_________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
_________________________________________________________________________
<PAGE>
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
Amendment No. 1 to Entergy Corporation's Form 10-Q for the quarter ended
June 30, 2000 is made to include earnings per share and dividend per
share information in the Entergy Corporation and Subsidiaries
Consolidated Statements of Income, which were inadvertently omitted from
the original filing.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2000
Entergy Corporation and Subsidiaries:
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Retained Earnings,
Comprehensive Income, and Paid-In Capital
Selected Operating Results
Notes to Financial Statements for Entergy Corporation
and Subsidiaries
Signature
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $1,664,688 $1,613,136 $3,017,570 $2,851,719
Natural gas 28,396 22,149 74,292 59,880
Steam products - 7,254 - 15,550
Competitive businesses 444,704 673,865 857,418 1,029,177
-----------------------------------------------------
TOTAL 2,137,788 2,316,404 3,949,280 3,956,326
-----------------------------------------------------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 464,436 490,871 962,190 893,844
Purchased power 502,521 676,827 872,064 1,050,626
Nuclear refueling outage expenses 16,629 17,135 35,186 36,820
Other operation and maintenance 450,223 410,707 827,634 778,338
Decommissioning 6,169 10,758 17,106 23,432
Taxes other than income taxes 83,540 83,053 163,158 166,121
Depreciation and amortization 178,749 176,707 357,025 361,549
Other regulatory credits - net (5,900) (2,372) (20,506) (18,970)
Amortization of rate deferrals 7,883 88,767 15,279 97,180
-----------------------------------------------------
TOTAL 1,704,250 1,952,453 3,229,136 3,388,940
-----------------------------------------------------
OPERATING INCOME 433,538 363,951 720,144 567,386
-----------------------------------------------------
OTHER INCOME
Allowance for equity funds used during
construction 8,041 7,348 15,735 12,759
Gain on sale of assets 21,057 40,718 21,574 61,301
Miscellaneous - net 73,651 40,064 102,633 60,016
-----------------------------------------------------
TOTAL 102,749 88,130 139,942 134,076
-----------------------------------------------------
INTEREST AND OTHER CHARGES
Interest on long-term debt 118,462 120,164 232,121 242,695
Other interest - net 23,369 36,942 43,652 45,483
Distributions on preferred securities
of subsidiary 4,709 4,710 9,419 9,419
Allowance for borrowed funds used
during Construction (5,889) (5,926) (11,977) (10,405)
-----------------------------------------------------
TOTAL 140,651 155,890 273,215 287,192
-----------------------------------------------------
INCOME BEFORE INCOME TAXES 395,636 296,191 586,871 414,270
Income taxes 149,863 86,433 232,688 131,606
-----------------------------------------------------
CONSOLIDATED NET INCOME 245,773 209,758 354,183 282,664
Preferred dividend requirements and
other 8,581 9,981 18,131 20,706
-----------------------------------------------------
EARNINGS APPLICABLE TO
COMMON STOCK $237,192 $199,777 $336,052 $261,958
=====================================================
Earnings per average common share:
Basic and diluted $1.04 $0.81 $1.45 $1.06
Dividends declared per common share $0.30 $0.30 $0.60 $0.60
Average number of common shares outstanding:
Basic 228,097,385 246,795,710 232,352,915 246,688,052
Diluted 228,152,627 247,207,533 232,382,112 246,962,829
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Consolidated net income $354,183 $282,664
Noncash items included in net income:
Amortization of rate deferrals 15,279 97,180
Reserve for regulatory adjustments 37,113 13,344
Other regulatory credits - net (20,506) (18,970)
Depreciation, amortization, and
decommissioning 374,131 384,981
Deferred income taxes and investment tax
credits (25,070) (180,410)
Allowance for equity funds used during
construction (15,735) (12,759)
Gain on sale of assets - net (21,574) (61,301)
Changes in working capital:
Receivables (219,406) (427,677)
Fuel inventory (28,416) (36,600)
Accounts payable 185,462 353,302
Taxes accrued 131,612 262,406
Interest accrued 26,391 (35,306)
Deferred fuel (154,214) (18,029)
Other working capital accounts 59,295 (86,458)
Provision for estimated losses and reserves (28,396) (24,632)
Changes in other regulatory assets (32,028) (32,960)
Other 99,715 132,513
------------------------
Net cash flow provided by operating activities 737,836 591,288
------------------------
INVESTING ACTIVITIES
Construction/capital expenditures (822,584) (545,842)
Allowance for equity funds used during
construction 15,735 12,759
Nuclear fuel purchases (73,533) (92,196)
Proceeds from sale/leaseback of nuclear fuel 43,758 75,097
Proceeds from sale of businesses 61,519 351,082
Investment in other nonregulated/nonutility
properties (98,493) (14,406)
Proceeds from other temporary investments 298,251 -
Decommissioning trust contributions and
realized change in trust assets (26,732) (35,738)
Other 5,624 11,909
------------------------
Net cash flow used in investing activities (596,455) (237,335)
------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 925,889 617,220
Common stock 9,385 11,664
Retirement of long-term debt (103,970) (608,112)
Repurchase of common stock (392,591) (14,957)
Redemption of preferred and preference stock (152,493) (76,758)
Changes in short-term borrowings - net 315,000 (215,500)
Dividends paid:
Common stock (139,585) (144,059)
Preferred stock (16,715) (21,671)
-------------------------
Net cash flow provided by (used in)
financing activities 444,920 (452,173)
-------------------------
Effect of exchange rates on cash and cash
equivalents (2,946) (541)
-------------------------
Net increase (decrease) in cash and cash
equivalents 583,355 (98,761)
Cash and cash equivalents at beginning of
period 1,213,719 1,184,495
-------------------------
Cash and cash equivalents at end of period $1,797,074 $1,085,734
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $224,697 $319,456
Income taxes $94,478 $50,819
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $7,379 $24,544
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $156,068 $108,198
Temporary cash investments - at cost,
which approximates market 1,637,028 1,105,521
Special deposits 3,978 -
-------------------------
Total cash and cash equivalents 1,797,074 1,213,719
-------------------------
Other temporary investments - at cost,
which approximates market 23,100 321,351
Notes receivable 3,643 2,161
Accounts receivable:
Customer 299,948 290,331
Allowance for doubtful accounts (9,007) (9,507)
Other 354,719 207,898
Accrued unbilled revenues 375,983 298,616
-------------------------
Total receivables 1,021,643 787,338
-------------------------
Deferred fuel costs 394,875 240,661
Fuel inventory - at average cost 122,835 94,419
Materials and supplies - at average cost 358,217 392,403
Rate deferrals 24,265 30,394
Deferred nuclear refueling outage costs 33,708 58,119
Prepayments and other 101,796 78,567
-------------------------
TOTAL 3,881,156 3,219,132
-------------------------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 214 214
Decommissioning trust funds 1,284,301 1,246,023
Non-utility property - at cost (less accumulated
depreciation) 327,191 317,165
Non-regulated investments 264,442 198,003
Other - at cost (less accumulated depreciation)
22,145 16,714
-------------------------
TOTAL 1,898,293 1,778,119
-------------------------
UTILITY PLANT
Electric 23,421,808 23,163,161
Plant acquisition adjustment 398,797 406,929
Property under capital lease 771,466 768,500
Natural gas 190,000 186,041
Construction work in progress 1,960,517 1,500,617
Nuclear fuel under capital lease 262,996 286,476
Nuclear fuel 109,098 87,693
-------------------------
TOTAL UTILITY PLANT 27,114,682 26,399,417
Less - accumulated depreciation and amortization 11,248,370 10,898,661
-------------------------
UTILITY PLANT - NET 15,866,312 15,500,756
-------------------------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 7,430 16,581
SFAS 109 regulatory asset - net 1,031,503 1,068,006
Unamortized loss on reacquired debt 192,493 198,631
Other regulatory assets 706,401 637,870
Long-term receivables 30,970 32,260
Other 709,718 533,732
-------------------------
TOTAL 2,678,515 2,487,080
-------------------------
TOTAL ASSETS $24,324,276 $22,985,087
=========================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Currently maturing long-term debt $194,108 $194,555
Notes payable 435,716 120,715
Accounts payable 796,560 707,678
Customer deposits 164,986 161,909
Taxes accrued 580,593 445,677
Accumulated deferred income taxes 115,987 72,640
Nuclear refueling outage costs 2,329 11,216
Interest accrued 153,388 129,028
Co-owner advances 14,382 7,018
Obligations under capital leases 175,466 178,247
Other 173,865 125,749
-------------------------
TOTAL 2,807,380 2,154,432
-------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,224,430 3,310,340
Accumulated deferred investment tax credits 506,142 519,910
Obligations under capital leases 177,874 205,464
FERC settlement - refund obligation 34,143 37,337
Other regulatory liabilities 225,843 199,139
Decommissioning 725,858 703,453
Transition to competition 176,722 157,034
Regulatory reserves 415,420 378,307
Accumulated provisions 280,378 279,425
Other 818,711 535,156
-------------------------
TOTAL 6,585,521 6,325,565
-------------------------
Long-term debt 7,378,602 6,612,583
Preferred stock with sinking fund 69,650 69,650
Preference stock - 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holdingsolely junior subordinated deferrable
debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 335,961 338,455
Common stock, $.01 par value, authorized 500,000,000
shares; issued 247,172,239 shares in 2000 and
247,082,345 shares in 1999 2,472 2,471
Paid-in capital 4,636,407 4,636,163
Retained earnings 2,982,495 2,786,467
Accumulated other comprehensive income:
Cumulative foreign currency translation
adjustment (69,811) (68,782)
Net unrealized investment losses (6,275) (5,023)
Less - treasury stock, at cost (23,709,144
shares in 2000 and 8,045,434 shares in 1999) 613,126 231,894
-------------------------
TOTAL 7,268,123 7,457,857
-------------------------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,324,276 $22,985,087
=========================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended
2000 1999
(In Thousands)
<S> <C> <C> <C> <C>
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,814,499 $2,514,735
Add - Earnings applicable to common stock 237,192 $237,192 199,777 $199,777
Deduct:
Dividends declared on common stock 68,393 74,031
Capital stock and other expenses 803 108
---------- ----------
Total 69,196 74,139
---------- ----------
Retained Earnings - End of period $2,982,495 $2,640,373
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($79,447) ($46,360)
Foreign currency translation adjustments (322) (322) (1,337) (1,337)
Net unrealized investment gains 3,683 3,683 - -
---------- ---------
Balance at end of period ($76,086) ($47,697)
========== -------- ========= --------
Comprehensive Income $240,553 $198,440
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,636,474 $4,631,040
Other paid in capital (67) 1,486
---------- ----------
Paid-in Capital - End of period $4,636,407 $4,632,526
========== ==========
Six Months Ended
2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,786,467 $2,526,888
Add - Earnings applicable to common stock 336,052 $336,052 261,958 $261,958
Deduct:
Dividends declared on common stock 140,051 148,020
Capital stock and other expenses (27) 453
---------- ----------
Total 140,024 148,473
---------- ----------
Retained Earnings - End of period $2,982,495 $2,640,373
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($73,805) ($46,739)
Foreign currency translation adjustments (1,029) (1,029) (958) (958)
Net unrealized investment losses (1,252) (1,252) - -
---------- ----------
Balance at end of period ($76,086) ($47,697)
========== -------- ========== --------
Comprehensive Income $333,771 $261,000
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,636,163 $4,630,609
Other paid in capital 244 1,917
---------- ----------
Paid-in Capital - End of period $4,636,407 $4,632,526
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Domestic Electric Operating Revenues:
Residential $524.9 $497.8 $27.1 5
Commercial 387.7 358.8 28.9 8
Industrial 497.1 449.6 47.5 11
Governmental 41.3 38.4 2.9 8
-----------------------------------
Total retail 1,451.0 1,344.6 106.4 8
Sales for resale 92.9 86.8 6.1 7
Other 120.8 181.7 (60.9) (34)
-----------------------------------
Total $1,664.7 $1,613.1 $51.6 3
===================================
Billed Electric Energy
Sales (GWH):
Residential 6,857 6,850 7 -
Commercial 5,880 5,741 139 2
Industrial 11,021 10,827 194 2
Governmental 635 624 11 2
-----------------------------------
Total retail 24,393 24,042 351 1
Sales for resale 2,523 2,094 429 20
-----------------------------------
Total 26,916 26,136 780 3
===================================
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $993.1 $929.8 $63.3 7
Commercial 734.5 675.0 59.5 9
Industrial 950.5 856.2 94.3 11
Governmental 80.1 74.4 5.7 8
----------------------------------
Total retail 2,758.2 2,535.4 222.8 9
Sales for resale 176.2 163.9 12.3 8
Other 83.2 152.4 (69.2) (45)
-----------------------------------
Total $3,017.6 $2,851.7 $165.9 6
===================================
Billed Electric Energy
Sales (GWH):
Residential 13,369 13,267 102 1
Commercial 11,160 10,910 250 2
Industrial 21,638 21,043 595 3
Governmental 1,222 1,213 9 1
-----------------------------------
Total retail 47,389 46,433 956 2
Sales for resale 4,795 4,303 492 11
-----------------------------------
Total 52,184 50,736 1,448 3
===================================
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures
(excluding nuclear fuel), long-term debt and preferred stock
maturities, and cash sinking fund requirements.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries
in the Entergy London and CitiPower sales transactions.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear
fuel, other high-level radioactive waste, and decommissioning costs
associated with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1,
and Pilgrim.
ANO Matters (Entergy Corporation and Entergy Arkansas)
See Note 9 to the financial statements in the Form 10-K for
information on cracks in a number of steam generator tubes at ANO 2
that were discovered and repaired during an outage in March 1992, and
the replacement of the steam generators scheduled for September 2000.
On July 21, 2000, ANO 2 went offline to conduct additional
inspections on the steam generator tubes as requested by the NRC.
Management expects that ANO 2 will go back online in mid-August 2000.
Environmental Issues
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially
responsible party (PRP) for the cleanup of certain hazardous waste
disposal sites. Entergy Gulf States is in periodic negotiations with
the U.S. Environmental Protection Agency and state authorities
regarding the cleanup of certain of these sites. As of June 30,
2000, a remaining recorded liability of approximately $17.7 million
existed related to the cleanup of the remaining sites at which
Entergy Gulf States has been designated a PRP. See "Environmental
Regulation" in Item 1 of Part I of the Form 10-K for additional
discussion of Entergy Gulf States' environmental clean-up activity
and related litigation.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the Louisiana Department of Environmental Quality
(LDEQ) issued new rules for solid waste regulation, including
regulation of wastewater impoundments. Entergy Louisiana and Entergy
New Orleans have determined that certain of their power plant
wastewater impoundments were affected by these regulations and chose
to upgrade or close them. Completion of this work is awaiting LDEQ
approval. LDEQ has issued notices of deficiencies for certain of
these sites. Additional notices of deficiencies are expected in the
third quarter of 2000. Recorded liabilities in the amounts of
$5.8 million and $0.5 million existed at June 30, 2000 for wastewater
upgrades and closures for Entergy Louisiana and Entergy New Orleans,
respectively. Management of Entergy Louisiana and Entergy New
Orleans believe these reserves are adequate based on current
estimates.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the
City of New Orleans pursuant to franchise ordinances. These
ordinances contain a continuing option for the City to purchase
Entergy New Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
separate but substantially identical transactions for the sale and
leaseback of undivided interests (aggregating approximately 9.3%) in
Waterford 3, which were refinanced in 1997. Entergy Louisiana is
obligated under certain circumstances to pay amounts sufficient to
permit the Owner Participants to withdraw from these lease
transactions. Additionally, Entergy Louisiana may be required to
assume the outstanding bonds issued by the Owner Trustee under these
leases to finance, in part, its acquisition of the undivided
interests in Waterford 3. See Note 10 to the financial statements in
the Form 10-K for further information.
Employment Litigation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans are defendants in numerous
lawsuits filed by former employees asserting that they were
wrongfully terminated and/or discriminated against on the basis of
age, race, and/or sex. The defendant companies are vigorously
defending these suits and deny any liability to the plaintiffs.
However, no assurance can be given as to the outcome of these cases.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement,
System Energy has agreed to a number of covenants relating to the
maintenance of certain capitalization and fixed charge coverage
ratios. System Energy agreed, during the term of the agreement, to
maintain its equity at not less than 33% of its adjusted
capitalization (defined in the agreement to include certain amounts
not included in capitalization for financial statement purposes). In
addition, System Energy must maintain, with respect to each fiscal
quarter during the term of the agreement, a ratio of adjusted net
income to interest expense (calculated, in each case, as specified in
the agreement) of at least 1.60 times earnings. System Energy was in
compliance with the above covenants at June 30, 2000. See Note 9 to
the financial statements in the Form 10-K for further information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In addition to those proceedings discussed elsewhere herein and
in the Form 10-K, Entergy and the domestic utility companies are
involved in a number of other legal proceedings and claims in the
ordinary course of their businesses. While management is unable to
predict the outcome of these other legal proceedings and claims, it
is not expected that their ultimate resolution individually or
collectively will have a material adverse effect on the results of
operations, cash flows, or financial condition of these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring
Previous developments and information related to electric
industry restructuring are presented in Note 2 to the financial
statements in the Form 10-K.
Arkansas
(Entergy Corporation and Entergy Arkansas)
As discussed in Note 2 to the financial statements in the Form
10-K, in April 1999 the Arkansas legislature enacted a law providing
for competition in the electric utility industry through retail open
access on January 1, 2002. When retail open access is achieved, the
generation operations will become a competitive business, but
transmission and distribution operations will continue to be
regulated. The APSC may delay implementation of retail open access,
but not beyond June 30, 2003.
The implementation of the Arkansas retail open access law
through rulemakings and company filings is ongoing. Rulemakings
associated with energy service provider licensing rules and affiliate
rules have been completed. In June 2000, the APSC declared that
billing would become a competitive service at the beginning of retail
open access. Entergy Arkansas filed a functional, but not corporate,
unbundling plan with the APSC on August 8, 2000. The plan initially
establishes separate business units for distribution, generation, and
a new retail energy service provider. The plan contemplates the
transfer of transmission assets to the Transco discussed in the Form
10-K in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS." The functional unbundling plan is
tentative because the regulatory requirements to implement the retail
open access law have not been finalized, and changes to the details
of the plan are likely.
In June 2000, Entergy Arkansas filed an application to continue
the stranded cost mitigation efforts agreed upon in the 1997
settlement agreement approved by the APSC. These mitigation efforts
include the funding of a transition cost account with excess earnings
to offset future stranded costs and the accelerated amortization of
Entergy Arkansas' share of the Grand Gulf purchased power obligation
under the Unit Power Sales Agreement. The filing included an updated
stranded cost estimate intended to support Entergy Arkansas'
recommendation that the mitigation efforts continue. The filing
presents an estimated range of stranded costs based upon the
comparison of possible generation asset market values to the
generation assets' book values and contractual obligations. The
range of possible generation asset market values used in the estimate
was determined using generation asset sales in other jurisdictions.
The estimated range of stranded costs in Arkansas set forth in the
filing is $254 million to $1.64 billion.
Texas
(Entergy Corporation and Entergy Gulf States)
As discussed in Note 2 to the financial statements in the Form
10-K, in June 1999 the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open
access. The law provides for retail open access by most electric
utilities, including Entergy Gulf States, on January 1, 2002. When
retail open access is achieved, the generation business and a new
retail electricity provider function will become competitive
businesses, but transmission and distribution operations will
continue to be regulated. The new retail provider function will be
the primary point of contact with the customers for most services
beyond initiation of electric service and restoration of service
following outages.
In January 2000, as required by the Texas restructuring
legislation, Entergy Gulf States filed a business separation plan
with the PUCT, which was amended in June 2000. The plan provided
that, by January 2002, Entergy Gulf States would ultimately be
divided into a Texas distribution company, a Texas transmission
company, a Texas generation company, a Texas retail electricity
provider, and a Louisiana company that will encompass distribution,
generation, and transmission operations. In July 2000, the PUCT
issued an interim order to approve the amended business separation
plan. The plan provides that the Louisiana company would retain the
liability for all debt obligations of Entergy Gulf States and that
the property of the Texas companies would be released from the lien
of Entergy Gulf States' mortgage. Each of the Texas companies would
assume a portion of Entergy Gulf States' debt obligations, which
assumptions would not act to release the Louisiana company's
obligations. Each of the Texas companies would also grant a lien on
properties in favor of the Louisiana company to secure its
obligations to the Louisiana company in respect of the assumed
obligations. In addition, under the plan Entergy Gulf States will
refinance or retire existing debt through 2004. Regulatory approvals
from FERC, the SEC, and the LPSC will be required before the business
separation plan can be implemented. Remaining business separation
issues in Texas will be addressed in the unbundled costs proceeding
before the PUCT. The LPSC has opened a docket to identify the
changes in corporate structure of Entergy Gulf States, and their
potential impact on Louisiana retail ratepayers, resulting from
restructuring in Texas and Arkansas. Entergy Gulf States filed
testimony in that proceeding in August 2000 and hearings are
scheduled in February 2001.
On March 31, 2000, pursuant to the Texas restructuring
legislation, Entergy Gulf States filed cost data with the PUCT for
its unbundled business functions and proposed tariffs for its
unbundled distribution utility. In the filing, Entergy Gulf States
is seeking approval for recovery of the following, among other
things:
o the unbundled distribution utility's cost of service;
o a 12% return on equity for the unbundled distribution utility;
and
o a ten-year non-bypassable charge to recover estimated stranded
costs and a non-bypassable charge to recover nuclear decommissioning
costs.
At a prehearing conference held in April 2000, a procedural
schedule for the case was established, calling for a hearing in
January 2001. Management cannot predict the outcome of this
proceeding. In connection with unbundled cost filings made by all
Texas investor-owned utilities, the PUCT has opened a "generic
docket" to determine issues that may be resolved on an industry-wide
basis before the individual utility hearings begin. These issues
include updating gas prices to be used in the model established by
the PUCT for estimating stranded costs and incentive mechanisms to
enhance the authorized rate of return.
Federal Regulatory Activity (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, and System Energy)
In April 2000, the LPSC and the Council filed a complaint with
FERC seeking revisions to the System Agreement that they allege are
necessary to accommodate the introduction of retail competition in
Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas
provide utility service, and to protect Entergy's Louisiana customers
from any adverse impact that may occur due to the introduction of
such retail competition in some jurisdictions but not others. The
LPSC and the Council request that FERC immediately institute a
proceeding to permit changes to be adopted prior to January 1, 2002,
and request, among other things, that FERC cap certain of the System
Agreement obligations of Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans and fix these companies' access to pool energy at
the average level existing for the three years prior to the date that
retail access is initiated in Texas and Arkansas. Alternatively, the
LPSC and the Council request that FERC require Entergy to provide
wholesale power contracts to these companies to satisfy their energy
requirements at costs no higher than would have been incurred if
retail competition were not implemented. The LPSC and the Council
request that the relief be made available for at least eight years
after implementation of retail competition or the withdrawal of
Entergy Arkansas and Entergy Gulf States from the System Agreement,
or until retail access is implemented in Louisiana and New Orleans.
In addition, among other things, the LPSC and the Council assert in
their complaint that:
o unless the requested relief is granted, the restructuring
legislation adopted in Texas and Arkansas, to the extent such
legislation requires, or has the effect of, altering the rights of
parties under the System Agreement, will result in violations of the
interstate commerce clause, the due process clause, and the
impairment of contracts clause in the U.S. Constitution; and
o the failure of the domestic utility companies to honor a right
of first refusal with respect to any sale of generating capacity and
associated energy under the System Agreement, and any attempt to
eliminate such right of first refusal from the System Agreement,
would violate the Federal Power Act and constitute a breach of the
System Agreement.
In June 2000, Entergy's domestic utility companies filed
proposed amendments to the System Agreement with FERC to facilitate
the implementation of retail competition in Arkansas and Texas and to
provide for continued equalization of costs among the domestic
utilities in Louisiana and Mississippi. The amendments provide the
following:
o cessation of participation in all aspects of the System
Agreement, other than those related to transmission equalization,
for any jurisdictional division of a domestic utility operating
in a jurisdiction that initiates retail access;
o certain sections of the System Agreement will no longer apply to
the sales of generating capacity, whether through the sale of
the asset or the output thereof, by a domestic utility operating
in a jurisdiction that has established a date by which it will
implement retail access; and
o modification of the service schedule developed to track changes
in energy costs resulting from the Entergy-Gulf States Utilities
merger to include one final true-up of fuel costs upon cessation
of one company's participation in the System Agreement, which
thereafter will no longer be applicable for any purpose.
Entergy believes that the proceedings relating to the proposed
amendments serve as a response to the complaint by the LPSC and the
Council and anticipates that the proceedings would be consolidated.
In response to Entergy's proposal, the LPSC and the Council have
requested that FERC dismiss the proposed amendments and proceed with
the complaint proceedings. Several other parties have also
intervened in the proceeding. In the event that the proceedings
relating to the proposed amendments proceed, the LPSC and the Council
have asserted that the charges to the domestic utility companies
under the Unit Power Sales Agreement need to be reconsidered.
Entergy has requested an expedited hearing on the proposed amendments
and that FERC issue a final decision by October 1, 2001. A
procedural schedule has not been established. Neither the timing,
nor the ultimate outcome of these proceedings at FERC can be
predicted at this time.
Retail Rate Proceedings
Previous developments and information related to retail rate
proceedings are presented in Note 2 to the financial statements in
the Form 10-K.
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In March 2000, Entergy Arkansas filed its annually redetermined
energy cost recovery (ECR) rate with the APSC in accordance with the
energy cost recovery rider formula. The filing reflected that an
increase was warranted to collect an under-recovery of energy costs
for 1999. The increased ECR rate is effective April 2000 through
March 2001.
As discussed in Note 2 to the financial statements in the Form
10-K, Entergy Arkansas is operating under the terms of a settlement
agreement approved by the APSC in December 1997 that allows the
collection of excess earnings in a transition cost account. An
adjustment was made to the transition cost account in May 2000
resulting in a negative net income impact of $4.4 million ($2.7
million after tax). Interest of $2.6 million ($1.6 million net of
tax) was also recorded in the transition cost account for the first
six months of 2000. The results of operations reflect these charges
in operating expenses.
Filings with the PUCT and Texas Cities
PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States)
As determined in the settlement agreement discussed in Note 2 to
the financial statements in the Form 10-K, Entergy Gulf States
adopted a methodology for calculating its fixed fuel factor based on
the market price of natural gas. This calculation and any necessary
adjustments occur semi-annually and will continue until December
2001.
The amounts collected under Entergy Gulf States' fixed fuel
factor through December 2001 are subject to fuel reconciliation
proceedings before the PUCT, including a fuel reconciliation case
filed by Entergy Gulf States in July 1999. In February 2000, Entergy
Gulf States reached a settlement with all but one of the parties to
that proceeding. Entergy Gulf States reconciled approximately $731
million (after excluding approximately $14 million related to Cajun
issues to be handled in a subsequent proceeding) of fuel and
purchased power costs. The settlement reduces Entergy Gulf States'
requested surcharge in the reconciliation filing from $14.7 million
to $2.2 million. This settlement was approved by the PUCT in
April 2000, confirming an interim order that allowed Entergy Gulf
States to begin the recovery of the $2.2 million surcharge between
April 2000 and January 2001. In addition, Entergy Gulf States agreed
to file a fuel reconciliation case by January 12, 2001 covering the
period from March 1, 1999 through August 31, 2000. The decrease in
the requested surcharge was recorded in March 2000 and is reflected
in Entergy Gulf States' operating income.
In September 1999, the PUCT approved the final adjustment of the
rate refunds ordered as a result of Entergy Gulf States' November
1996 rate case. These refunds were completed in the October 1999
billing month. Pursuant to the September 1999 order, a true-up
proceeding was initiated, which required Entergy Gulf States to
refund an additional $25 million. This refund was concluded in
December 1999. The PUCT approved the final refund and concluded the
proceeding in June 2000.
In September 1999, Entergy Gulf States filed an application with
the PUCT requesting an interim fuel surcharge to collect under-
recovered fuel and purchased power expenses incurred from March 1999
through July 1999. In December 1999, the PUCT approved the
collection of $33.9 million over a five-month period beginning
January 2000. An administrative appeal of the interim fuel surcharge
was filed by certain cities in Travis County District Court. The
fuel and purchased power expenses contained in this surcharge will be
subject to future fuel reconciliation proceedings.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf
States)
In June 2000, the LPSC approved a settlement between Entergy
Gulf States and the LPSC staff to refund $83 million, including
interest, resolving refund issues in Entergy Gulf States' second,
third, fourth, and fifth post-Merger earnings reviews by the LPSC.
The refund, for which adequate reserves have been made, will occur
over a three-month period beginning July 2000.
In May 2000, Entergy Gulf States filed its seventh required post-
Merger earnings analysis with the LPSC. This filing will be subject
to review by the LPSC, which may result in a change in rates.
Entergy Gulf States also is proposing that the allowed return on
common equity be increased to 11.60%. A procedural schedule has not
yet been established by the LPSC.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In April 1999, Entergy Louisiana submitted its fourth annual
performance-based rate plan filing for the 1998 test year. A rate
reduction of $15 million was implemented effective August 1, 1999.
In May 2000, the LPSC ordered an additional $6.4 million refund
effective April 2000. Entergy Louisiana has provided reserves for
these refunds. In addition, the LPSC extended Entergy Louisiana's
formula rate plan for an additional year with the last filing to be
made on April 15, 2001.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based rate plan filing for the 1999 test year. The
filing indicated that a $24.8 million base rate reduction might be
appropriate for implementation effective August 2000. Entergy
Louisiana is proposing to increase prospectively the allowed return
on common equity from 10.5% to 11.6%, which would reduce the amount
of any rate reduction implemented. This filing will be subject to
review by the LPSC. A procedural schedule has not yet been
established by the LPSC.
Fuel Adjustment Clause Litigation
(Entergy Corporation and Entergy Louisiana)
In May 1998, a group of ratepayers filed a complaint against
Entergy Corporation, Entergy Power, and Entergy Louisiana in state
court in Orleans Parish purportedly on behalf of all Entergy
Louisiana ratepayers. The plaintiffs seek treble damages for alleged
injuries arising from alleged violations by the defendants of
Louisiana's antitrust laws in connection with the costs included in
fuel filings with the LPSC and passed through to ratepayers. Among
other things, the plaintiffs allege that Entergy Louisiana improperly
introduced certain costs into the calculation of the fuel charges,
including high-cost electricity imprudently purchased from its
affiliates and high-cost gas imprudently purchased from independent
third party suppliers. In addition, plaintiffs seek to recover
interest and attorney's fees. Exceptions were filed by Entergy,
asserting that this dispute should be litigated before the LPSC and
FERC. At the appropriate time, if necessary, Entergy will raise its
defenses to the antitrust claims. At present, the suit in state
court is stayed by stipulation of the parties.
Plaintiffs also requested that the LPSC initiate a review of
Entergy Louisiana's monthly fuel adjustment charge filings and force
restitution to ratepayers of all costs that the plaintiffs allege
were improperly included in those fuel adjustment filings. Marathon
Oil Company and Louisiana Energy Users Group have also intervened in
the LPSC proceeding. Discovery at the LPSC has been conducted and is
expected to continue. Direct testimony was filed with the LPSC by
plaintiffs and the intervenors in July 1999. In their testimony for
the period 1989 through 1998, plaintiffs purport to quantify many of
their claims in an amount totaling $544 million, plus interest. The
plaintiffs will likely assert additional damages for the period 1974
through 1988. The Entergy companies filed responsive and rebuttal
testimony in September 1999. Rebuttal testimony by the plaintiffs
and intervenors was filed in November 1999.
Entergy Louisiana and the staff of the LPSC have reached an
agreement in principle for the settlement of the matter before the
LPSC. The terms of the proposed settlement have not as yet been
agreed to by other parties to the LPSC proceeding, and must be
approved by the LPSC after any parties contesting the settlement are
afforded the opportunity for a hearing. Entergy Louisiana would
agree under the proposed settlement terms to refund to customers
approximately $72 million to resolve all claims arising out of or
relating to Entergy Louisiana's fuel adjustment clause filings from
January 1, 1975 through December 31, 1999, except with respect to
purchased power and associated costs included in the fuel adjustment
clause filings for the period May 1 through September 30, 1999.
Reserves were previously provided by Entergy Louisiana for the
refund. If the proposed settlement is approved, Entergy Louisiana
would also consent to future fuel cost recovery under a long-term gas
contract based on a formula that would likely result in an under-
recovery of actual costs under that contract for the remainder of its
term, which runs through 2013. The future under-recovery cannot be
precisely estimated at this time because it will depend upon factors
that are not certain, such as the price of gas and the amount of gas
purchased under the long-term contract. In recent years, Entergy
Louisiana has made purchases under that contract totaling from $91
million to $121 million annually. Had the proposed settlement terms
been applicable to such purchases, the under-recoveries would have
ranged from $4 million to $9 million per year. Hearings in this
proceeding are scheduled for September 2000, which will include
consideration of the proposed settlement.
In its intervention, Marathon Oil Company and Louisiana Energy
Users Group requested that the LPSC review the prudence of a contract
entered into by Entergy Louisiana to purchase energy generated by a
hydroelectric facility known as the Vidalia project through the year
2031. Note 9 to the financial statements in the Form 10-K contains
further discussions of the obligations related to the Vidalia
project. By orders entered by the LPSC in 1985 and 1990, the LPSC
approved Entergy Louisiana's entry into the Vidalia contract and
Entergy Louisiana's right to recover, through the fuel adjustment
clause, the costs of power purchased thereunder. Additionally, the
wholesale electric rates under the Vidalia power purchase contract
were filed at FERC. In December 1999, the LPSC instituted a review
of the following issues relating to the Vidalia project: (i) the
LPSC's jurisdiction over the Vidalia project; (ii) Entergy
Louisiana's management of the Vidalia contract, including
opportunities to restructure or otherwise reform the contract; (iii)
the appropriateness of Entergy Louisiana's recovery of 100% of the
Vidalia contract costs from ratepayers; (iv) the appropriateness of
the fuel adjustment clause as the method for recovering all or part
of the Vidalia contract costs; (v) the appropriate regulatory
treatment of the Vidalia contract in the event the LPSC approves
implementation of retail competition; and (vi) Entergy Louisiana's
communication of pertinent information to the LPSC regarding the
Vidalia project and contract. Based on its review, the LPSC will
determine whether it should disallow any of the costs of the Vidalia
project included in the fuel adjustment clause.
In March 2000, Entergy Louisiana filed testimony in this sub-
docket asserting that the prudence of the Vidalia contract already
has been approved by final orders of the LPSC and that recovery of
all amounts paid by Entergy Louisiana related to the Vidalia project
pursuant to the FERC-filed rate is appropriate. Direct testimony was
filed by intervenor Marathon Oil Company in May 2000 and by the LPSC
staff and intervenor Louisiana Energy Users Group in July 2000. In
its testimony the LPSC staff alleges that Entergy Louisiana was
imprudent for not declaring to the LPSC that the Vidalia project had
become uneconomic and not threatening to block the Vidalia project's
owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985
order (approving the Entergy Louisiana/Vidalia project power purchase
agreement), unless the Vidalia project's owners' shared with Entergy
Louisiana's ratepayers some portion of what the LPSC staff quantifies
as approximately $90 million of tax consequences available to the
project. The LPSC staff's testimony does not quantify how much of
the potential tax savings Entergy Louisiana should have demanded in
exchange for not attempting to block the Vidalia project's owners'
request for clarification; however, that testimony does suggest
various alternatives by which some portion of the $90 million,
perhaps $45 million plus interest since 1990, could be returned to
the ratepayers. The direct testimony of the intervenor Louisiana
Energy Users Group alleges that Entergy Louisiana was imprudent for
not attempting to block the Vidalia project's owners' July 30, 1990
request that the LPSC clarify the LPSC's 1985 order approving the
Entergy Louisiana/Vidalia project power purchase agreement; however,
that intervenor does not quantify the amount of damage alleged to
have been caused by this alleged imprudence. The direct testimony of
the intervenor Marathon Oil Company alleges with respect to Entergy
Louisiana that imprudent Vidalia project costs should be disallowed
and that Entergy Louisiana's customers should not be charged 100% of
the Vidalia costs. It is anticipated that hearings in this sub-
docket concerning the Vidalia contract will be completed by the end
of 2000.
(Entergy Corporation and Entergy New Orleans)
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state court in Orleans Parish purportedly on behalf
of all Entergy New Orleans ratepayers. The plaintiffs seek treble
damages for alleged injuries arising from the defendants' alleged
violations of Louisiana's antitrust laws in connection with certain
costs passed on to ratepayers in Entergy New Orleans' fuel adjustment
filings with the Council. In particular, plaintiffs allege that
Entergy New Orleans improperly included certain costs in the
calculation of fuel charges and that Entergy New Orleans imprudently
purchased high-cost fuel from other Entergy affiliates. Plaintiffs
allege that Entergy New Orleans and the other defendant Entergy
companies conspired to make these purchases to the detriment of
Entergy New Orleans' ratepayers and to the benefit of Entergy's
shareholders, in violation of Louisiana's antitrust laws. Plaintiffs
also seek to recover interest and attorney's fees. Exceptions to the
plaintiffs' allegations were filed by Entergy, asserting, among other
things, that jurisdiction over these issues rests with the Council
and FERC. If necessary, at the appropriate time, Entergy will also
raise its defenses to the antitrust claims. At present, the suit in
state court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the Council in order
to initiate a review by the Council of their allegations and to force
restitution to ratepayers of all costs they allege were improperly
and imprudently included in the fuel adjustment filings. Discovery
has begun in the proceedings before the Council. In April 2000,
testimony was filed on behalf of the plaintiffs in this proceeding.
The testimony asserts, among other things, that Entergy New Orleans
and other defendants have engaged in fuel procurement and power
purchasing practices that could have resulted in New Orleans
customers being overcharged by more than $45 million over a period of
years. However, it is not clear precisely what periods and damages
are being alleged. Entergy intends to defend this matter vigorously,
both in court and before the Council. The ultimate outcome of the
lawsuit and the Council proceeding cannot be predicted at this time.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
In March 2000, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 1999 test year.
The filing indicated that no change in rate levels was warranted and
the current rate levels remain in effect.
Purchased Power for Summer 2000 (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies filed applications with the APSC,
the LPSC, the MPSC, and the Council to approve the sale of power by
Entergy Gulf States from its unregulated, undivided 30% interest in
River Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. In addition, Entergy Gulf
States and Entergy Louisiana filed an application with the LPSC for
authorization to purchase capacity and electric power from third
parties for the summer of 2000. The commissions and Council have
approved the applications, with a reservation of their right to
review the prudence of the purchases and the appropriate
catagorization of the costs as either capacity or energy charges for
purposes of recovery.
Proposed Rate Increase (Entergy Corporation, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
As discussed in Note 2 to the financial statements in the Form
10-K, System Energy applied to FERC in May 1995 for a $65.5 million
rate increase. The request sought changes to System Energy's rate
schedule, including increases in the revenue requirement associated
with decommissioning costs, the depreciation rate, and the rate of
return on common equity. In December 1995, System Energy implemented
the $65.5 million rate increase, subject to refund, for which a
portion has been reserved.
After a hearing, FERC issued an order in August 2000 in the
proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on
equity, but modified the return to reflect changes in capital market
conditions since the ALJ's decision. FERC adjusted the rate of
return to 10.58% for the period December 1995 to the date of FERC's
decision, and prospectively adjusted the rate of return to 10.94%
from the date of FERC's decision. FERC's decision also changed other
aspects of System Energy's proposed rate schedule, including the
depreciation rate and decommissioning costs and their methodology.
System Energy has provided reserves for a potential refund to
the rate level of the initial ALJ decision, including interest.
Management is analyzing the effect of FERC's decision, but a refund
to the FERC decision rate level is not expected to have a material
adverse effect on Entergy's, System Energy's, or the domestic utility
companies results of operations. Management's analysis may result in
a request for rehearing or an appeal of FERC's order.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 2000, Entergy Corporation
repurchased 16,126,000 shares of common stock in the open market for
an aggregate purchase price of approximately $389 million. These
shares were purchased pursuant to Entergy's stock repurchase plan and
also to fulfill the requirements of various stock-based compensation
and benefit plans. Under the terms of the Merger Agreement, Entergy
will use its commercially reasonable efforts to purchase in open
market transactions an additional $430 million of shares of its
common stock.
During the six months ended June 30, 2000, Entergy Corporation
issued 462,290 shares of its previously repurchased common stock to
satisfy stock options exercised and employee stock purchases. In
addition, Entergy Corporation received proceeds of approximately $2.0
million from the issuance of 89,894 shares of common stock under its
dividend reinvestment and stock purchase plan.
NOTE 4. LONG-TERM DEBT
(Entergy Mississippi)
On February 15, 2000, Entergy Mississippi issued $120 million of
7.75% Series First Mortgage Bonds due February 15, 2003. The
proceeds are being used for general corporate purposes, including the
retirement of short-term indebtedness that was incurred for working
capital needs and capital expenditures.
(Entergy Arkansas)
On March 9, 2000, Entergy Arkansas issued $100 million of 7.72%
Series First Mortgage Bonds due March 1, 2003. The proceeds are
being used for general corporate purposes, including the retirement
of short-term indebtedness that was incurred for working capital
needs and capital expenditures.
(Entergy Louisiana)
On March 1, 2000, Entergy Louisiana redeemed, at maturity, $100
million of 6.00% Series First Mortgage Bonds using funds received
from an open-account advance from Entergy Corporation.
On May 23, 2000, Entergy Louisiana issued $150 million of 8.50%
Series First Mortgage Bonds due June 1, 2003. The proceeds are being
used for general corporate purposes, including the repayment of the
open account advance from Entergy Corporation and of short-term
indebtedness that was incurred for capital needs and capital
expenditures.
(Entergy Gulf States)
On June 1, 2000, Entergy Gulf States issued $300 million of
First Mortgage Bonds due June 2, 2003 bearing interest at an initial
rate of 8.04%. The proceeds are being used for general corporate
purposes, including the retirement of short-term indebtedness that
was incurred for capital needs and capital expenditures, and the
mandatory redemption of $150 million of preference stock.
(Entergy New Orleans)
On July 25, 2000, Entergy New Orleans issued $30 million of
8.125% Series First Mortgage Bonds due July 15, 2005. The proceeds
are being used for general corporate purposes, including the
retirement of short-term indebtedness that was incurred for capital
needs and capital expenditures.
(Entergy Corporation)
In May 2000, Entergy's global power development business entered
into 10-year interest rate swap agreements with an average fixed rate
of 6.568% for approximately 75% of the debt outstanding under the
Damhead Creek bridge and term loan portion of the Senior Credit
Facility. The global power development business is exposed to market
risks from movements in interest rates for the hedged portion of the
debt only in the unlikely event that the counterparties to the
interest rate swap agreements were to default on contractual
payments. At June 30, 2000, Entergy's global power development
business had outstanding interest rate swap agreements totalling a
notional amount of $362.8 million. Under the Senior Credit Facility
and the Subordinated Credit Facility, the ability of the global power
development business to make distributions of dividends, loans, or
advances to Entergy Corporation is restricted by, among other things,
the requirement to pay permitted project costs, make debt repayments,
and maintain cash reserves. See Note 7 to the financial statements
in the Form 10-K for further discussion on the financing of the
Damhead Creek project.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 28, 2000, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.30 per share, payable on
September 1, 2000, to holders of record on August 14, 2000.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
See Note 14 to the financial statements in the Form 10-K for
information regarding Entergy's adoption of SFAS 131 and its
operating segments. Entergy's segment financial information for the
three months ended June 30, 2000 and 1999 is as follows (in
thousands):
<TABLE>
<CAPTION>
Domestic Power
Utility and Marketing
System and All
Energy Trading* Other* Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
2000
Operating Revenues $1,697,577 $372,803 $ 79,988 $ (12,580) $2,137,788
Income Taxes 120,306 2,061 27,496 - 149,863
Net Income 186,946 3,823 55,004 - 245,773
1999
Operating Revenues $1,646,027 $ 668,797 $ 9,868 $ (8,288) $ 2,316,404
Income Taxes 107,903 1,187 (22,657) - 86,433
Net Income 174,868 (142) 35,032 - 209,758
</TABLE>
Entergy's segment financial information for the six months ended
June 30, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Domestic Power
Utility and Marketing
System and
Energy Trading* All Other* Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
2000
Operating Revenues $3,098,921 $718,960 $ 155,839 $ (24,440) $ 3,949,280
Income Taxes 191,497 7,797 33,394 - 232,688
Net Income 274,284 15,120 64,779 - 354,183
Total Assets 20,228,032 849,718 3,780,569 (534,043) 24,324,276
1999
Operating Revenues $2,932,729 $1,013,595 $ 21,731 $ (11,729) $ 3,956,326
Income Taxes 167,497 (7,036) (28,855) - 131,606
Net Income 257,444 (14,155) 39,375 - 282,664
Total Assets 19,515,460 952,960 2,838,509 (223,197) 23,083,732
</TABLE>
Businesses marked with * are referred to as the "competitive
businesses," with the exception of the parent company, Entergy
Corporation, which is also included in the "All Other" column. The
"All Other" category includes the parent, Entergy Corporation,
segments below the quantitative threshold for separate disclosure,
and other business activities. Other segments principally include
global power development and non-utility nuclear power operations and
management. Other business activities principally include the gains
on the sales of businesses. The elimination of power marketing and
trading mark-to-market profits on intercompany power transactions is
also included in "All Other." Eliminations are primarily
intersegment activity.
NOTE 7. SUBSEQUENT EVENT (Entergy Corporation)
On July 30, 2000, Entergy Corporation and FPL Group entered into
a Merger Agreement, providing for a business combination that results
in the creation of a new company. The Merger will be accounted for
under the purchase method of accounting as an acquisition of Entergy
by FPL Group. Each outstanding share of FPL Group common stock will
be converted into the right to receive one share of the new company's
common stock, and each outstanding share of Entergy Corporation
common stock will be converted into the right to receive 0.585 of a
share of the new company's common stock. It is expected that FPL
Group's shareholders will own approximately 57% of the common equity
of the new company and Entergy's shareholders will own approximately
43%. The new company will be given a new name that will be agreed
upon between the Boards of Directors of FPL and Entergy prior to the
consummation of the Merger. The new company will maintain its
principal corporate offices and headquarters in Juno Beach, Florida,
and will maintain its utility headquarters in New Orleans, Louisiana.
The Merger is conditioned, among other things, upon approvals of the
shareholders of FPL Group and Entergy and approvals of various local,
state, and federal regulatory agencies and commissions. Entergy and
FPL Group will seek to consummate the Merger by late 2001.
__________________________________
In the opinion of the management of Entergy Corporation, the
accompanying unaudited condensed 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 results for the interim periods
presented should not be used as a basis for estimating results of
operations for a full year.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ENTERGY CORPORATION
/s/ Nathan E. Langston
Nathan E. Langston
Vice President and Chief Accounting Officer
Date: August 11, 2000
