalization is balanced between equity and debt, as shown in the following table.  The increase in the debt to capital for Entergy Louisiana as of March 31, 2011 is primarily due to the issuance of $200 million of 4.8% Series first mortgage bonds in March 2011.

   
March 31,
2011
 
December 31,
2010
         
Debt to capital
 
49.0%
 
46.1%
Effect of subtracting cash
 
(1.3)%
 
(1.7)%
Net debt to net capital
 
47.7%
 
44.4%

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 member’s 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.  Following are updates to the information provided in the Form 10-K.


 
78

Entergy Louisiana, LLC 
Management's Financial Discussion ana Analysis
 

Entergy Louisiana's receivables from the money pool were as follows:

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
$84,257
 
$49,887
 
$46,369
 
$52,807

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

As discussed in the Form 10-K, Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in August 2012.  No borrowings were outstanding under the facility as of March 31, 2011.

In March 2011, Entergy Louisiana issued $200 million of 4.80% Series first mortgage bonds due May 2021.  Entergy Louisiana used the proceeds, together with other available funds, to purchase Unit 2 of the Acadia Energy Center, as discussed below.

Acadia Unit 2 Purchase Agreement

As discussed more fully in the Form 10-K, in October 2009, Entergy Louisiana announced that it signed an agreement to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer.  Entergy Louisiana acquired the plant on April 29, 2011.

Little Gypsy Repowering Project

See the Form 10-K for a discussion of the Little Gypsy repowering project.  As of March 2011, $207.6 million of costs, including carrying costs, had been incurred by Entergy Louisiana for the project.  As discussed in the Form 10-K, in January 2011 all parties conducted a mediation on the disputed issues, and thereafter, reached agreement on a settlement of all disputed issues, including cost recovery and cost allocation.  The proposed settlement, which provides for Entergy Louisiana to recover $200 million as of March 31, 2011, and carrying costs on that amount on specified terms thereafter, is expected to be presented to the LPSC for approval at its May 2011 meeting.  The proposed settlement also provides for Entergy Louisiana to recover the approved project costs by securitization.  In April 2011, Entergy Louisiana filed an application with the LPSC to recover the project costs by securitization.  The LPSC is expected to consider Entergy Louisiana’s application for securitization during the second quarter 2011.

Waterford 3 Steam Generator Replacement Project

See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project.  With regard to the delay in the delivery of the steam generators, Entergy Louisiana is working with the manufacturer to fully develop and evaluate repair options.  Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011.  The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators.  Entergy Louisiana is required to report its findings to the NRC through a report made 180 days after plant start up.  At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated.  Entergy Louisiana expects to file a special LPSC monitoring report in second quarter 2011 that will reflect the updated project cost and schedule.  Entergy Louisiana also expects to resume the revenue requirement proceeding before the LPSC in Fall 2012.  Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.


 
79

Entergy Louisiana, LLC 
Management's Financial Discussion ana Analysis
 

New Nuclear Development

See the Form 10-K for a discussion of the project option being developed by Entergy Gulf States Louisiana and Entergy Louisiana for new nuclear generation at River Bend.  In March 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the development activities.  On April 15, 2011, the procedural schedule was suspended to allow for further settlement discussions among the parties.  Entergy Gulf States Louisiana and Entergy Louisiana expect a new hearing date will be established.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation" in the Form 10-K for a discussion of state and local rate regulation.

On May 2, 2011, Entergy Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $43.1 million net rate increase to reflect adjustments in accordance with a previous LPSC order relating to acquisition of Unit 2 of the Acadia Energy Center.  The net rate increase represents the decrease in the additional capacity revenue requirement resulting from the termination of the power purchase agreement with Acadia and the increase in the revenue requirement resulting from the ownership of the Acadia facility.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

Nuclear Matters

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters" in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks" in the Form 10-K for a discussion of 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 Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.


 
INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 515,434     $ 611,524  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    85,225       159,249  
   Purchased power
    200,378       220,073  
   Nuclear refueling outage expenses
    7,475       6,098  
   Other operation and maintenance
    106,365       101,980  
Decommissioning
    6,001       5,587  
Taxes other than income taxes
    16,739       18,000  
Depreciation and amortization
    49,646       50,227  
Other regulatory credits - net
    (3,956 )     (6,018 )
TOTAL
    467,873       555,196  
                 
OPERATING INCOME
    47,561       56,328  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    7,374       6,537  
Interest and investment income
    20,410       16,342  
Miscellaneous - net
    (522 )     (821 )
TOTAL
    27,262       22,058  
                 
INTEREST EXPENSE
               
Interest expense
    28,635       31,037  
Allowance for borrowed funds used during construction
    (4,097 )     (4,368 )
TOTAL
    24,538       26,669  
                 
INCOME BEFORE INCOME TAXES
    50,285       51,717  
                 
Income taxes
    9,987       14,884  
                 
NET INCOME
    40,298       36,833  
                 
Preferred dividend requirements and other
    1,738       1,738  
                 
EARNINGS APPLICABLE TO
               
COMMON EQUITY
  $ 38,560     $ 35,095  
                 
See Notes to Financial Statements.
               
 


 
 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)
 
 
 

 
STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 40,298     $ 36,833  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    69,822       71,721  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    67,448       (3,823 )
  Changes in working capital:
               
    Receivables
    (30,234 )     (57,916 )
    Fuel inventory
    (28,153 )     -  
    Accounts payable
    (76,165 )     (17,809 )
    Prepaid taxes and taxes accrued
    (44,287 )     29,379  
    Interest accrued
    (6,059 )     (5,403 )
    Deferred fuel costs
    (31,290 )     44,146  
    Other working capital accounts
    (288 )     44,130  
  Changes in provisions for estimated losses
    (4,774 )     (4,254 )
  Changes in other regulatory  assets
    2,807       (8,229 )
  Changes in pension and other postretirement liabilities
    (29,844 )     (604 )
  Other
    77,321       (27,592 )
Net cash flow provided by operating activities
    6,602       100,579  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (108,014 )     (132,063 )
Allowance for equity funds used during construction
    7,374       6,537  
Nuclear fuel purchases
    (119,435 )     -  
Proceeds from nuclear decommissioning trust fund sales
    6,077       20,453  
Investment in nuclear decommissioning trust funds
    (9,038 )     (22,575 )
Change in money pool receivable - net
    (34,370 )     6,438  
Other
    (94 )     (241 )
Net cash flow used in investing activities
    (257,500 )     (121,451 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    217,762       -  
Changes in short-term borrowings - net
    61,253       24,925  
Retirement of long-term debt
    (30,284 )     (47,326 )
Distributions paid:
               
  Common equity
    (12,400 )     -  
  Preferred membership interests
    (1,738 )     (1,738 )
Other
    -       (5,024 )
Net cash flow provided by (used in) financing activities
    234,593       (29,163 )
                 
Net decrease in cash and cash equivalents
    (16,305 )     (50,035 )
                 
Cash and cash equivalents at beginning of period
    123,254       151,849  
                 
Cash and cash equivalents at end of period
  $ 106,949     $ 101,814  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 33,726     $ 35,537  
                 
Noncash investing and financing activities:
               
Proceeds from long-term debt issued for the purpose
               
  of refunding prior long-term debt
  $ -     $ 150,000  
                 
See Notes to Financial Statements.
               
 



 
BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 8,754     $ 708  
  Temporary cash investments
    98,195       122,546  
    Total cash and cash equivalents
    106,949       123,254  
Accounts receivable:
               
  Customer
    97,693       85,799  
  Allowance for doubtful accounts
    (1,889 )     (1,961 )
  Associated companies
    141,476       81,050  
  Other
    13,254       14,594  
  Accrued unbilled revenues
    65,211       71,659  
    Total accounts receivable
    315,745       251,141  
Accumulated deferred income taxes
    8,582       7,072  
Fuel inventory
    28,156       3  
Materials and supplies - at average cost
    136,815       138,047  
Deferred nuclear refueling outage costs
    8,859       11,364  
Gas hedge contracts
    4,623       -  
Prepaid taxes
    69,297       25,010  
Prepayments and other
    11,963       10,719  
TOTAL
    690,989       566,610  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliate preferred membership interests
    807,424       807,424  
Decommissioning trust funds
    251,512       240,535  
Storm reserve escrow account
    201,066       200,972  
Non-utility property - at cost (less accumulated depreciation)
    901       946  
TOTAL
    1,260,903       1,249,877  
                 
UTILITY PLANT
               
Electric
    7,284,137       7,216,146  
Property under capital lease
    264,266       264,266  
Construction work in progress
    561,260       521,172  
Nuclear fuel
    174,172       134,528  
TOTAL UTILITY PLANT
    8,283,835       8,136,112  
Less - accumulated depreciation and amortization
    3,508,534       3,457,190  
UTILITY PLANT - NET
    4,775,301       4,678,922  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    237,450       235,404  
  Other regulatory assets
    657,289       662,746  
  Deferred fuel costs
    67,998       67,998  
Other
    32,565       26,866  
TOTAL
    995,302       993,014  
                 
TOTAL ASSETS
  $ 7,722,495     $ 7,488,423  
                 
See Notes to Financial Statements.
               
 


 
ENTERGY LOUISIANA, LLC
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 24,864     $ 35,550  
Short-term borrowings
    84,319       23,066  
Accounts payable:
               
  Associated companies
    65,764       148,528  
  Other
    140,970       140,564  
Customer deposits
    85,185       84,437  
Interest accrued
    25,830       31,889  
Deferred fuel costs
    27,937       59,227  
Pension and other postretirement liabilities
    8,700       8,632  
Other
    18,540       17,514  
TOTAL
    482,109       549,407  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    1,968,907       1,896,685  
Accumulated deferred investment tax credits
    75,660       76,453  
Other regulatory liabilities
    119,588       88,899  
Decommissioning
    327,177       321,176  
Accumulated provisions
    218,782       223,556  
Pension and other postretirement liabilities
    315,881       345,725  
Long-term debt
    1,971,656       1,771,566  
Other
    78,970       78,085  
TOTAL
    5,076,621       4,802,145  
                 
Commitments and Contingencies
               
                 
EQUITY
               
Preferred membership interests without sinking fund
    100,000       100,000  
Member's equity
    2,087,993       2,061,833  
Accumulated other comprehensive loss
    (24,228 )     (24,962 )
TOTAL
    2,163,765       2,136,871  
                 
TOTAL LIABILITIES AND EQUITY
  $ 7,722,495     $ 7,488,423  
                 
See Notes to Financial Statements.
               
 
 


 
STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
         
Common Equity
       
   
Preferred Membership Interests
   
Member's Equity
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
Balance at December 31, 2009
  $ 100,000     $ 1,837,348     $ (25,539 )   $ 1,911,809  
                                 
Net income
    -       36,833       -       36,833  
Other comprehensive income:
                               
    Pension and other postretirement liabilities (net of tax expense of $377)
    -       -       446       446  
        Total comprehensive income
                            37,279  
                                 
Dividends/distributions declared on preferred membership interests
    -       (1,738 )     -       (1,738 )
                                 
Balance at March 31, 2010
  $ 100,000     $ 1,872,443     $ (25,093 )   $ 1,947,350  
                                 
                                 
Balance at December 31, 2010
  $ 100,000     $ 2,061,833     $ (24,962 )   $ 2,136,871  
                                 
Net income
    -       40,298       -       40,298  
Other comprehensive income:
                               
    Pension and other postretirement liabilities (net of tax expense of $366)
    -       -       734       734  
        Total comprehensive income
                            41,032  
Dividends/distributions declared on common equity
    -       (12,400 )     -       (12,400 )
Dividends/distributions declared on preferred membership interests
    -       (1,738 )     -       (1,738 )
                                 
Balance at March 31, 2011
  $ 100,000     $ 2,087,993     $ (24,228 )   $ 2,163,765  
                                 
See Notes to Financial Statements.
                               
                                 
 


 
 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 172     $ 215     $ (43 )     (20 )
  Commercial
    114       132       (18 )     (14 )
  Industrial
    175       204       (29 )     (14 )
  Governmental
    10       11       (1 )     (9 )
    Total retail
    471       562       (91 )     (16 )
  Sales for resale:
                               
     Associated companies
    32       37       (5 )     (14 )
     Non-associated companies
    2       3       (1 )     (33 )
  Other
    10       10       -       -  
    Total
  $ 515     $ 612     $ (97 )     (16 )
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    2,251       2,389       (138 )     (6 )
  Commercial
    1,403       1,384       19       1  
  Industrial
    3,631       3,223       408       13  
  Governmental
    119       128       (9 )     (7 )
    Total retail
    7,404       7,124       280       4  
  Sales for resale:
                               
     Associated companies
    472       234       238       102  
     Non-associated companies
    39       51       (12 )     (24 )
    Total
    7,915       7,409       506       7  
                                 
 
 


ENTERGY MISSISSIPPI, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations

Net Income

Net income increased $6.1 million primarily due to higher net revenue, partially offset by a higher effective income tax rate.

Net Revenue

Net revenue 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 change in net revenue comparing the first quarter 2011 to the first quarter 2010.

   
Amount
   
(In Millions)
     
2010 net revenue
 
$112.5 
Retail electric price
 
6.9 
Volume/weather
 
3.6 
Deferral of refunds for future recovery
 
1.6 
Other
 
0.8 
2011 net revenue
 
$125.4 

The retail electric price variance is primarily due to the elimination of the summer/winter residential rate differential effective September 2010.

The volume/weather variance is primarily due to an increase of 108 GWh in weather-adjusted usage in the residential, commercial, and industrial sectors.  The increase was partially offset by the effect of milder weather on the residential sector in the first quarter 2011 compared to the first quarter 2010.

The deferral of refunds for future recovery is due to the deferral of fuel expenses originally recorded in 2008 for the payment of refunds made in connection with the interruptible load proceeding as discussed further in Note 2 to the financial statements.

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

Gross operating revenues increased primarily due to an increase of $44.5 million in fuel cost recovery revenues due to higher fuel rates.

Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense as a result of higher fuel revenues, as discussed above, partially offset by a decrease in the average market price of purchased power.

Other regulatory charges decreased primarily due to decreased recovery of costs associated with the power management recovery rider. There is no material effect on net income due to quarterly adjustments to the power management recovery rider.

 
88

Entergy Mississippi, Inc. 
Management's Financial Discussion ana Analysis
 

Income Taxes

The effective income tax rates for the first quarters 2011 and 2010 were 35.0% and 28.5%, respectively.  The difference between the effective income tax rate for the first quarter 2010 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to allowance for equity funds used during construction.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$1,216 
 
$91,451 
         
Cash flow provided by (used in):
       
 
Operating activities
 
(52,784)
 
(26,142)
 
Investing activities
 
(35,582)
 
(45,591)
 
Financing activities
 
88,366 
 
(10,559)
Net decrease in cash and cash equivalents
 
 
(82,292)
         
Cash and cash equivalents at end of period
 
$1,216 
 
$9,159 

Operating Activities

Cash flow used in operating activities increased $26.6 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to the purchase of $42.6 million of fuel oil from System Fuels because System Fuels will no longer procure fuel oil for the Utility companies, the timing of collection of receivables from customers, and an increase of $13.3 million in pension contributions, partially offset by an increased recovery of deferred fuel costs.  See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits.

Investing Activities

Cash flow used in investing activities decreased $10 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a decrease in construction expenditures resulting from a $49 million payment in 2010 to a System Energy subsidiary for costs associated with the development of new nuclear generation at Grand Gulf and the repayment by System Fuels of Entergy Mississippi’s $5.5 million  investment in System Fuels, partially offset by money pool activity and an increase in transmission construction expenditures resulting from an increase in reliability work in 2011.

Decreases in Entergy Mississippi's receivable from the money pool are a source of cash flow, and Entergy Mississippi's receivable from the money pool decreased $27.3 million for the three months ended March 31, 2010.  Entergy Mississippi did not have a receivable from the money pool in the three months ended March 31, 2011.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries' need for external short-term borrowings.


 
89

Entergy Mississippi, Inc. 
Management's Financial Discussion ana Analysis
 

Financing Activities

Entergy Mississippi's financing activities provided $88.4 million in cash flow for the three months ended March 31, 2011 compared to using $10.6 million in cash flow for the three months ended March 31, 2010 primarily due to an increase in borrowings from the money pool.

Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi's payable to the money pool increased by $92.4 million for the three months ended March 31, 2011.

Capital Structure

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

   
March 31,
2011
 
December 31,
2010
         
Debt to capital
 
51.4%
 
51.8%
Effect of subtracting cash
 
0.0%
 
0.0%
Net debt to net capital
 
51.4%
 
51.8%

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, preferred stock without sinking fund, and common 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 additional updates to the information provided in the Form 10-K.

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

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
($125,702)
 
($33,255)
 
$4,176
 
$31,435

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

As discussed in the Form 10-K, Entergy Mississippi has three separate credit facilities in the aggregate amount of $70 million scheduled to expire in May 2011.  Entergy Mississippi expects to renew all of its credit facilities prior to expiration.  No borrowings were outstanding under the credit facilities as of March 31, 2011.

In April 2011, Entergy Mississippi issued $150 million of 6.0% Series first mortgage bonds due May 2051. Entergy Mississippi used a portion of the proceeds to pay at maturity its $80 million 4.65% Series first mortgage bonds due May 2011.


 
90

Entergy Mississippi, Inc. 
Management's Financial Discussion ana Analysis
 

Hinds Energy Facility Purchase Agreement

In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation.  The purchase price is approximately $206 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million.  The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Because Hinds represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hinds facility.  KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011.  Closing is expected to occur in mid-2012.  Entergy Mississippi expects to initiate its request for approval for the acquisition and cost recovery from the MPSC in Summer 2011.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation" in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. Following is an update to that discussion.

Formula Rate Plan

In March 2011, Entergy Mississippi submitted its formula rate plan 2010 test year filing.  The filing shows an earned return on common equity of 10.65% for the test year, which is within the earnings bandwidth and results in no change in rates. The filing is currently subject to MPSC review.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

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 qualified pension and other postretirement benefits.


 
INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 288,912     $ 243,557  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    81,306       8,053  
   Purchased power
    75,134       100,335  
   Other operation and maintenance
    48,007       47,400  
Taxes other than income taxes
    17,171       16,048  
Depreciation and amortization
    22,987       22,104  
Other regulatory charges - net
    7,092       22,694  
TOTAL
    251,697       216,634  
                 
OPERATING INCOME
    37,215       26,923  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    2,094       1,391  
Interest and investment income
    51       188  
Miscellaneous - net
    (554 )     28  
TOTAL
    1,591       1,607  
                 
INTEREST EXPENSE
               
Interest expense
    13,403       13,650  
Allowance for borrowed funds used during construction
    (1,165 )     (776 )
TOTAL
    12,238       12,874  
                 
INCOME BEFORE INCOME TAXES
    26,568       15,656  
                 
Income taxes
    9,298       4,463  
                 
NET INCOME
    17,270       11,193  
                 
Preferred dividend requirements and other
    707       707  
                 
EARNINGS APPLICABLE TO
               
COMMON STOCK
  $ 16,563     $ 10,486  
                 
See Notes to Financial Statements.
               
 



 
STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 17,270     $ 11,193  
Adjustments to reconcile net income to net cash flow used in operating activities:
         
  Depreciation and amortization
    22,987       22,104  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    3,224       (22,905 )
  Changes in working capital:
               
    Receivables
    7,801       23,913  
    Fuel inventory
    (44,456 )     (41 )
    Accounts payable
    (10,394 )     (11,588 )
    Taxes accrued
    (26,632 )     (4,318 )
    Interest accrued
    (532 )     (1,082 )
    Deferred fuel costs
    7,564       (55,749 )
    Other working capital accounts
    (3,430 )     34,505  
  Changes in provision for estimated losses
    73       (3,183 )
  Changes in other regulatory assets
    (6,888 )     (20,048 )
  Changes in pension and other postretirement liabilities
    (17,311 )     (3,601 )
  Other
    (2,060 )     4,658  
Net cash flow used in operating activities
    (52,784 )     (26,142 )
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (43,192 )     (78,185 )
Allowance for equity funds used during construction
    2,094       1,391  
Proceeds from sale of assets
    -       3,951  
Change in money pool receivable - net
    -       27,259  
Investment in affiliates
    5,527       -  
Other
    (11 )     (7 )
Net cash flow used in investing activities
    (35,582 )     (45,591 )
                 
FINANCING ACTIVITIES
               
Change in money pool payable - net
    92,447       -  
Dividends paid:
               
  Common stock
    (3,300 )     (9,800 )
  Preferred stock
    (707 )     (707 )
Other
    (74 )     (52 )
Net cash flow provided by (used in) financing activities
    88,366       (10,559 )
                 
Net decrease in cash and cash equivalents
    -       (82,292 )
                 
Cash and cash equivalents at beginning of period
    1,216       91,451  
                 
Cash and cash equivalents at end of period
  $ 1,216     $ 9,159  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 13,270     $ 14,102  
                 
See Notes to Financial Statements.
               
 



 
BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 1,207     $ 1,207  
  Temporary cash investments
    9       9  
    Total cash and cash equivalents
    1,216       1,216  
Accounts receivable:
               
  Customer
    61,263       58,204  
  Allowance for doubtful accounts
    (862 )     (985 )
  Associated companies
    42,666       41,803  
  Other
    5,219       7,500  
  Accrued unbilled revenues
    32,149       41,714  
    Total accounts receivable
    140,435       148,236  
Deferred fuel costs
    -       3,157  
Accumulated deferred income taxes
    23,209       19,308  
Fuel inventory - at average cost
    51,334       6,878  
Materials and supplies - at average cost
    34,507       34,499  
Prepayments and other
    8,443       4,902  
TOTAL
    259,144       218,196  
                 
OTHER PROPERTY AND INVESTMENTS
               
Non-utility property - at cost (less accumulated depreciation)
    4,746       4,753  
Storm reserve escrow account
    31,872       31,862  
TOTAL
    36,618       36,615  
                 
UTILITY PLANT
               
Electric
    3,200,044       3,174,148  
Property under capital lease
    12,596       13,197  
Construction work in progress
    159,267       147,169  
TOTAL UTILITY PLANT
    3,371,907       3,334,514  
Less - accumulated depreciation and amortization
    1,186,658       1,166,463  
UTILITY PLANT - NET
    2,185,249       2,168,051  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    63,913       63,533  
  Other regulatory assets
    259,049       253,231  
Other
    19,647       22,009  
TOTAL
    342,609       338,773  
                 
TOTAL ASSETS
  $ 2,823,620     $ 2,761,635  
                 
See Notes to Financial Statements.
               
 



ENTERGY MISSISSIPPI, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 80,000     $ 80,000  
Accounts payable:
               
  Associated companies
    159,734       75,128  
  Other
    47,969       53,417  
Customer deposits
    66,423       65,873  
Taxes accrued
    1,107       27,739  
Interest accrued
    20,562       21,094  
Deferred fuel costs
    4,407       -  
System agreement cost equalization
    36,650       36,650  
Other
    9,464       9,895  
TOTAL
    426,316       369,796  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    687,969       680,467  
Accumulated deferred investment tax credits
    6,302       6,541  
Obligations under capital lease
    10,105       10,747  
Other regulatory liabilities
    2,783       262  
Asset retirement cost liabilities
    5,454       5,375  
Accumulated provisions
    39,539       39,466  
Pension and other postretirement liabilities
    87,601       104,912  
Long-term debt
    745,396       745,378  
Other
    22,287       22,086  
TOTAL
    1,607,436       1,615,234  
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    50,381       50,381  
                 
COMMON EQUITY
               
Common stock, no par value, authorized 12,000,000
               
 shares; issued and outstanding 8,666,357 shares in 2011 and 2010
    199,326       199,326  
Capital stock expense and other
    (690 )     (690 )
Retained earnings
    540,851       527,588  
TOTAL
    739,487       726,224  
                 
TOTAL LIABILITIES AND EQUITY
  $ 2,823,620     $ 2,761,635  
                 
See Notes to Financial Statements.
               
 



 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
   
Common Equity
       
   
Common Stock
   
Capital Stock Expense and Other
   
Retained Earnings
   
Total
 
Balance at December 31, 2009
  $ 199,326     $ (690 )   $ 490,129     $ 688,765  
                                 
Net income
    -       -       11,193       11,193  
Common stock dividends
    -       -       (9,800 )     (9,800 )
Preferred stock dividends
    -       -       (707 )     (707 )
                                 
Balance at March 31, 2010
  $ 199,326     $ (690 )   $ 490,815     $ 689,451  
                                 
                                 
Balance at December 31, 2010
  $ 199,326     $ (690 )   $ 527,588     $ 726,224  
                                 
Net income
    -       -       17,270       17,270  
Common stock dividends
    -       -       (3,300 )     (3,300 )
Preferred stock dividends
    -       -       (707 )     (707 )
                                 
Balance at March 31, 2011
  $ 199,326     $ (690 )   $ 540,851     $ 739,487  
                                 
See Notes to Financial Statements.
                               
                                 
                                 
 



 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 125     $ 106     $ 19       18  
  Commercial
    95       84       11       13  
  Industrial
    36       29       7       24  
  Governmental
    9       9       -       -  
    Total retail
    265       228       37       16  
  Sales for resale:
                               
     Associated companies
    16       8       8       100  
     Non-associated companies
    5       8       (3 )     (38 )
  Other
    3       -       3       -  
    Total
  $ 289     $ 244     $ 45       18  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,442       1,545       (103 )     (7 )
  Commercial
    1,124       1,096       28       3  
  Industrial
    539       502       37       7  
  Governmental
    95       97       (2 )     (2 )
    Total retail
    3,200       3,240       (40 )     (1 )
  Sales for resale:
                               
     Associated companies
    170       67       103       154  
     Non-associated companies
    52       75       (23 )     (31 )
    Total
    3,422       3,382       40       1  
                                 
                                 
                                 
                                 
 

 

ENTERGY NEW ORLEANS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations

Net Income

Net income decreased $2.7 million primarily due to lower net revenue, partially offset by lower interest expense and lower other operation and maintenance expenses.

Net Revenue

Net revenue 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 2011 to the first quarter 2010.

   
Amount
   
(In Millions)
     
2010 net revenue
 
$70.3 
Retail electric price
 
(4.0)
Net gas revenue
 
(3.8)
Other
 
1.5 
2011 net revenue
 
$64.0 

The retail electric price variance is primarily due to a formula rate plan decrease effective October 2010.  See Note 2 to the financial statements in the Form 10-K for a discussion of the formula rate plan filing.

The net gas revenue variance is primarily due to milder weather compared to last year.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues decreased primarily due to:

·  
a decrease of $12.9 million in gross gas revenues primarily due to lower fuel cost recovery revenues as a  result of  lower fuel rates;
·  
formula rate plan decreases effective October 2010, as discussed above; and
·  
a decrease of $2.7 million in electric fuel cost recovery revenues due to lower fuel rates.

Fuel and purchased power expenses decreased primarily due to a decrease in the recovery from customers of deferred fuel costs and decreased system purchases due to decreased demand for gas, as discussed above.

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to a decrease of $2.4 million in fossil expenses as a result of a prior year outage.  The decrease was offset by several items which were individually insignificant.

Interest expense decreased primarily due to the repayment in May 2010 of the notes payable issued to affiliates as part of Entergy New Orleans’ plan of reorganization and the repayment, at maturity, of $30 million of 4.98% Series first mortgage bonds in July 2010.

 
98

Entergy New Orleans, Inc. 
Management's Financial Discussion ana Analysis
 

Income Taxes

The effective income tax rate was 36.7% for the first quarter 2011 and 34.7% for the first quarter 2010.  The difference in the effective income tax rate for the first quarter 2011 versus the federal statutory rate of 35% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by flow-through book and tax timing differences.  The difference in the effective income tax rate for the first quarter 2010 versus the federal statutory rate of 35% is primarily due to flow-through book and tax timing differences, partially offset by state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the first quarters of 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$54,986 
 
$191,191 
         
Cash flow provided by (used in):
       
 
Operating activities
 
(2,854)
 
11,268 
 
Investing activities
 
(16,053)
 
(18,831)
 
Financing activities
 
(5,906)
 
(15,155)
Net decrease in cash and cash equivalents
 
(24,813)
 
(22,718)
         
Cash and cash equivalents at end of period
 
$30,173 
 
$168,473 

Operating Activities

Entergy New Orleans’s operating activities used $2.9 million of cash for the three months ended March 31, 2011 compared to providing $11.3 million for the three months ended March 31, 2010 primarily due to an increase of $6.0 million in pension contributions and decreased recovery of deferred fuel costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits.

Investing Activities

Net cash flow used in investing activities decreased $2.8 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to money pool activity and System Fuels repayment of Entergy New Orleans’s $3.3 million investment in System Fuels.  The decrease was offset by a withdrawal in 2010 from the storm escrow account related to Hurricane Gustav costs.

Increases in Entergy New Orleans's receivable from the money pool are a use of cash flow, and Entergy New Orleans's receivable from the money pool increased by $2.7 million for the three months ended March 31, 2011 compared to increasing by $10.8 million for the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries' need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities decreased $9.2 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a decrease of $9.3 million in common stock dividends paid.
 
 
99

Entergy New Orleans, Inc. 
Management's Financial Discussion ana Analysis
 

Capital Structure

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

   
March 31,
 2011
 
December 31,
2010
         
Debt to capital
 
43.8%
 
44.2%
Effect of subtracting cash
 
(4.8)%
 
(9.5)%
Net debt to net capital
 
39.0%
 
34.7%

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and shareholders' equity.  Net capital consists of capital less cash and cash equivalents.  Entergy New Orleans 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 New Orleans'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 New Orleans's uses and sources of capital.  Following are updates to the information provided in the Form 10-K.

Entergy New Orleans's receivables from the money pool were as follows:

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
$24,562
 
$21,820
 
$76,981
 
$66,149

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Rate, Cost-recovery, and Other Regulation - State and Local Rate Regulation and Fuel-Cost Recovery" in the Form 10-K for a discussion of state and local rate regulation.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks" in the Form 10-K for a discussion of 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 Entergy New Orleans's accounting for unbilled revenue and qualified pension and other postretirement benefits.


 
INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
 
 
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 115,990     $ 124,966  
Natural gas
    42,266       55,133  
TOTAL
    158,256       180,099  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    45,853       60,091  
   Purchased power
    47,906       48,909  
   Other operation and maintenance
    27,146       28,128  
Taxes other than income taxes
    11,021       11,946  
Depreciation and amortization
    8,992       8,709  
Other regulatory charges - net
    479       764  
TOTAL
    141,397       158,547  
                 
OPERATING INCOME
    16,859       21,552  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    106       169  
Interest and investment income
    54       134  
Miscellaneous - net
    (236 )     (184 )
TOTAL
    (76 )     119  
                 
INTEREST EXPENSE
               
Interest expense
    2,789       4,057  
Allowance for borrowed funds used during construction
    (48 )     (82 )
TOTAL
    2,741       3,975  
                 
INCOME BEFORE INCOME TAXES
    14,042       17,696  
                 
Income taxes
    5,159       6,135  
                 
NET INCOME
    8,883       11,561  
                 
Preferred dividend requirements and other
    241       241  
                 
EARNINGS APPLICABLE TO
               
COMMON STOCK
  $ 8,642     $ 11,320  
                 
See Notes to Financial Statements.
               
                 

 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)

 

 
STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 8,883     $ 11,561  
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
         
  Depreciation and amortization
    8,992       8,709  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    (8,709 )     (19,528 )
  Changes in working capital:
               
    Receivables
    4,739       (2,095 )
    Fuel inventory
    (2,595 )     1,895  
    Accounts payable
    (13,865 )     (9,729 )
    Taxes accrued
    11,343       26,232  
    Interest accrued
    (1,121 )     (2,150 )
    Deferred fuel costs
    (2,182 )     3,144  
    Other working capital accounts
    (5,457 )     (7,587 )
  Changes in provisions for estimated losses
    2,328       (9,639 )
  Changes in other regulatory assets
    2,051       6,144  
  Changes in pensions and other postretirement liabilities
    (6,804 )     (1,580 )
  Other
    (457 )     5,891  
Net cash flow provided by (used in) operating activities
    (2,854 )     11,268  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (15,085 )     (16,491 )
Allowance for equity funds used during construction
    106       169  
Change in money pool receivable - net
    (2,742 )     (10,832 )
Investment in affiliates
    3,256       -  
Changes in other investments - net
    (1,588 )     8,323  
Net cash flow used in investing activities
    (16,053 )     (18,831 )
                 
FINANCING ACTIVITIES
               
Dividends paid:
               
  Common stock
    (5,600 )     (14,900 )
  Preferred stock
    (241 )     (241 )
Other
    (65 )     (14 )
Net cash flow used in financing activities
    (5,906 )     (15,155 )
                 
Net decrease in cash and cash equivalents
    (24,813 )     (22,718 )
                 
Cash and cash equivalents at beginning of period
    54,986       191,191  
                 
Cash and cash equivalents at end of period
  $ 30,173     $ 168,473  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 3,669     $ 6,043  
                 
See Notes to Financial Statements.
               
 
 


 
BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents
           
  Cash
  $ 1,548     $ 1,386  
  Temporary cash investments
    28,625       53,600  
        Total cash and cash equivalents
    30,173       54,986  
Accounts receivable:
               
  Customer
    39,786       38,160  
  Allowance for doubtful accounts
    (527 )     (734 )
  Associated companies
    45,209       44,842  
  Other
    1,781       1,824  
  Accrued unbilled revenues
    14,946       19,100  
    Total accounts receivable
    101,195       103,192  
Accumulated deferred income taxes
    15,392       15,092  
Fuel inventory - at average cost
    5,241       2,646  
Materials and supplies - at average cost
    10,092       9,896  
Prepayments and other
    11,126       5,375  
TOTAL
    173,219       191,187  
                 
OTHER PROPERTY AND INVESTMENTS
               
Non-utility property at cost (less accumulated depreciation)
    1,016       1,016  
Storm reserve escrow account
    7,541       5,953  
TOTAL
    8,557       6,969  
                 
UTILITY PLANT
               
Electric
    843,532       822,003  
Natural gas
    208,618       206,148  
Construction work in progress
    7,246       11,669  
TOTAL UTILITY PLANT
    1,059,396       1,039,820  
Less - accumulated depreciation and amortization
    548,039       531,871  
UTILITY PLANT - NET
    511,357       507,949  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Deferred fuel costs
    4,080       4,080  
  Other regulatory assets
    132,954       135,282  
Other
    6,193       8,081  
TOTAL
    143,227       147,443  
                 
TOTAL ASSETS
  $ 836,360     $ 853,548  
                 
See Notes to Financial Statements.
               
 



ENTERGY NEW ORLEANS, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Accounts payable:
           
  Associated companies
  $ 23,244     $ 25,140  
  Other
    18,231       30,093  
Customer deposits
    21,358       21,206  
Taxes accrued
    11,343       -  
Interest accrued
    1,707       2,828  
Deferred fuel costs
    4,745       6,927  
System agreement cost equalization
    15,510       15,510  
Other
    2,993       2,655  
TOTAL CURRENT LIABILITIES
    99,131       104,359  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    170,950       180,290  
Accumulated deferred investment tax credits
    1,761       1,835  
Regulatory liability for income taxes - net
    41,200       40,142  
Asset retirement cost liabilities
    3,454       3,396  
Accumulated provisions
    13,534       11,206  
Pension and other postretirement liabilities
    42,011       48,815  
Long-term debt
    167,218       167,215  
Gas system rebuild insurance proceeds
    72,633       75,700  
Other
    10,020       9,184  
TOTAL NON-CURRENT LIABILITIES
    522,781       537,783  
                 
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    19,780       19,780  
                 
COMMON EQUITY
               
Common stock, $4 par value, authorized 10,000,000
               
  shares; issued and outstanding 8,435,900 shares in 2011
               
  and 2010
    33,744       33,744  
Paid-in capital
    36,294       36,294  
Retained earnings
    124,630       121,588  
TOTAL
    194,668       191,626  
                 
TOTAL LIABILITIES AND EQUITY
  $ 836,360     $ 853,548  
                 
See Notes to Financial Statements.
               
 



 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
Balance at December 31, 2009
  $ 33,744     $ 36,294     $ 138,548     $ 208,586  
                                 
Net income
    -       -       11,561       11,561  
Common stock dividends
    -       -       (14,900 )     (14,900 )
Preferred stock dividends
    -       -       (241 )     (241 )
                                 
Balance at March 31, 2010
  $ 33,744     $ 36,294     $ 134,968     $ 205,006  
                                 
                                 
Balance at December 31, 2010
  $ 33,744     $ 36,294     $ 121,588     $ 191,626  
                                 
Net income
    -       -       8,883       8,883  
Common stock dividends
    -       -       (5,600 )     (5,600 )
Preferred stock dividends
    -       -       (241 )     (241 )
                                 
Balance at March 31, 2011
  $ 33,744     $ 36,294     $ 124,630     $ 194,668  
                                 
See Notes to Financial Statements.
                               
                                 
 

 

 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
             
Electric Operating Revenues:
                       
  Residential
  $ 41     $ 46     $ (5 )     (11 )
  Commercial
    35       37       (2 )     (5 )
  Industrial
    7       7       -       -  
  Governmental
    14       15       (1 )     (7 )
    Total retail
    97       105       (8 )     (8 )
  Sales for resale:
                               
    Associated companies
    18       20       (2 )     (10 )
  Other
    1       -       1       -  
    Total
  $ 116     $ 125     $ (9 )     (7 )
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    467       486       (19 )     (4 )
  Commercial
    439       428       11       3  
  Industrial
    112       107       5       5  
  Governmental
    183       183       -       -  
    Total retail
    1,201       1,204       (3 )     -  
  Sales for resale:
                               
     Associated companies
    317       280       37       13  
     Non-associated companies
    6       8       (2 )     (25 )
    Total
    1,524       1,492       32       2  
                                 
                                 
 



ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations

Net Income

Net income increased by $3.3 million primarily due to higher net revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses.

Net Revenue

Net revenue 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 (credits).  Following is an analysis of the change in net revenue comparing the first quarter 2011 to the first quarter 2010.

   
Amount
   
(In Millions)
     
2010 net revenue
 
$121.1 
Retail electric price
 
10.5 
Volume/weather
 
3.8 
Purchased power capacity
 
(6.4)
Other
 
(1.8)
2011 net revenue
 
$127.2 

The retail electric price variance is primarily due to rate actions, including an annual base rate increase of $59 million beginning August 2010 as a result of the settlement of the December 2009 rate case.  See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement.

The volume/weather variance is primarily due to an increase of 182 GWh in weather-adjusted usage in the residential and industrial sectors.  The increase was partially offset by the effect of milder weather on the residential sector in the first quarter 2011 compared to the first quarter 2010.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

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

Gross operating revenues increased primarily due to an increase of $22.8 million in fuel cost recovery revenues primarily attributable to lower interim fuel refunds in the first quarter 2011 versus the first quarter 2010 and base rate increases effective August 2010, as discussed above.  The increase was partially offset by a decrease of $18.8 million in rider revenues primarily due to the rough production cost equalization adjustment rider discussed in Note 2 to the financial statements the Form 10-K.  The interim fuel refunds and the PUCT approvals are also discussed in Note 2 to the financial statements in the Form 10-K.

Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense as a result of lower interim fuel refunds in the first quarter 2011 versus the first quarter 2010, as discussed above, partially offset by a decrease in the average market price of purchased power.

 
108

Entergy Texas, Inc. and Subsidiaries 
Management's Financial Discussion ana Analysis
 


Other regulatory charges decreased primarily due to the distribution of $17.4 million to customers of the 2007 rough production cost equalization remedy receipts.  See Note 2 to the financial statements in the Form 10-K for further discussion of the rough production cost equalization proceedings.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $1.4 million due to a change in the classification of over-recovery energy efficiency costs.  There is no impact on net income.;
·  
an increase of $1 million in transmission expenses primarily due to higher transmission equalization expenses in 2011;
·  
an increase of $0.7 million in compensation and benefits costs, resulting primarily from an increase in the accrual for incentive-based compensation; and
·  
an increase of $0.6 million in local easement fees as the result of higher gross revenues in certain locations within the Texas jurisdiction.

The increase was partially offset by a decrease of $1 million in fossil expenses due to higher plant outage expenses in 2010 due to the larger scope of the outages in 2010.

Income Taxes

The effective income tax rate was 37.9% for the first quarter 2011 and 43.0% for the first quarter 2010.  The difference in the effective income tax rate for the first quarter 2011 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by the amortization of investment tax credits and book and tax differences related to allowance for equity funds used during construction.  The difference in the effective income tax rate for the first quarter 2010 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$35,342 
 
$200,703 
         
Cash flow used in:
       
 
Operating activities
 
(11,003)
 
(39,877)
 
Investing activities
 
(7,787)
 
(33,600)
 
Financing activities
 
(14,783)
 
(23,072)
Net decrease in cash and cash equivalents
 
(33,573)
 
(96,549)
         
Cash and cash equivalents at end of period
 
$1,769 
 
$104,154 

Operating Activities

Net cash flow used in operating activities decreased $28.9 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to $57.9 million of fuel cost refunds in the first quarter 2011 versus $99 million of fuel cost refunds in the first quarter 2010.  See Note 2 to the financial statements for discussion of the 2011 fuel cost refund.
 
 
109

Entergy Texas, Inc. and Subsidiaries 
Management's Financial Discussion ana Analysis
 

Investing Activities

Net cash flow used in investing activities decreased $25.8 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to the timing of remittances to and payments from the transition charge account as a result of the issuance of $546 million in securitization bonds in November 2009, partially offset by money pool activity.  See Note 5 to the financial statements in the Form 10-K for further discussion of the issuance of the securitization bonds.

Decreases in Entergy Texas's receivable from the money pool are a source of cash flow, and Entergy Texas's receivable from the money pool decreased by $13.7 million for the three months ended March 31, 2011 compared to decreasing by $21.8 million for the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities decreased $8.3 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a decrease of $13.9 million in common equity distributions and money pool activity, partially offset by the retirement of $21.1 million of securitization bonds in 2011 compared to the retirement of $9.2 million of governmental bonds in 2010.

Increases in Entergy Texas's payable to the money pool are a source of cash flow, and Entergy Texas's payable to the money pool increased by $6.3 million for the three months ended March 31, 2011.

Capital Structure

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

   
March 31,
 2011
 
December 31,
2010
         
Debt to capital
 
66.1%
 
66.8%
Effect of excluding the securitization bonds
 
(15.7)%
 
(16.0)%
Debt to capital, excluding securitization bonds (1)
 
50.4%
 
50.8%
Effect of subtracting cash
 
(0.1)%
 
(1.0)%
Net debt to net capital, excluding securitization bonds (1)
 
50.3%
 
49.8%

  (1)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and long-term debt, including the currently maturing portion and the debt assumption liability.  Capital consists of debt and shareholder's equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Texas 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 Texas'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 Texas's uses and sources of capital.  Following are updates to the information provided in the Form 10-K.

 
110

Entergy Texas, Inc. and Subsidiaries 
Management's Financial Discussion ana Analysis
 


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

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
($6,310)
 
$13,672
 
$47,481
 
$69,317

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

As discussed in the Form 10-K, Entergy Texas has a credit facility in the amount of $100 million scheduled to expire in August 2012.  No borrowings were outstanding under the facility as of March 31, 2011.

State and Local Rate Regulation

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation" in the Form 10-K for a discussion of state and local rate regulation.

In December 2010, Entergy Texas filed with the PUCT a request to refund fuel cost recovery over-collections through October 2010.  Pursuant to a stipulation among the parties that was approved by the PUCT in March 2011, Entergy Texas will refund over-collections through November 2010 of approximately $72.7 million, including interest through the refund period.  The refund will be made for most customers over a three-month period that began with the February 2011 billing cycle.

Federal Regulation

See "System Agreement" and "Independent Coordinator of Transmission" in the "Rate, Cost-recovery, and Other Regulation" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks" in the Form 10-K for a discussion of 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 unbilled revenue and qualified pension and other postretirement benefits.


 
 
CONSOLIDATED INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 348,884     $ 336,206  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    44,081       6,559  
   Purchased power
    180,664       192,694  
   Other operation and maintenance
    47,241       43,369  
Taxes other than income taxes
    14,857       16,525  
Depreciation and amortization
    19,526       19,128  
Other regulatory charges (credits) - net
    (3,078 )     15,848  
TOTAL
    303,291       294,123  
                 
OPERATING INCOME
    45,593       42,083  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    766       641  
Interest and investment income
    690       1,054  
Miscellaneous - net
    (175 )     1,454  
TOTAL
    1,281       3,149  
                 
INTEREST EXPENSE
               
Interest expense
    22,077       23,908  
Allowance for borrowed funds used during construction
    (526 )     (480 )
TOTAL
    21,551       23,428  
                 
INCOME BEFORE INCOME TAXES
    25,323       21,804  
                 
Income taxes
    9,597       9,386  
                 
NET INCOME
  $ 15,726     $ 12,418  
                 
                 
See Notes to Financial Statements.
               
 



 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 15,726     $ 12,418  
Adjustments to reconcile net income to net cash flow used in operating activities:
               
  Depreciation, amortization, and decommissioning
    19,526       19,128  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    14,340       29,581  
  Changes in working capital:
               
    Receivables
    8,252       (5,415 )
    Fuel inventory
    248       (531 )
    Accounts payable
    6,120       7,218  
    Taxes accrued
    (15,502 )     (30,221 )
    Interest accrued
    (8,202 )     718  
    Deferred fuel costs
    (36,287 )     (76,280 )
    Other working capital accounts
    3,473       2,774  
  Changes in provision for estimated losses
    44       (2,274 )
  Changes in other regulatory assets
    13,749       10,176  
  Changes in pension and other postretirement liabilities
    (9,439 )     (2,865 )
  Other
    (23,051 )     (4,304 )
Net cash flow used in operating activities
    (11,003 )     (39,877 )
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (32,295 )     (34,138 )
Allowance for equity funds used during construction
    766       641  
Change in money pool receivable - net
    13,672       21,836  
Remittances to transition charge account
    (20,440 )     (21,939 )
Payments from transition charge account
    30,510       -  
Net cash flow used in investing activities
    (7,787 )     (33,600 )
                 
FINANCING ACTIVITIES
               
Retirement of long-term debt
    (21,086 )     (9,160 )
Change in money pool payable - net
    6,310       -  
Dividends paid:
               
  Common stock
    -       (13,900 )
Other
    (7 )     (12 )
Net cash flow used in financing activities
    (14,783 )     (23,072 )
                 
Net decrease in cash and cash equivalents
    (33,573 )     (96,549 )
                 
Cash and cash equivalents at beginning of period
    35,342       200,703  
                 
Cash and cash equivalents at end of period
  $ 1,769     $ 104,154  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid/(received) during the period for:
               
  Interest - net of amount capitalized
  $ 29,194     $ 22,159  
  Income taxes
  $ (4,500 )   $ (2,254 )
                 
See Notes to Financial Statements.
               
 



 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 1,731     $ 1,719  
   Temporary cash investments
    38       33,623  
    Total cash and cash equivalents
    1,769       35,342  
Securitization recovery trust account
    30,561       40,632  
Accounts receivable:
               
  Customer
    47,367       56,358  
  Allowance for doubtful accounts
    (1,938 )     (2,185 )
  Associated companies
    41,908       53,128  
  Other
    10,536       11,605  
  Accrued unbilled revenues
    38,580       39,471  
    Total accounts receivable
    136,453       158,377  
Accumulated deferred income taxes
    38,162       44,752  
Fuel inventory - at average cost
    53,624       53,872  
Materials and supplies - at average cost
    29,149       28,842  
Prepayments and other
    10,821       14,856  
TOTAL
    300,539       376,673  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investments in affiliates - at equity
    808       812  
Non-utility property - at cost (less accumulated depreciation)
    1,150       1,223  
Other
    17,561       17,037  
TOTAL
    19,519       19,072  
                 
UTILITY PLANT
               
Electric
    3,247,834       3,205,566  
Construction work in progress
    65,744       80,096  
TOTAL UTILITY PLANT
    3,313,578       3,285,662  
Less - accumulated depreciation and amortization
    1,258,710       1,245,729  
UTILITY PLANT - NET
    2,054,868       2,039,933  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    126,285       127,046  
  Other regulatory assets (includes securitization property of
       $751,936 as of March 31, 2011 and
       $763,841 as of December 31, 2010)
    1,151,730       1,168,960  
Long-term receivables - associated companies
    32,327       32,596  
Other
    22,276       19,584  
TOTAL
    1,332,618       1,348,186  
                 
TOTAL ASSETS
  $ 3,707,544     $ 3,783,864  
                 
See Notes to Financial Statements.
               
 
 

ENTERGY TEXAS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Accounts payable:
           
  Associated companies
  $ 86,395     $ 69,862  
  Other
    67,323       70,325  
Customer deposits
    37,958       38,376  
Taxes accrued
    13,049       28,551  
Interest accrued
    25,475       33,677  
Deferred fuel costs
    41,143       77,430  
Pension and other postretirement liabilities
    1,276       1,354  
Other
    4,463       4,222  
TOTAL
    277,082       323,797  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    837,066       829,668  
Accumulated deferred investment tax credits
    20,536       20,936  
Other regulatory liabilities
    5,657       26,178  
Asset retirement cost liabilities
    3,705       3,651  
Accumulated provisions
    5,364       5,320  
Pension and other postretirement liabilities
    63,285       72,724  
Long-term debt (includes securitization bonds of
       $785,987 as of March 31, 2011 and
       $807,066 as of December 31, 2010)
    1,638,253       1,659,230  
Other
    16,580       18,070  
TOTAL
    2,590,446       2,635,777  
                 
Commitments and Contingencies
               
                 
COMMON EQUITY
               
Common stock, no par value, authorized 200,000,000 shares;
               
  issued and outstanding 46,525,000 shares in 2011 and 2010
    49,452       49,452  
Paid-in capital
    481,994       481,994  
Retained earnings
    308,570       292,844  
TOTAL
    840,016       824,290  
                 
TOTAL LIABILITIES AND EQUITY
  $ 3,707,544     $ 3,783,864  
                 
See Notes to Financial Statements.
               
 



 
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                         
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
Balance at December 31, 2009
  $ 49,452     $ 481,994     $ 313,044     $ 844,490  
                                 
Net income
    -       -       12,418       12,418  
Common stock dividends
    -       -       (13,900 )     (13,900 )
                                 
Balance at March 31, 2010
  $ 49,452     $ 481,994     $ 311,562     $ 843,008  
                                 
                                 
Balance at December 31, 2010
  $ 49,452     $ 481,994     $ 292,844     $ 824,290  
                                 
Net income
    -       -       15,726       15,726  
                                 
Balance at March 31, 2011
  $ 49,452     $ 481,994     $ 308,570     $ 840,016  
                                 
See Notes to Financial Statements.
                               
                                 
                                 
 
 


 
SELECTED OPERATING RESULTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
                         
                         
               
Increase/
       
Description
 
2011
   
2010
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 126     $ 113     $ 13       12  
  Commercial
    73       66       7       11  
  Industrial
    63       67       (4 )     (6 )
  Governmental
    5       5       0       -  
    Total retail
    267       251       16       6  
  Sales for resale:
                               
     Associated companies
    55       57       (2 )     (4 )
     Non-associated companies
    20       25       (5 )     (20 )
  Other
    7       3       4       133  
    Total
  $ 349     $ 336     $ 13       4  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,383       1,500       (117 )     (8 )
  Commercial
    991       985       6       1  
  Industrial
    1,448       1,303       145       11  
  Governmental
    69       65       4       6  
    Total retail
    3,891       3,853       38       1  
  Sales for resale:
                               
     Associated companies
    828       632       196       31  
     Non-associated companies
    321       458       (137 )     (30 )
    Total
    5,040       4,943       97       2  
                                 
                                 
 

 

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 remained relatively flat, decreasing $1.3 million for the first quarter 2011 compared to the first quarter 2010 primarily due to a decrease in rate base resulting in lower operating income.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2011 and 2010 were as follows:

   
2011
 
2010
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$263,772 
 
$264,482 
         
Cash flow provided by (used in):
       
 
Operating activities
 
57,634 
 
65,587 
 
Investing activities
 
(115,470)
 
32,102 
 
Financing activities
 
(80,629)
 
(77,568)
Net increase (decrease) in cash and cash equivalents
 
(138,465)
 
20,121 
         
Cash and cash equivalents at end of period
 
$125,307 
 
$284,603 

Operating Activities

Net cash provided by operating activities decreased $8 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to an increase of $14.2 million in pension contributions.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits.

Investing Activities

System Energy’s investing activities used $115.5 million for the three months ended March 31, 2011 compared to providing $32.1 million for the three months ended March 31, 2010 primarily due to:

·  
the proceeds from the transfer, in the first quarter 2010, of $100.3 million in development costs related to Entergy New Nuclear Development, LLC, as discussed in the Form 10-K;
·  
an increase of $29.5 million in construction expenditures primarily due to the Grand Gulf power uprate project;

 
118

System Energy Resources, Inc. 
Management's Financial Discussion ana Analysis
 

·  
an increase of $27.8 million in nuclear fuel purchases due to the timing of refueling outages and the purchase of nuclear fuel from System Fuels because the Utility companies will now purchase nuclear fuel as System Fuels procures it, rather than primarily at the time of refueling; and
·  
a $22 million loan to an affiliate under an intercompany credit agreement between Entergy New Nuclear Development, LLC (a subsidiary of System Energy) and Entergy Nuclear Power Marketing.  The loan was repaid in early-May 2011.

The increase was partially offset by money pool activity.  Increases in System Energy’s receivable from the money pool are a use of cash flow, and System Energy’s receivable from the money pool increased $8.2 million in the three months ended March 31, 2011 compared to increasing $34.8 million in the three months ended March 31, 2010.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash used in financing activities increased $3.1 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 primarily due to a decrease in net borrowings of $10.1 million from the nuclear fuel company variable interest entity credit facility in the three months ended March 31, 2011 compared to the same period in 2010.  See Note 4 to the financial statements for a discussion of the credit facility.  The increase was partially offset by a decrease of $4.9 million in dividends paid on common stock.

Capital Structure

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

   
March 31,
 2011
 
December 31,
2010
         
Debt to capital
 
49.7%
 
51.7%
Effect of subtracting cash
 
(4.2)%
 
(9.0)%
Net debt to net capital
 
45.5%
 
42.7%

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 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.  Following are updates to the information provided in the Form 10-K.

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

March 31,
2011
 
December 31,
2010
 
March 31,
2010
 
December 31,
2009
(In Thousands)
             
$106,128
 
$97,948
 
$125,301
 
$90,507

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
 
 
119

System Energy Resources, Inc. 
Management's Financial Discussion ana Analysis
 

Nuclear Matters

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters" in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks" in the Form 10-K for a discussion of 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 qualified pension and other postretirement benefits.  The following is an update to that discussion.

Nuclear Decommissioning Costs

            In the first quarter 2011, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study.  The revised estimate resulted in a $38.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset. 



 
INCOME STATEMENTS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
OPERATING REVENUES
           
Electric
  $ 128,395     $ 128,584  
                 
OPERATING EXPENSES
               
Operation and Maintenance:
               
   Fuel, fuel-related expenses, and
               
     gas purchased for resale
    19,690       15,318  
   Nuclear refueling outage expenses
    4,022       4,673  
   Other operation and maintenance
    28,957       28,886  
Decommissioning
    8,202       7,634  
Taxes other than income taxes
    5,423       6,031  
Depreciation and amortization
    28,663       28,371  
Other regulatory credits - net
    (2,949 )     (725 )
TOTAL
    92,008       90,188  
                 
OPERATING INCOME
    36,387       38,396  
                 
OTHER INCOME
               
Allowance for equity funds used during construction
    4,145       1,819  
Interest and investment income
    2,541       5,386  
Miscellaneous - net
    (104 )     (131 )
TOTAL
    6,582       7,074  
                 
INTEREST EXPENSE
               
Interest expense
    11,389       10,309  
Allowance for borrowed funds used during construction
    (1,353 )     (629 )
TOTAL
    10,036       9,680  
                 
INCOME BEFORE INCOME TAXES
    32,933       35,790  
                 
Income taxes
    13,597       15,177  
                 
NET INCOME
  $ 19,336     $ 20,613  
                 
See Notes to Financial Statements.
               
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)
 

 
STATEMENTS OF CASH FLOWS
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
OPERATING ACTIVITIES
           
Net income
  $ 19,336     $ 20,613  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    50,981       47,068  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    (55,312 )     (47,751 )
  Changes in working capital:
               
    Receivables
    10,634       7,166  
    Accounts payable
    8,932       95,653  
    Prepaid taxes
    53,904       47,526  
    Interest accrued
    (37,428 )     (38,723 )
    Other working capital accounts
    (2,101 )     (1,129 )
  Changes in provision for estimated losses
    -       (2,009 )
  Changes in other regulatory assets
    38,385       3,086  
  Changes in pensions and other postretirement liabilities
    (16,279 )     (2,140 )
  Other
    (13,418 )     (63,773 )
Net cash flow provided by operating activities
    57,634       65,587  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (52,796 )     (26,741 )
Proceeds from the transfer of development costs
    -       100,280  
Allowance for equity funds used during construction
    4,145       1,819  
Nuclear fuel purchases
    (27,759 )     -  
Proceeds from nuclear decommissioning trust fund sales
    88,605       81,447  
Investment in nuclear decommissioning trust funds
    (97,485 )     (89,909 )
Loan to affiliate
    (22,000 )     -  
Changes in money pool receivable - net
    (8,180 )     (34,794 )
Net cash flow provided by (used in) investing activities
    (115,470 )     32,102  
                 
FINANCING ACTIVITIES
               
Retirement of long-term debt
    (38,161 )     (41,715 )
Changes in credit borrowings - net
    (22,293 )     (12,146 )
Dividends paid:
               
  Common stock
    (18,700 )     (23,600 )
  Other
    (1,475 )     (107 )
Net cash flow used in financing activities
    (80,629 )     (77,568 )
                 
Net increase (decrease) in cash and cash equivalents
    (138,465 )     20,121  
                 
Cash and cash equivalents at beginning of period
    263,772       264,482  
                 
Cash and cash equivalents at end of period
  $ 125,307     $ 284,603  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 12,039     $ 6,752  
                 
See Notes to Financial Statements.
               
 
 

 
BALANCE SHEETS
 
ASSETS
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 1,357     $ 903  
  Temporary cash investments
    123,950       262,869  
        Total cash and cash equivalents
    125,307       263,772  
Accounts receivable:
               
  Associated companies
    146,377       147,180  
  Other
    3,419       5,070  
    Total accounts receivable
    149,796       152,250  
Loan to affiliate
    22,000       -  
Materials and supplies - at average cost
    85,226       84,077  
Deferred nuclear refueling outage costs
    18,631       22,627  
Prepaid taxes
    14,135       68,039  
Prepayments and other
    6,097       1,142  
TOTAL
    421,192       591,907  
                 
OTHER PROPERTY AND INVESTMENTS
               
Decommissioning trust funds
    408,978       387,876  
TOTAL
    408,978       387,876  
                 
UTILITY PLANT
               
Electric
    3,368,606       3,362,422  
Property under capital lease
    486,280       489,175  
Construction work in progress
    248,880       210,536  
Nuclear fuel
    176,277       155,282  
TOTAL UTILITY PLANT
    4,280,043       4,217,415  
Less - accumulated depreciation and amortization
    2,436,514       2,417,811  
UTILITY PLANT - NET
    1,843,529       1,799,604  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    126,317       126,642  
  Other regulatory assets
    258,006       296,715  
Other
    22,024       21,326  
TOTAL
    406,347       444,683  
                 
TOTAL ASSETS
  $ 3,080,046     $ 3,224,070  
                 
See Notes to Financial Statements.
               
 
 
 
 
SYSTEM ENERGY RESOURCES, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
March 31, 2011 and December 31, 2010
 
(Unaudited)
 
             
   
2011
   
2010
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 40,163     $ 33,740  
Short-term borrowings
    15,971       38,264  
Accounts payable:
               
  Associated companies
    2,525       6,520  
  Other
    53,623       38,447  
Accumulated deferred income taxes
    6,967       8,508  
Interest accrued
    18,653       56,081  
Other
    2,265       2,258  
TOTAL
    140,167       183,818  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    589,530       617,012  
Accumulated deferred investment tax credits
    53,886       54,755  
Other regulatory liabilities
    225,550       201,364  
Decommissioning
    422,094       452,782  
Pension and other postretirement liabilities
    88,966       105,245  
Long-term debt
    746,829       796,728  
Other
    22       -  
TOTAL
    2,126,877       2,227,886  
                 
Commitments and Contingencies
               
                 
COMMON EQUITY
               
Common stock, no par value, authorized 1,000,000 shares;
               
  issued and outstanding 789,350 shares in 2011 and 2010
    789,350       789,350  
Retained earnings
    23,652       23,016  
TOTAL
    813,002       812,366  
                 
TOTAL LIABILITIES AND EQUITY
  $ 3,080,046     $ 3,224,070  
                 
See Notes to Financial Statements.
               
 



 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Three Months Ended March 31, 2011 and 2010
 
(Unaudited) (In Thousands)
 
                   
   
Common Equity
       
   
Common Stock
   
Retained Earnings
   
Total
 
Balance at December 31, 2009
  $ 789,350     $ 40,592     $ 829,942  
                         
Net income
    -       20,613       20,613  
Common stock dividends
    -       (23,600 )     (23,600 )
                         
Balance at March 31, 2010
  $ 789,350     $ 37,605     $ 826,955  
                         
                         
Balance at December 31, 2010
  $ 789,350     $ 23,016     $ 812,366  
                         
Net income
    -       19,336       19,336  
Common stock dividends
    -       (18,700 )     (18,700 )
                         
Balance at March 31, 2011
  $ 789,350     $ 23,652     $ 813,002  
                         
See Notes to Financial Statements.
                       
 


 
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, administrative, and other regulatory proceedings affecting Entergy.  Following is an update to that discussion.  Also see "Item 5, Other Information, Environmental Regulation", below, for updates regarding environmental proceedings and regulation and Note 11 to the financial statements for a description of a legal proceeding involving Vermont Yankee.

Texas Power Price Lawsuit

See the Form 10-K for a discussion of the lawsuit filed in August 2003 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, Inc. who were billed and paid for electric power from January 1, 1994 to the present.  The case is pending in state district court, and the court has scheduled a class certification hearing for August 2011.

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 (1)

 
 
 
 
Period
 
 
 
 
Total Number of
Shares Purchased
 
 
 
 
Average Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
 
Maximum $
Amount
of Shares that May
Yet be Purchased
Under a Plan (2)
                 
1/01/2011-1/31/2011
 
-
 
$-
 
-
 
$500,000,000
2/01/2011-2/28/2011
 
160,000
 
$71.65
 
160,000
 
$500,000,000
3/01/2011-3/31/2011
 
632,000
 
$67.94
 
632,000
 
$500,000,000
Total
 
792,000
 
$68.69
 
792,000
   
 
 
(1)
In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy's common stock.  According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.  Entergy's management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.  See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.  In addition to this authority, in October 2010 the Board granted authority for an additional $500 million share repurchase program.  The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.
(2)
Maximum amount of shares that may yet be repurchased does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.




Item 5.  Other Information

Environmental Regulation

Following are updates to the Environmental Regulation section of Part I, Item 1 of the Form 10-K.

Clean Air Act and Subsequent Amendments

Hazardous Air Pollutants

The EPA is developing a Maximum Achievable Control Technology retrofit standard for new and existing coal and oil-fired units.  In 2009 the EPA issued an Information Collection Request to gather data needed for promulgation of Hazardous Air Pollutant regulations.  In March 2011 the EPA released a prepublication version of the proposed rule to regulate Hazardous Air Pollutants for Electric Generating Utilities; and the final rule is expected in November 2011.  Entergy is reviewing the proposal and remains involved in the current rulemaking process.

Nelson Unit 6 (Entergy Gulf States Louisiana)
 
Entergy Gulf States Louisiana self-reported to the Louisiana Department of Environmental Quality (LDEQ) potential exceedances of annual carbon monoxide emission limits at the Nelson Unit 6 coal-fired facility for the years 2006-2010 and the failure to report these potential exceedances in semi-annual reporting and in annual Title V compliance certifications.  Entergy Gulf States Louisiana is not required to monitor carbon monoxide emissions from Nelson Unit 6 on a regular or continuous schedule.  Stack tests performed in 2010 appear to indicate carbon monoxide emissions in excess of the maximum hourly limit for three 1-hour test runs and the annual limit.  Comparison of the 2010 stack tests with the most recent previous tests from 2006, however, appear to indicate that the permit limits were calculated incorrectly and should have been higher.  The 2010 test emission levels did not cause a violation of National Ambient Air Quality Standards.  Additionally, the 2010 stack testing, which was performed in compliance with an EPA data request connected to the EPA’s development of a new air emissions rule, was not taken during a period of normal and representative operations for Nelson Unit 6.  Entergy Gulf States Louisiana is negotiating the issue with LDEQ.

Clean Water Act

316(b) Cooling Water Intake Structures

See the Form 10-K for a discussion of the EPA regulations finalized in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures.  The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts.  Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule.  In January 2007, the U.S. Second Circuit Court of Appeals remanded the rule to the EPA for reconsideration.  The court instructed the EPA to reconsider several aspects of the rule that were beneficial to businesses affected by the rule after finding that these provisions of the rule were contrary to the language of the Clean Water Act or were not sufficiently explained in the rule.  In April 2008, the U.S. Supreme Court agreed to review the Second Circuit decision on the question of whether the EPA may take into consideration a cost-benefit analysis in developing these regulations, a consideration of potential benefit to businesses affected by the rule that the Second Circuit disallowed.  In March 2009, the Supreme Court ruled in favor of the petitioners that cost-benefit analysis may be taken into consideration.  The EPA reissued the proposed rule in April 2011, with finalization anticipated by July 27, 2012.  Entergy currently is reviewing the revised proposed rule and developing comments based on its facility-level analysis.



Other Environmental Matters

Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas

The Texas Commission on Environmental Quality (TCEQ) notified Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas that the TCEQ believes those entities are PRPs concerning contamination existing at the San Angelo Electric Service Company (SESCO) facility in San Angelo, Texas.  The facility operated as a transformer repair and scrapping facility from the 1930s until 2003.  Both soil and groundwater contamination exists at the site.  Entergy Gulf States, Inc. and Entergy Louisiana sent transformers to this facility during the 1980s.  Entergy Gulf States Louisiana, Entergy Texas, Entergy Louisiana, and Entergy Arkansas responded to an information request from the TCEQ and continue to cooperate in this investigation.  Entergy Gulf States Louisiana, Entergy Texas, and Entergy Louisiana joined a group of PRPs responding to site conditions in cooperation with the State of Texas, creating cost allocation models based on review of SESCO documents and employee interviews, and investigating contribution actions against other PRPs.  Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Texas have agreed to contribute to the remediation of contaminated soil and groundwater at the site in a measure proportionate to those companies’ involvement at the site, while Entergy Arkansas and Entergy New Orleans likely will pay de minimis amounts.  Current estimates, although preliminary and variable depending on the level of third-party cost contributions, indicate that Entergy’s total share of remediation costs likely will be less than $1 million.  The TCEQ approved an agreed administrative order in September 2006 that allows the implementation of a Remedial Investigation/Feasibility Study at the SESCO site; with the ultimate disposition being a remedial action to remove contaminants of concern.  The TCEQ approved the Remedial Investigation Work Plan in May 2007 and field sampling began in July 2007.  Off-site removal activities of PCB-impacted soil and debris were completed at the site in December 2010.  The Remedial Investigation report was submitted in February 2011 to the TCEQ and was approved on April 15, 2011.  The PRP working group will now prepare a Feasibility Study and description of proposed site remediation and management actions for TCEQ’s review.

Property

Following is an update to the Entergy Wholesale Commodities, Property section of Part I, Item 1 of the Form 10-K.

Nuclear Generating Stations

As discussed further in the Form 10-K, the NRC operating license for Vermont Yankee was to expire in March 2012.  In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032.  See Note 11 to the financial statements herein for additional discussion of Vermont Yankee.


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

The Registrant Subsidiaries 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,
 
2006
 
2007
 
2008
 
2009
 
2010
 
2011
                       
Entergy Arkansas
3.37
 
3.19
 
2.33
 
2.39
 
3.91
 
4.09
Entergy Gulf States Louisiana
3.01
 
2.84
 
2.44
 
2.99
 
3.58
 
3.76
Entergy Louisiana
3.23
 
3.44
 
3.14
 
3.52
 
3.41
 
3.45
Entergy Mississippi
2.54
 
3.22
 
2.92
 
3.25
 
3.30
 
3.50
Entergy New Orleans
1.52
 
2.74
 
3.71
 
3.66
 
4.41
 
4.46
Entergy Texas
2.12
 
2.07
 
2.04
 
1.92
 
2.10
 
2.16
System Energy
4.05
 
3.95
 
3.29
 
3.73
 
3.64
 
3.53


 
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions
 
Twelve Months Ended
 
December 31,
 
March 31,
 
 
2006
 
2007
 
2008
 
2009
 
2010
 
2011
 
                         
Entergy Arkansas
3.06
 
2.88
 
1.95
 
2.09
 
3.50
 
3.68
 
Entergy Gulf States Louisiana
2.90
 
2.73
 
2.42
 
2.95
 
3.53
 
3.71
 
Entergy Louisiana
2.90
 
3.08
 
2.87
 
3.27
 
3.13
 
3.15
 
Entergy Mississippi
2.34
 
2.97
 
2.67
 
3.01
 
3.06
 
3.23
 
Entergy New Orleans
1.35
 
2.54
 
3.45
 
3.38
 
3.97
 
3.97
 

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.




Item 6.  Exhibits *

*
4(a) -
Seventy-first Supplemental Indenture, dated as of March 1, 2011, to Entergy Louisiana, LLC Mortgage and Deed of Trust, dated as of April 1, 1944 (4.08 to Form 8-K dated March 24, 2011 in 1-32718).
     
*
4(b) -
Twenty-eighth Supplemental Indenture, dated as of April 1, 2011, to Entergy Mississippi, Inc. Mortgage and Deed of Trust, dated as of February 1, 1988 (4.38 to Form 8-K dated April 15, 2011 in 1-31508).
     
 
12(a) -
Entergy Arkansas's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
     
 
12(b) -
Entergy Gulf States Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
     
 
12(c) -
Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
     
 
12(d) -
Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
     
 
12(e) -
Entergy New Orleans's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Pre­ferred Dividends, as defined.
     
 
12(f) -
Entergy Texas's Computation of Ratios of Earnings to Fixed Charges, as defined.
     
 
12(g) -
System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined.
     
 
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 Arkansas.
     
 
31(e) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
     
 
31(f) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
     
 
31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
     
 
31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
     
 
31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
     
 
31(j) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
     
 
31(k) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
     
 
31(l) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
     
 
31(m) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
     
 
 
31(n) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
     
 
31(o) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
     
 
31(p) -
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 Arkansas.
     
 
32(e) -
Section 1350 Certification for Entergy Gulf States Louisiana.
     
 
32(f) -
Section 1350 Certification for Entergy Gulf States Louisiana.
     
 
32(g) -
Section 1350 Certification for Entergy Louisiana.
     
 
32(h) -
Section 1350 Certification for Entergy Louisiana.
     
 
32(i) -
Section 1350 Certification for Entergy Mississippi.
     
 
32(j) -
Section 1350 Certification for Entergy Mississippi.
     
 
32(k) -
Section 1350 Certification for Entergy New Orleans.
     
 
32(l) -
Section 1350 Certification for Entergy New Orleans.
     
 
32(m) -
Section 1350 Certification for Entergy Texas.
     
 
32(n) -
Section 1350 Certification for Entergy Texas.
     
 
32(o) -
Section 1350 Certification for System Energy.
     
 
32(p) -
Section 1350 Certification for System Energy.
     
 
101 INS -
XBRL Instance Document.
     
 
101 SCH -
XBRL Taxonomy Extension Schema Document.
     
 
101 PRE -
XBRL Taxonomy Presentation Linkbase Document.
     
 
101 LAB -
XBRL Taxonomy Label Linkbase Document.
     
 
101 CAL -
XBRL Taxonomy Calculation Linkbase Document.
     
 
101 DEF -
XBRL Definition Linkbase Document.
___________________________

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.

*
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 LOUISIANA, L.L.C.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Theodore H. Bunting, Jr.
Theodore H. Bunting, Jr
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)


Date:    May 6, 2011