_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
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) 529-5262
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-2703 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_____________________________________________________________________
<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
Common Stock Outstanding Outstanding at October 31, 1997
Entergy Corporation ($0.01 par value) 243,923,404
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1997
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 3
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 6
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 14
Statements of Consolidated Income 17
Statements of Consolidated Cash Flows 18
Consolidated Balance Sheets 20
Selected Operating Results 22
Entergy Arkansas, Inc.:
Results of Operations 24
Statements of Income 26
Statements of Cash Flows 27
Balance Sheets 28
Selected Operating Results 30
Entergy Gulf States, Inc.:
Results of Operations 32
Statements of Income (Loss) 34
Statements of Cash Flows 35
Balance Sheets 36
Selected Operating Results 38
Entergy Louisiana, Inc.:
Results of Operations 40
Statements of Income 42
Statements of Cash Flows 43
Balance Sheets 44
Selected Operating Results 46
Entergy Mississippi, Inc.:
Results of Operations 48
Statements of Income 50
Statements of Cash Flows 51
Balance Sheets 52
Selected Operating Results 54
Entergy New Orleans, Inc.:
Results of Operations 56
Statements of Income 58
Statements of Cash Flows 59
Balance Sheets 60
Selected Operating Results 62
System Energy Resources, Inc.:
Results of Operations 63
Statements of Income 64
Statements of Cash Flows 65
Balance Sheets 66
Notes to Financial Statements for Entergy
Corporation and Subsidiaries 68
Part II:
Item 1. Legal Proceedings 83
Item 5. Other Information 84
Item 6. Exhibits and Reports on Form 8-K 85
Experts 86
Signature 87
<PAGE>
This combined Quarterly Report on Form 10-Q is separately filed
by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc. Information
contained herein relating to any individual company is filed by such
company on its own behalf. Each company makes representations 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, 1996, and the Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997,
filed by the individual registrants with the SEC, and should be read
in conjunction therewith.
Forward Looking Information
Investors are cautioned that forward-looking statements
contained herein with respect to the revenues, earnings, competitive
performance, or other prospects for the business of Entergy
Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., System Energy Resources, Inc. or their affiliated
companies may be influenced by factors that could cause actual
outcomes and results to be materially different than projected. Such
factors include, but are not limited to, the effects of weather, the
performance of generating units, fuel prices and availability,
regulatory decisions and the effects of changes in law, capital
spending requirements, the evolution of competition, changes in
accounting standards, interest rate changes, changes in foreign
currency exchange rates, and other factors.
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
Algiers 15th Ward of the City of New Orleans,
Louisiana
ALJ Administrative Law Judge
ANO Arkansas Nuclear One Plant
ANO 1 Unit No. 1 of ANO
ANO 2 Unit No. 2 of ANO
APSC Arkansas Public Service Commission
BPS British pounds sterling
Cajun Cajun Electric Power Cooperative, Inc.
Capital Funds Agreement Agreement, dated as of June 21, 1974, as
amended, between System Energy and Entergy
Corporation, and the assignments thereof
CitiPower CitiPower Pty.
Council Council of the City of New Orleans,
Louisiana
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
Entergy Entergy Corporation and its various direct
and indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas
Power & Light Company
Entergy Corporation Entergy Corporation, a Delaware corporation,
successor to Entergy Corporation, a Florida
corporation
Entergy Enterprises Entergy Enterprises, Inc.
Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf
States Utilities Company (including wholly
owned subsidiaries - Varibus Corporation,
GSG&T, Inc., Prudential Oil & Gas, Inc., and
Southern Gulf Railway Company)
Entergy London
Investments Entergy London Investments plc, formerly
Entergy Power UK, plc
Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana
Power & Light Company
Entergy Mississippi Entergy Mississippi, Inc., formerly
Mississippi Power & Light Company
Entergy New Orleans Entergy New Orleans, Inc., formerly New
Orleans Public Service Inc.
Entergy Operations Entergy Operations, Inc., a subsidiary of
Entergy Corporation that has operating
responsibility for ANO, Grand Gulf 1, River
Bend, and Waterford 3
Entergy Services Entergy Services, Inc.
EPA U.S. Environmental Protection Agency
EPAct Energy Policy Act of 1992
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 1996, of
Entergy, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy
Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant
ISES Independence Steam Electric Generating
Station
kWh Kilowatt-hour(s)
LPSC Louisiana Public Service Commission
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy on February 7, 1997
Merger The combination transaction, consummated on
December 31, 1993, by which Entergy Gulf
States became a subsidiary of Entergy
Corporation and Entergy Corporation became a
Delaware corporation
MPSC Mississippi Public Service Commission
NRC Nuclear Regulatory Commission
Owner Participant A corporation that, in connection with the
Waterford 3 sale and leaseback transactions,
has acquired a beneficial interest in a
trust, the Owner Trustee of which is the
owner and lessor of undivided interests in
Waterford 3
Owner Trustee Each institution and/or individual acting as
Owner Trustee under a trust agreement with
an Owner Participant in connection with the
Waterford 3 sale and leaseback transactions
PCBs Polychlorinated biphenyls
PUHCA Public Utility Holding Company Act of 1935,
as amended
PUCT Public Utility Commission of Texas
PURPA Public Utility Regulatory Policies Act
River Bend River Bend Nuclear Plant, owned by Entergy
Gulf States
RUS Rural Utilities Service
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
System Agreement Agreement , effective January 1, 1983, as
modified, among the domestic utility
companies relating to the sharing of
generating capacity and other power
resources
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
UK The United Kingdom of Great Britain and
Northern Ireland
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash flow from operations for Entergy Corporation, the
domestic utility companies, and System Energy for the nine months
ended September 30, 1997 and 1996 was as follows:
Nine Months Nine Months
Company Ended 9/30/97 Ended 9/30/96
(In Millions)
Entergy Corporation $1,574.7 $1,268.7
Entergy Arkansas $ 400.5 $ 344.2
Entergy Gulf States $ 382.6 $ 263.4
Entergy Louisiana $ 271.6 $ 284.6
Entergy Mississippi $ 141.0 $ 146.6
Entergy New Orleans $ 36.8 $ 27.0
System Energy $ 201.0 $ 223.7
The positive cash flow from operations for the domestic utility
companies results from continued efforts to streamline operations and
to reduce costs, as well as from collections under rate phase-in
plans that exceed current cash requirements for the related costs.
In the income statement, these revenue collections are offset by the
amortization of the previously deferred costs so that there is no
effect on net income. These phase-in plans will continue to
contribute to Entergy Corporation's cash position in the immediate
future. The Grand Gulf 1 phase-in plans will expire in 1998 for
Entergy Arkansas and Entergy Mississippi, and in 2001 for Entergy New
Orleans. Entergy Gulf States' phase-in plan for River Bend will
expire in 1998. Entergy Louisiana's phase-in plan for Waterford 3
expired in June 1997. Competitive growth businesses contributed
$290.8 million to Entergy Corporation's cash flow from operations.
In accordance with the purchase method of accounting, London
Electricity's results of operations are not included in Entergy
Corporation's nine months ended September 30, 1996 Statements of
Consolidated Cash Flows.
Financing Sources
As discussed in Note 7, the acquisition of London Electricity
for $2.1 billion was accomplished in February 1997. The acquisition
was financed with $1.7 billion of debt that is non-recourse to
Entergy Corporation, and $392 million of equity provided by Entergy
Corporation from available cash and borrowings under its $300 million
line of credit. Entergy Corporation anticipates refinancing this
debt during the fourth quarter of 1997 through the issuance of up to
$300 million of preferred securities and new bank financing. In
addition to cash flow from operations, London Electricity had several
primary sources of liquidity available at September 30, 1997
including: (i) the availability under its credit facilities agreement
of approximately BPS220 million, (ii) several uncommitted loan
facilities totaling BPS200 million provided by banking institutions,
and (iii) London Electricity's BPS150 million commercial paper
program. As of September 30, 1997, a total of BPS45 million was
borrowed under the commercial paper facility. In addition, London
Electricity intends to use availability under existing facilities, or
replacements thereof, to finance its payments of windfall profits
taxes in December 1997 and 1998 which will total BPS140 million.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Mississippi issued a series of general and refunding
mortgage bonds in June 1997 totaling $65 million, the proceeds of
which were used to meet a scheduled July 1, 1997 debt maturity.
Excluding the London Electricity investment and the Entergy
Mississippi bond issuance, cash from operations, supplemented by cash
on hand, was sufficient to meet substantially all investing and
financing requirements of the domestic utility companies and System
Energy, including capital expenditures, dividends, and debt and
preferred stock maturities for the nine months ended September 30,
1997.
Entergy's domestic utility companies other than Entergy
Mississippi have been able to fund their capital requirements with
cash from operations as discussed above in "Cash Flows". Should
additional cash be needed to fund investments or to retire debt, the
domestic utility companies and System Energy each have the ability,
subject to regulatory approval and compliance with issuance tests, to
issue debt or preferred securities to meet such requirements. In
addition, to the extent market conditions and interest and dividend
rates allow, the domestic utility companies and System Energy will
continue to refinance and/or redeem higher cost debt and preferred
stock prior to maturity. See Note 4 herein for a discussion of the
recent refinancing by Entergy Louisiana. The domestic utility
companies may continue to establish special purpose trusts as
financing subsidiaries for the purpose of issuing trust preferred
securities, such as those issued in 1996 by Entergy Louisiana Capital
I and Entergy Arkansas Capital I, and those issued in January 1997 by
Entergy Gulf States Capital I. Entergy Corporation, the domestic
utility companies, and System Energy also have the ability to effect
short-term borrowings. See Notes 4, 5, 6, 7, 9 and 10 in the Form 10-
K for additional information on Entergy's capital and refinancing
requirements in 1997-2001.
As of September 30, 1997, Entergy Corporation had $150 million
outstanding under its $300 million bank credit facility. In
addition, Entergy Corporation had $91 million outstanding and Entergy
Technology Holding Company (ETHC) had $17 million outstanding on a
joint $250 million bank line of credit as of September 30, 1997. See
Note 4 to the Form 10-K for information on the domestic utility
companies' and System Energy's short-term borrowing authorizations
and bank lines of credit.
Financing Uses
Productive investment by Entergy Corporation is integral to
enhancing the long-term value of its common stock. Entergy
Corporation has been expanding its investments in business
opportunities overseas as well as in the United States. As of
September 30, 1997, Entergy Corporation had acquired or participated
in foreign electric ventures in Australia, Argentina, China, Chile,
Pakistan, Peru, and the UK, and had acquired several
telecommunications-based businesses in the United States. As of
September 30, 1997, Entergy Corporation had a net investment of $1.2
billion in equity capital in competitive growth businesses. See Note
7 for a discussion of Entergy Corporation's acquisition of London
Electricity on February 7, 1997.
To make capital investments, fund its subsidiaries, and pay
dividends, Entergy Corporation will utilize internally generated
funds, cash on hand, funds available under its bank credit
facilities, funds received from its dividend reinvestment and stock
purchase plan, and bank financings as required. See Note 3 herein for
information regarding proceeds from the issuance of common stock
under Entergy Corporation's dividend reinvestment and stock purchase
plan during the nine months ended September 30, 1997. See Note 9 in
the Form 10-K for a discussion of capital requirements. Entergy
Corporation receives funds through dividend payments from its
subsidiaries. During the nine months ended September 30, 1997 such
dividend payments from subsidiaries totaled $420.0 million. Entergy
Gulf States resumed paying common stock dividends in the third
quarter of 1997. During the nine months ended September 30, 1997
Entergy Corporation paid $328.2 million of
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
common stock dividends. Declarations of dividends on common stock
are made at the discretion of Entergy Corporation's Board of
Directors. Management will not recommend future changes in dividends
to the Board unless warranted by economic circumstances and the then
current business environment. See Note 8 in the Form 10-K for
information on dividend restrictions.
Entergy Corporation and Entergy Gulf States
See Notes 1 and 2 regarding River Bend and Cajun litigation. An
adverse ruling by the PUCT regarding River Bend could result in up to
approximately $271 million of potential write-offs (net of tax).
Such write-offs could result in substantial net losses being reported
in the future by Entergy Gulf States, with resulting adverse
adjustments to the common equity of Entergy Corporation and Entergy
Gulf States. Adverse resolution of these matters could negatively
affect Entergy Gulf States' ability to obtain financing, which could
in turn affect Entergy Gulf States' liquidity and ability to pay
common stock dividends to Entergy Corporation.
Entergy Corporation and System Energy
Under the Capital Funds Agreement, Entergy Corporation has
agreed to supply System Energy with sufficient capital to maintain
System Energy's equity capital at a minimum of 35% of its total
capitalization (excluding short-term debt), to permit the continued
commercial operation of Grand Gulf 1, and to pay in full all
indebtedness for borrowed money of System Energy when due under any
circumstances. In addition, under supplements to the Capital Funds
Agreement assigning System Energy's rights thereunder as security for
specific debt of System Energy, Entergy Corporation has agreed to
make cash capital contributions, if required, to enable System Energy
to make payments on such debt when due. The Capital Funds Agreement
may be terminated by the parties thereto, subject to the consent of
certain creditors.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, including
"Open Access Transmission", "Municipalization", "Industry
Consolidation", "Functional Unbundling", and "Effects of Alternate
Energy Sources on Retail Electric Sales to Industrial and Large
Commercial Customers" for a discussion of the increasing competitive
pressures facing Entergy and the electric utility industry. See "ANO
Matters", and "Property Tax Exemptions" in the Form 10-K for a
discussion of other significant issues affecting Entergy. Set forth
below are recent developments to the Form 10-K disclosure for the
sections presented.
Competition and Industry Challenges
Transition to Competition Filings
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and Note 2
herein for a discussion of the domestic utility companies' filings
with their respective state and local regulators concerning the
transition to competition. Entergy Gulf States made a supplemental
filing with the PUCT on April 4, 1997, outlining a comprehensive
market reform proposal calling for the establishment of retail
competition, service quality standards, a regional power exchange,
and an independent system operator. Entergy Gulf States requested
from the PUCT a reciprocal commitment to provide an opportunity for
the full recovery of prudently incurred investments previously
approved by regulators. The PUCT had scheduled hearings on the
transition to competition to begin in October 1997 but those hearings
were rescheduled and began on November 5, 1997.
The MPSC conducted hearings in April 1997 on various transition
to competition issues, including the recoverability of stranded
costs, the potential for cost shifting, and electric supply
reliability. In early July the MPSC issued an order directing the
Mississippi Public Utilities Staff to submit a report outlining a
plan for restructuring the electric utility industry in Mississippi.
On November 3, 1997, the Mississippi Public Utilities Staff submitted
to the MPSC a proposed transition plan for retail competition in the
electric industry in Mississippi. The plan represents the staffs'
current position on how retail competition can be implemented in
Mississippi and includes an implementation schedule in which retail
competition would begin on January 1, 2001. The plan assumes the
passage of necessary enabling legislation in 1999. The plan also
provides for a transition period, from January 1, 2001, through
December 31, 2004, for the recovery of any allowed stranded costs
through a non-bypassable charge. Parties will file comments and
reply comments on the plan during January and February of 1998 and a
hearing will be conducted by the MPSC in April 1998.
In October 1996, Entergy Arkansas filed a proposal with the APSC
designed to achieve an orderly transition to retail electric
competition in Arkansas. Entergy Arkansas supplemented its proposal
with a May 1, 1997 filing and additional testimony in response to the
testimony of the other parties. The proposal included a rate
decrease totaling $158 million over a two-year period beginning
January 1998. On October 9, 1997, Entergy Arkansas and other parties
to the proceeding submitted a settlement agreement to the APSC. The
proposed settlement provides for more than $200 million in rate
reductions. The proposal allows Entergy Arkansas to accelerate,
beginning in 1999, the recovery of purchased power costs associated
with Entergy Arkansas' allocation of Grand Gulf 1 plant investment,
pending FERC approval. The $200 million reduction includes
approximately $170 million associated with the termination of the
Grand Gulf deferrals, a reduction which was part of an earlier
settlement agreement with the APSC. The settlement also provides for
a Transition Cost Account which will utilize any excess earnings
above the allowed return on equity to offset stranded costs when
customer choice occurs. The agreement calls for the APSC to hold a
hearing in 2001 to review Entergy Arkansas' potential stranded costs
and to evaluate the magnitude of stranded costs and the mechanism in
place to address those stranded costs. In addition, the settlement
includes, the opening of a generic docket by the APSC in 1998 to take
testimony regarding transition to retail electric competition, with
the findings from that docket to be turned over to the Arkansas
legislature in October 1998. The APSC held a hearing on October 17,
1997 to consider the settlement agreement and is expected to issue a
decision with respect to the settlement agreement by mid-December
1997.
In September 1996, Entergy Gulf States and Entergy Louisiana
filed proposals with the LPSC designed to achieve an orderly
transition to retail electric competition in Louisiana, while
protecting certain classes of ratepayers from bearing the burden of
any cost shifting. See Note 2 herein for additional information
regarding this filing. Hearings on these proposals have been delayed
until 1998.
In February 1997, the LPSC ruled that certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals would be
addressed in those companies' existing rate dockets and that certain
other issues would be addressed in an ongoing generic regulatory
proceeding examining electric utility industry restructuring.
In March 1997, the Council established new dockets regarding
electric and gas utility service competition in the City of New
Orleans. The dockets will address competitive issues, including the
advisability of implementing competition, recoverability and
measurement of stranded costs, maximization of consumer savings,
minimization of cost shifting, and potential conflicts among federal,
state, and local regulators, as such issues relate to electric and
gas service currently being provided to New Orleans customers by
Entergy New Orleans and electric service being provided in Algiers
by Entergy Louisiana. Comments were filed by interested parties in
April 1997. Public hearings on these issues were held in May, July
and October of 1997.
Entergy New Orleans made its cost of service and revenue
requirement filing in conjunction with its transition to competition
plan on September 17, 1997. On November 6, 1997, the Council severed
the traditional ratemaking issues from the transition filings, and
established a procedural schedule for the second phase of the rate
proceeding, pursuant to which hearings will be conducted in July
1998. Additionally, the Council ordered Entergy New Orleans to file
unbundled gas rates, in preparation for an investigation of issues
relating to gas industry competition. The electric transition to
competition filing is generally similar to those filed for the other
domestic utility companies. It includes a rate cap coupled with a
continuing right of the Council to conduct reviews of Entergy New
Orleans' earnings, an offer to seek authority from FERC for
accelerated recovery of Grand Gulf purchased power obligations, and
implementation of a non-bypassable universal service charge for all
existing customers, together with functional unbundling of electric
rates. Entergy New Orleans' transition filing will be subject to
further review by the Council. A procedural schedule for that filing
has not been set, although public comment has been requested by the
Council.
Retail and Wholesale Rate Issues
See Note 2 to the Form 10-K, as supplemented hereby, for a
discussion of the ongoing trend of regulatory mandated rate
reductions as well as incentive and performance-based regulation and
filings made with state and local regulators regarding an orderly
transition to a more competitive market for electricity. See Note 2
herein for a discussion of rate reductions implemented at Entergy
Louisiana and Entergy New Orleans during the current period.
On July 14, 1997, Entergy Services filed with the FERC its
wholesale transmission open access compliance tariff incorporating
the requirements of FERC Order No. 888-A.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Legislative Activity
A number of bills have been introduced in the U. S. Congress
calling for deregulation of the electric power industry. Included in
these proposals are some that would amend or repeal PUHCA and/or
PURPA. These bills generally have provisions that would give
consumers the ability to choose their own electricity service
provider. The Energy and Power Subcommittee of the Commerce
Committee of the U.S. House of Representatives held hearings on this
issue in October 1997, at which it was agreed that a consensus
approach to electricity deregulation was needed. However, no
agreement was reached as to a specific approach.
Entergy Gulf States was an active participant in discussions
aimed at developing legislation relating to electric utility industry
restructuring and competition in the Texas Legislature before it
adjourned on June 2, 1997. However, no such legislation was passed
in Texas during the recent session. The legislature will not convene
again until January 1999, by which time Entergy Gulf States believes
the PUCT will have acted on the transition to competition filing of
Entergy Gulf States.
The Arkansas Senate has passed a resolution requesting a study
of the impact of electric utility industry competition on the
citizens of Arkansas, the electric utility industry, and the
regulatory authority of the APSC. This study, to be performed by a
joint legislative committee of the Arkansas General Assembly, is
scheduled to begin by December 1, 1997, and conclude prior to the
1999 legislative session.
Competitive Growth Businesses
Entergy Corporation seeks opportunities to expand its domestic
and foreign businesses that are not regulated by domestic state and
local utility regulatory authorities. Such businesses currently
include the development, ownership, and/or operation of electric
distribution businesses and electric generation facilities as well as
businesses which offer a broad range of energy management, security
monitoring, and telecommunications services. Refer to "MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES"
for a discussion of Entergy Corporation's 1997 investments in
competitive growth businesses. Some of these investments may involve
a greater risk than domestic regulated utility enterprises. For the
nine months ended September 30, 1997, Entergy Corporation's
competitive growth businesses reduced consolidated net income by
approximately $117 million principally due to the impact of a
windfall profits tax in the UK which was partially offset by the
reduction in the UK corporation tax rate, as discussed in more detail
below in "Windfall Profits Tax". Excluding the impact of these
items, the competitive growth businesses contributed $52 million to
consolidated net income during the nine months ended September 30,
1997.
Entergy Nuclear, Inc. (Entergy Nuclear), a wholly-owned
subsidiary of Entergy Enterprises, began providing management and
operations services in February 1997 to Maine Yankee Atomic Power
Company (Maine Yankee) at the Maine Yankee nuclear plant for an
initial period of up to one year. On August 6, 1997, the board of
directors of Maine Yankee announced the permanent closure of this
nuclear plant. On November 6, 1997, Entergy Nuclear and Maine Yankee
entered into an agreement which calls for Entergy Nuclear to provide
management services for initial decommissioning activities through
September 30, 1998. This contract replaces the short-term contract
in effect from February 1997 through September 30, 1997.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Through its London Electricity acquisition, Entergy expects to
gain valuable experience in the deregulated UK electricity market, in
anticipation of the deregulation of the electricity market in the
United States. London Electricity has already experienced seven
years of a partially competitive supply environment and expects to be
in a fully competitive supply market beginning April 1, 1998. In
conjunction with the acquisition of London Electricity, Entergy
established an international retail operations group to coordinate
retail electric operations in the UK, Australia, and Argentina.
In February 1997, Entergy Richmond Power Corporation, a wholly-
owned subsidiary of Entergy Power Development Corporation (Entergy
Power), sold its 50% interest in Richmond Power Enterprise LP (owner
of a gas-fired electric and steam generation facility), to a third
party for $10 million, realizing an after tax gain of $2.7 million.
In February 1997, Entergy Corporation announced a joint venture
with Hyperion Telecommunications. It is expected that by the end of
1997, the joint venture (to be known as Entergy Hyperion
Telecommunications) will offer competitive local access telephone
services primarily to business customers in the metropolitan areas of
Little Rock, Arkansas, Jackson, Mississippi, and Baton Rouge,
Louisiana.
In June 1997, Entergy Transener, S.A., another wholly-owned
subsidiary of Entergy Power, sold its interest in a consortium that
owned 65% of Transener S.A. for $27.5 million, realizing an after-tax
gain of $5.8 million. During the second quarter of 1997, Entergy
Pakistan Limited, another wholly-owned subsidiary of Entergy Power,
sold 25% of its interest in Hub Power Company, Ltd. for $26.5
million, which resulted in an after-tax gain of $9.1 million.
During the second quarter of 1997, Entergy Power Chile, S.A., an
indirect wholly-owned subsidiary of Entergy Power, purchased a 25%
interest in the San Isidro project, a 370 MW gas-fired, combined
cycle generating facility under construction in Chile. Entergy Power
Chile, S.A. is obligated to fund up to $20 million for the cost of
completing the plant, scheduled for commercial operation in 1999.
The other project owner, which is also the developer, is Empresa
Nacional de Electricidad, S.A. (Endesa).
On July 1, 1997, Entergy Security Company, a wholly-owned
subsidiary of Entergy Technology Holding Company (Entergy's principal
telecommunications subsidiary), acquired the Ranger American group of
companies for an aggregate purchase price of approximately $60.8
million. Ranger American is a leading provider of electronic
security services in the largest cities in Texas and in Atlanta,
Georgia. This expansion increases Entergy Security's customer total
to approximately 140,000 and its annual revenues to more than $53
million. See Note 3 for details regarding the Entergy Corporation
common stock that was issued in connection with this acquisition.
In September 1997, Entergy Power acquired Kingsnorth Power Ltd.
(KPL) for $67 million. KPL owns land in Southeast England and
certain rights to build a power station. The acquisition of KPL was
financed by borrowings under a BPS50 million credit facility with an
international bank. In early October 1997, Entergy Power announced
construction of a 740 MW combined cycle gas turbine merchant power
plant to be known as Damhead Creek on the KPL site. Construction is
scheduled to begin in April 1998, at an estimated cost of $625
million. The target date for commercial operation is the second
quarter of 2000. Financing and other project requirements are
currently in the final stages of development.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
During the third quarter of 1997, Nantong Entergy Heat and Power
Co., Ltd., a cooperative Joint Venture which is 92% owned by Entergy
Electric Asia, Ltd., a wholly-owned subsidiary of Entergy Power
International Holdings Corporation, commenced construction of a 24 MW
cogeneration plant in Nantong, China. The total cost of this project
is currently estimated to be approximately $33 million.
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, and Note 7
herein, for a discussion of Entergy's major competitive growth
businesses.
Windfall Profits Tax
As a result of Parliamentary elections held on May 1, 1997, the
Labour Party gained control of the British government. On July 31,
1997, the British government enacted into law a one-time "windfall
profits tax" on privatized industries, including regional electric
utilities such as London Electricity. London Electricity's windfall
profits tax liability is approximately BPS140 million (approximately
$234 million), which will not be deductible for UK corporation tax
purposes. Payment of the tax is required in two equal installments,
the first due on December 1, 1997, and the second due on December 1,
1998.
The British government also decreased the UK corporation tax
rate from 33% to 31%, effective as of April 1, 1997. In accordance
with SFAS 109, "Accounting for Income Taxes", this reduction in UK
corporation tax rates resulted in a one-time reduction in income tax
expense of approximately $65 million. The liability for the windfall
profits tax (with a corresponding charge against income) and the
reduction in London Electricity's deferred income tax liability (with
a corresponding reduction in income tax expense) were recorded in
July 1997.
Catalyst Technologies, Inc.
On August 8, 1997, a jury in the Civil District Court of Orleans
Parish, Louisiana, returned a verdict against Entergy Enterprises, a
wholly-owned non-utility subsidiary of Entergy Corporation, in the
amount of $346 million. Catalyst Technologies, Inc. (CTI) alleged in
its lawsuit that Entergy Enterprises had agreed to transfer computer
software to CTI but breached its obligation to do so, and claimed
damages in an amount equaling its purported lost profits. On
September 23, 1997, the judge in the case entered a judgment in the
amount of the verdict, plus accrued interest from the date of the
plaintiff's original demand in the amount of approximately $118
million, which continues to accrue at a rate of approximately $88,000
per day. The judgment in favor of CTI currently is the subject of
post-trial motions in which Entergy Enterprises seeks, in the
alternative, a judgment notwithstanding the verdict, a new trial or a
substantial reduction of the amount awarded to CTI.
Entergy Enterprises contended in the trial that it was never
obligated to transfer any technology to CTI because CTI never
fulfilled the conditions necessary to give rise to such an
obligation. Moreover, Entergy Enterprises contended that CTI's claim
for lost profits was totally speculative, having been made by a start-
up company that has never engaged in any substantial business and
having arisen in connection with a product that has never been
marketed or sold and has never generated any revenue or profit for
Entergy Enterprises. Based on these facts and the advice of counsel,
management continues to believe that there are a number of strong
legal arguments in support of Entergy Enterprises' position, that the
judgment in favor of CTI is contrary to the facts and applicable law,
and that either the case will be reversed or the judgment will be
reduced to an amount that would not be material to Entergy
Corporation. Subject to the outcome of the post-trial motions, which
were the subject of oral argument before the court on November 5,
1997, Entergy Enterprises will appeal the judgment of the trial
court. Refer to "Other Regulation and Litigation" in Item 1 of the
Form 10-K for information regarding the original petition filed by
CTI and to Note 1 herein for additional information on related court
actions brought by both Entergy and CTI.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Waterford 3
On January 6, 1997, Waterford 3 received from the NRC its
Systematic Assessment of License Performance ("SALP") report for the
period April 29, 1995 through November 30, 1996. During this period,
observed performance declined from the previous SALP report, and
three of the four functional areas received lower ratings. Waterford
3 personnel are having periodic performance meetings with NRC
personnel, and significant Waterford 3 management changes have been
effected in order to address these matters. Additionally, Waterford
3 has instituted a multi-year program to improve performance and is
incurring additional costs in doing so.
A scheduled 45-day refueling outage for the Waterford 3 nuclear
plant began on April 12, 1997. Additional work and two minor
incidents caused the outage to be extended from May 27 to mid-June.
On May 28, 1997, a start-up transformer at Waterford 3 failed due to
an internal fault. A replacement transformer was located and shipped
to Waterford 3, where certain plant configuration changes were made
to facilitate its installation. After installation of the
replacement transformer, the plant was restarted on July 29, 1997.
Cajun - River Bend
On October 7, 1997, the RUS elected not to become the
transferee of Cajun's 30% interest in River Bend. Accordingly,
under the terms of the Settlement, Cajun's interest in River Bend
will be transferred by Cajun's Trustee in Bankruptcy to Entergy Gulf
States at no cost. The transfer is subject to all necessary
regulatory approvals, including approval of the NRC. The terms of the
transfer provide that Cajun will establish a trust fund in the
amount of $125 million to satisfy its obligation for decommissioning
its 30% share of the plant. The regulatory and accounting treatment
of the plant to be transferred will be determined as soon as the
transfer date and conditions are confirmed. See Note 1 herein.
Labor Agreements
During April 1997, Entergy Gulf States and a union representing
1,000 employees in Texas and Louisiana signed a two-year labor
contract (expiring August 14, 1999). The contract stipulates that
there will be no layoffs in the next two years and wages will be
increased 3% per year in 1997 and 1998.
In early July 1997, Entergy Operations and the union
representing 317 employees at River Bend, and Entergy Mississippi and
the union representing 400 of its employees, signed two-year labor
contracts for the period from October 1998 to October 2000 which
stipulate that there will be no layoffs of covered employees over the
next two years and that wages will be increased 3% in each of the
next two years.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Deregulated Utility Operations
Entergy Gulf States discontinued regulatory accounting
principles in 1989 for its wholesale jurisdiction and steam
department, and in 1991 for the Louisiana deregulated portion of
River Bend. Operating income from these operations during the three
and nine months ended September 30, 1997, was $6.6 million and $15.8
million, respectively, compared to $3.3 million and $11.3 million
during the comparable periods in 1996. There were approximately $825
million in deregulated operations net assets as of September 30,
1997.
The increase in operating income from these deregulated
operations for the three and nine months ended September 30, 1997 was
principally due to decreased steam department expenses, partially
offset by reduced wholesale jurisdiction revenues. The future impact
of the deregulated utility operations on Entergy's and Entergy Gulf
States' results of operations and financial position will depend on
future operating costs, future efficiency and availability of
generating units, and market prices for energy over the remaining
life of the assets.
Accounting Issues
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note 1 in the Form 10-K for
a discussion of the impact of the adoption by Entergy of SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", effective January 1, 1996.
Continued Application of SFAS 71 - As a result of the EPAct, the
actions of regulatory bodies, and other factors, the electric utility
industry is moving toward a combination of competition and a modified
regulatory environment. The domestic utility companies' and System
Energy's financial statements currently reflect, for the most part,
assets and costs based on existing cost-based ratemaking regulations
in accordance with SFAS 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). Continued applicability of SFAS 71
to the domestic utility companies' and System Energy's financial
statements requires that rates set by an independent regulator on a
cost-of-service basis be charged to and collected from customers.
In the event that all or a portion of a utility's operations
cease to meet those criteria for various reasons, including
deregulation, a change in the method of regulation, or a change in
the competitive environment for the utility's regulated services, the
utility is required to discontinue application of SFAS 71 for the
relevant portion of its operations by eliminating from the balance
sheet the effects of any actions of regulators recorded as regulatory
assets and liabilities. Discontinuation of the application of SFAS
71 could have a material adverse impact on Entergy's financial
statements.
The SEC has expressed concern regarding the continuing
applicability of SFAS 71 to the financial statements of electric
utilities that either have been ordered by regulators to adopt
transition to competition plans or are in the process of
participating with the state legislatures and/or regulators in the
development of such plans. While such plans may call for rate caps
or decreases, they generally provide for recovery of investments in
uneconomic or noncompetitive generating plants and other regulatory
assets (together defined as stranded costs). The SEC is concerned
that portions of entities subject to such plans may not meet the
criteria for the continued application of SFAS 71. The Emerging
Issues Task Force (EITF) of the FASB met in May and July of 1997 to
address the issues of when such an entity should discontinue the
application of SFAS 71, and how SFAS 101, "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB Statement
No. 71", should be applied to a portion of an entity subject to such
a plan. As a result of these meetings, a consensus was
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
reached that SFAS 71 should be discontinued at a date no later than
when the details of the transition to competition plan for all or a
portion of the entity subject to such plan are known. Additionally,
the EITF reached a consensus that stranded costs which are to be
recovered through cash flows derived from another portion of the
entity which continues to apply SFAS 71 should not be written off;
rather, they should be considered regulatory assets of the segment
which will continue to apply SFAS 71.
The domestic utility companies' and System Energy's financial
statements continue to apply SFAS 71 for their regulated operations,
except for those portions of Entergy Gulf States' business described
in "Deregulated Utility Operations" above. Although discussions with
regulatory authorities regarding retail competition have occurred and
are expected to continue, no final transition to competition plans
for Entergy's domestic utility subsidiaries have yet been adopted.
See Note 1 to the Form 10-K for additional discussion of Entergy's
application of SFAS 71.
Accounting for Decommissioning Costs - In February 1996, the
FASB issued an exposure draft of a proposed SFAS addressing the
accounting for decommissioning costs of nuclear generating units as
well as liabilities related to the closure and removal of all long-
lived assets. See Note 1 herein for a discussion of proposed changes
in the accounting for decommissioning/closure costs and the potential
impact of these changes on Entergy.
Year 2000 Issues
Like many companies, Entergy is currently evaluating its
computer software and databases to determine the extent to which
modifications are required to prevent problems related to the year
2000, and the resources which will be required to make such
modifications. These problems could result in malfunctions in
certain software and databases with respect to dates on or after
January 1, 2000, unless corrected.
Financial Derivatives
Derivative instruments have been used by Entergy on a limited
basis. Entergy uses financial derivatives primarily to mitigate
business risks and not for speculative purposes. See Notes 7 and 9
to the Form 10-K and Note 4 herein for additional information
concerning Entergy's derivative instruments outstanding as of
December 31, 1996, and September 30, 1997, respectively.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
On February 7, 1997, Entergy Corporation made unconditional its
offer to acquire London Electricity. In accordance with the purchase
method of accounting, the results of operations for the three and
nine months ended September 30, 1996 of Entergy Corporation and
subsidiaries reported in the Statements of Consolidated Income and
Cash Flows do not include London Electricity's results of operations.
Consolidated net income for the three and nine months ended September
30, 1997 reflects London Electricity's results subsequent to February
1, 1997. See Note 7 for additional information regarding London
Electricity.
Net Income
Consolidated net income decreased for the three and nine months
ended September 30, 1997 primarily due to the recording of a one-time
windfall profits tax at London Electricity and the reversal of the
Cajun River Bend litigation accrual at Entergy Gulf States in
September 1996, partially offset by a one-time reduction in income
tax expense for London Electricity due to a reduction in the UK
corporation tax rate from 33% to 31%. The one-time net of tax
write-off of River Bend rate deferrals pursuant to SFAS 121 at
Entergy Gulf States in January 1996 also partially offset the impact
of these items causing the decrease for the nine months ended
September 30, 1997. See Note 7 for further discussion of London
Electricity.
Excluding the one-time items mentioned above, net income for the
three months ended September 30, 1997 would have remained relatively
unchanged as compared to the same period in 1996. Net income for the
nine months ended September 30, 1997 would have decreased $19.2
million primarily due to a decrease in electric revenues and an
increase in other operations and maintenance expenses, partially
offset by an increase in competitive growth business revenues and a
decrease in income tax expenses.
Excluding the one-time windfall profits tax and the one-time
reduction in the corporate income tax rate for London Electricity,
the competitive growth businesses contributed approximately $52.0
million to net income for the nine months ended September 30, 1997.
This is primarily due to the inclusion of London Electricity results
subsequent to February 1, 1997. Also contributing to the competitive
growth businesses' earnings increase for the nine months ended
September 30, 1997 was an increase in CitiPower's net income of
approximately $23.0 million. CitiPower's earnings increased
primarily due to favorable weather trends, lower interest expense,
and the recording of restructuring charges in 1996.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues associated with
Entergy's domestic regulated operations for the three and nine months
ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($20.4) ($58.2)
Rate riders (1.0) (18.4)
Fuel cost recovery (4.8) 18.3
Sales volume/weather 16.3 (19.7)
Other revenue (including unbilled) 37.6 8.5
Sales for resale 3.4 (32.4)
----- -------
Total $31.1 ($101.9)
===== =======
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues of the domestic utility companies
and System Energy increased for the three months ended September 30,
1997 primarily due to an increase in other revenue (primarily
unbilled revenue) and higher sales volume partially offset by a
decrease in base revenues. Unbilled revenue and sales volume
increased as a result of warmer weather in September 1997 as compared
to the same period in 1996. Base revenues decreased primarily due to
a base rate reduction for Louisiana retail customers that became
effective in the third quarter of 1997.
Electric operating revenues for the nine months ended September
30, 1997 decreased for the domestic utility companies and System
Energy primarily due to lower sales volume caused by decreases in
base revenues, rate rider revenues, and sales for resale to non-
associated utilities. These decreases were partially offset by an
increase in fuel adjustment revenues. Base revenues decreased
primarily due to rate reductions for Louisiana retail customers,
aggressive pricing strategies for targeted customer segments, and a
change in sales mix from residential and commercial customers to
industrial customers at Entergy Gulf States. The reduction of rate
rider revenues is due to an MPSC decision in October 1996 to reduce
Entergy Mississippi's Grand Gulf 1 rate rider based on an estimate of
costs over the next year. The decrease in sales for resale to non-
associated utilities is primarily due to changes in generation
requirements and availability among the domestic utility companies,
principally Entergy Arkansas and Entergy Gulf States. Fuel
adjustment revenues, which do not affect net income, increased for
the nine months ended September 30, 1997 due to a PUCT order that
approved recovery of under-recovered fuel expenses by Entergy Gulf
States and due to shifting generation requirements as a result of the
extended Waterford 3 refueling outage. See Note 2 for further
discussion of the rate and regulatory matters.
Competitive growth business revenues increased for the three and
nine months ended September 30, 1997 primarily due to the February
1997 acquisition of London Electricity. London Electricity generated
revenues of $438 million and $1.3 billion for the three and nine
months ended September 30, 1997, respectively. Also contributing to
the increases in competitive growth business revenues were increases
in revenue at Entergy Power Marketing, Inc. of $166.2 million and
$221.2 million for the three and nine months ended September 30,
1997, respectively. These increases were offset by increased power
purchased for resale as discussed below.
Expenses
Operating expenses for the three months ended September 30, 1997
and the nine months ended September 30, 1997 include the operating
expenses of London Electricity, which were not included in the prior
year's financial statements. Operating expenses for the three and
nine months ended September 30, 1997, excluding London Electricity,
increased primarily due to increases in power purchased for resale by
Entergy Power Marketing Corporation, depreciation, amortization, and
decommissioning expense, and other operation and maintenance
expenses, partially offset by a reduction in fuel expenses. The
increase in purchased power is primarily the result of a higher level
of power trading by Entergy Power Marketing Corporation. The
increase in depreciation, amortization, and decommissioning is due to
plant additions and improvements. Other operation and maintenance
expenses increased due to increased litigation loss reserves at
Entergy Mississippi and contract work and maintenance performed by
Entergy Louisiana and Entergy Mississippi. Fuel expenses decreased
primarily due to lower sales volume resulting from milder weather in
the first half of the year.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income decreased for the three and nine months ended
September 30, 1997 primarily due to the one-time windfall profits tax
impact on London Electricity. Offsetting the decrease for the nine
months ended September 30, 1997 was the January 1996 net of tax write-
off of River Bend rate deferrals at Entergy Gulf States pursuant to
SFAS 121. Excluding London Electricity, other income decreased for
the three months ended September 30, 1997 due to the reversal of the
accrual for Cajun-River Bend litigation in September 1996 at Entergy
Gulf States. In addition, excluding London Electricity, other income
increased for the nine months ended September 30, 1997 primarily due
to the previously mentioned 1996 write-off .
Interest on long-term debt, excluding London Electricity,
decreased for the three and nine months ended September 30, 1997 due
primarily to ongoing retirement and refinancing of higher cost debt.
Interest on debt associated with the London Electricity acquisition
more than offset this decrease.
For the three months ended September 30, 1997 and 1996 the
effective income tax rates were 55.71% and 39.26%, respectively. The
increase is primarily due to the impact of the one-time windfall
profits tax which was not deductible for UK corporation tax purposes,
partially offset by a reduction in the UK corporation tax rate from
33% to 31%. For the nine months ended September 30, 1997 and 1996 the
effective income tax rates were 41.93% and 45.76%, respectively. The
decrease is primarily due to the January 1996 net of tax write-off of
River Bend rate deferrals at Entergy Gulf States pursuant to SFAS
121. See Note 7 for a discussion of London Electricity.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $1,998,058 $1,966,969 $4,952,725 $5,054,647
Natural gas 17,516 21,402 98,037 107,866
Steam products 11,142 15,144 35,103 45,936
Competitive growth businesses 770,871 144,817 1,935,565 392,552
---------- ---------- ---------- ----------
Total 2,797,587 2,148,332 7,021,430 5,601,001
---------- ---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 509,532 527,769 1,248,052 1,309,082
Purchased power 656,214 177,824 1,593,270 525,134
Nuclear refueling outage expenses 18,675 12,196 49,083 40,144
Other operation and maintenance 466,380 394,526 1,358,929 1,127,823
Depreciation, amortization, and decommissioning 246,736 196,937 716,051 586,604
Taxes other than income taxes 92,233 90,572 275,429 269,485
Rate deferrals (8,388) (3,767) (25,872) (34,842)
Amortization of rate deferrals 143,588 142,512 327,766 324,236
---------- ---------- ---------- ----------
Total 2,124,970 1,538,569 5,542,708 4,147,666
---------- ---------- ---------- ----------
Operating Income 672,617 609,763 1,478,722 1,453,335
---------- ---------- ---------- ----------
Other Income (Deductions):
Windfall Profit tax - London Electricity (234,080) - (234,080) -
Allowance for equity funds used
during construction 1,777 2,399 7,845 7,753
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net (914) 62,330 45,703 85,791
---------- ---------- ---------- ----------
Total (233,217) 64,729 (180,532) (100,954)
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt 208,909 164,795 599,709 512,342
Other interest - net 16,541 17,221 39,594 39,166
Distributions on preferred securities of subsidiaries 4,709 1,947 13,591 1,947
Allowance for borrowed funds used
during construction (1,455) (2,032) (6,332) (6,499)
---------- ---------- ---------- ----------
Total 228,704 181,931 646,562 546,956
---------- ---------- ---------- ----------
Income Before Income Taxes 210,696 492,561 651,628 805,425
Income Taxes 117,375 193,395 273,243 368,548
---------- ---------- ---------- ----------
Net Income 93,321 299,166 378,385 436,877
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 12,379 19,286 41,405 55,745
---------- ---------- ---------- ----------
Earnings Applicable to Common Stock $80,942 $279,880 $336,980 $381,132
========== ========== ========== ==========
Earnings per average common share $0.33 $1.22 $1.41 $1.67
Dividends declared per common share $0.90 $0.45 $1.80 $1.35
Average number of common shares outstanding 242,172,319 228,603,813 238,653,723 228,141,842
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $378,385 $436,877
Noncash items included in net income:
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals/excess capacity-net 335,818 316,184
Depreciation, amortization, and decommissioning 716,051 586,604
Deferred income taxes and investment tax credits (169,887) (57,324)
Allowance for equity funds used during construction (7,845) (7,753)
Changes in working capital:
Receivables (175,147) (160,616)
Fuel inventory 68,892 (260)
Accounts payable 59,540 (73,293)
Taxes accrued 387,233 226,147
Windfall profit tax liability 234,080 -
Interest accrued (30,923) (14,350)
Other working capital accounts (103,731) (131,331)
Decommissioning trust contributions (67,259) (36,675)
Other (50,492) (9,970)
---------- ----------
Net cash flow provided by operating activities 1,574,715 1,268,738
---------- ----------
Investing Activities:
Construction/capital expenditures (554,638) (425,652)
Allowance for equity funds used during construction 7,845 7,753
Nuclear fuel purchases (52,323) (118,958)
Proceeds from sale/leaseback of nuclear fuel 91,504 107,035
Acquisition of London Electricity, net of cash acquired (1,951,701) -
Acquisition of CitiPower - (1,156,112)
Acquisition of security companies and assets (71,258) -
Investment in nonregulated/nonutility properties 6,652 (4,151)
Proceeds from sale of Hub Power stock 26,530 16,503
Proceeds from sale of investment in Transener 27,500 -
Proceeds from sale of ISES - 39,398
Other (25,863) (31,285)
---------- ----------
Net cash flow used in investing activities (2,495,752) (1,565,469)
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Financing Activities:
Proceeds from the issuance of:
General and refunding mortgage bonds 64,827 39,608
First mortgage bonds 84,064 431,906
Bank notes and other long-term debt 1,717,569 1,004,243
Preferred securities of subsidiaries trust 82,323 125,963
Common stock 238,193 36,869
Retirement of:
First mortgage bonds (327,692) (695,392)
General and refunding mortgage bonds (7,622) (56,000)
Other long-term debt (76,583) (143,373)
Redemption of preferred stock (119,367) (91,879)
Changes in short-term borrowings - net 103,454 75,025
Dividends paid:
Preferred stock (39,540) (54,793)
Common stock (328,182) (301,675)
---------- ----------
Net cash flow provided by financing activities 1,391,444 370,502
---------- ----------
Effect of exchange rates on cash and cash equivalents 2,655 66
---------- ----------
Net increase in cash and cash equivalents 473,062 73,837
Cash and cash equivalents at beginning of period 388,703 533,590
---------- ----------
Cash and cash equivalents at end of period $861,765 $607,427
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $650,190 $526,252
Income taxes $116,761 $236,288
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets $16,309 ($12,460)
Treasury shares issued to acquire Ranger American $21,464 -
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $99,476 $34,807
Temporary cash investments - at cost,
which approximates market 762,289 346,782
Special deposits - 7,114
---------- ----------
Total cash and cash equivalents 861,765 388,703
Notes receivable 9,316 1,384
Accounts receivable:
Customer (less allowance for doubtful accounts of
$26.2 million in 1997 and $9.2 million in 1996) 618,849 324,687
Other 207,578 99,066
Accrued unbilled revenues 512,138 351,429
Deferred fuel 154,003 122,184
Fuel inventory 70,711 139,603
Materials and supplies - at average cost 360,203 339,622
Rate deferrals 327,821 444,543
Prepayments and other 171,346 151,312
---------- ----------
Total 3,293,730 2,362,533
---------- ----------
Other Property and Investments:
Decommissioning trust funds 425,221 357,962
Non-regulated investments 557,796 513,058
Other 82,686 59,053
---------- ----------
Total 1,065,703 930,073
---------- ----------
Utility Plant:
Electric 25,374,226 22,811,164
Plant acquisition adjustment - Entergy Gulf States 443,227 455,425
Electric plant under leases 684,367 679,991
Property under capital leases - electric 138,462 147,277
Natural gas 168,099 168,143
Steam products 81,743 81,743
Construction work in progress 391,524 401,676
Nuclear fuel under capital leases 263,937 250,651
Nuclear fuel 61,832 112,625
---------- ----------
Total 27,607,417 25,108,695
Less - accumulated depreciation and amortization 9,477,321 8,885,572
---------- ----------
Utility plant - net 18,130,096 16,223,123
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 180,397 399,493
SFAS 109 regulatory asset - net 1,189,341 1,196,041
Unamortized loss on reacquired debt 201,977 217,664
Other regulatory assets 470,652 435,652
Long-term receivables 215,040 216,082
CitiPower license (net of $25.0 million of amortization) 545,391 606,214
London Electricity license (net of $22.4 million 1,310,919 -
of amortization)
Other 506,930 379,419
---------- ----------
Total 4,620,647 3,450,565
---------- ----------
TOTAL $27,110,176 $22,966,294
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $273,675 $345,620
Notes payable 387,229 20,686
Accounts payable 793,625 554,558
Customer deposits 185,336 155,534
Taxes accrued 654,816 180,340
Accumulated deferred income taxes 92,069 78,010
Interest accrued 193,465 203,425
Dividends declared 117,732 8,950
Obligations under capital leases 169,568 151,287
Other 112,768 184,157
---------- ----------
Total 2,980,283 1,882,567
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,575,808 3,770,760
Accumulated deferred investment tax credits 592,925 607,641
Obligations under capital leases 239,098 247,360
Other 1,653,119 1,298,306
---------- ----------
Total 7,060,950 5,924,067
---------- ----------
Long-term debt 9,394,235 7,590,804
Subsidiaries' preferred stock with sinking fund 196,237 216,986
Subsidiary's preference stock 150,000 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 215,000 130,000
Shareholders' Equity:
Subsidiaries' preferred stock without sinking fund 334,454 430,955
Common stock, $.01 par value, authorized 500,000,000
shares; issued 243,431,490 shares in 1997 and
234,456,457 shares in 1996 2,434 2,345
Paid-in capital 4,546,564 4,320,591
Retained earnings 2,246,729 2,341,703
Cumulative foreign currency translation adjustment (5,682) 21,725
Less - treasury stock (308,202 shares in 1997 and
1,496,118 shares in 1996, at cost) 11,028 45,449
---------- ----------
Total 7,113,471 7,071,870
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $27,110,176 $22,966,294
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 803.6 $ 800.6 $ 3.0 -
Commercial 466.2 473.7 (7.5) (2)
Industrial 532.6 548.6 (16.0) (3)
Governmental 46.8 48.5 (1.7) (4)
--------- --------- -------
Total retail 1,849.2 1,871.4 (22.2) (1)
Sales for resale 110.1 106.7 3.4 3
Other 38.8 (11.1) 49.9 449
--------- --------- -------
Total $ 1,998.1 $ 1,967.0 $ 31.1 2
========= ========= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 9,892 9,631 261 3
Commercial 6,563 6,378 185 3
Industrial 11,425 11,716 (291) (2)
Governmental 693 703 (10) (1)
--------- --------- -------
Total retail 28,573 28,428 145 1
Sales for resale 2,883 3,007 (124) (4)
--------- --------- -------
Total 31,456 31,435 21 -
========= ========= =======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 1,759.9 $ 1,824.1 ($64.2) (4)
Commercial 1,197.0 1,208.3 (11.3) (1)
Industrial 1,506.5 1,505.9 0.6 -
Governmental 128.8 128.5 0.3 -
--------- --------- -------
Total retail 4,592.2 4,666.8 (74.6) (2)
Sales for resale 267.8 300.2 (32.4) (11)
Other 92.7 87.6 5.1 6
--------- --------- -------
Total $ 4,952.7 $ 5,054.6 ($101.9) (2)
========= ========= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 21,823 22,603 (780) (3)
Commercial 16,410 16,254 156 1
Industrial 33,560 33,145 415 1
Governmental 1,886 1,850 36 2
--------- --------- -------
Total retail 73,679 73,852 (173) -
Sales for resale 7,136 8,817 (1,681) (19)
--------- --------- -------
Total 80,815 82,669 (1,854) (2)
========= ========= =======
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30,
1997 primarily due to an increase in electric operating revenues and
a decrease in other operation and maintenance expenses, partially
offset by higher income taxes. Net income decreased for the nine
months ended September 30, 1997 primarily as a result of a decrease
in electric operating revenues, partially offset by lower income
taxes.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.3) ($3.1)
Rate riders 7.3 6.8
Fuel cost recovery 2.1 5.3
Sales volume/weather 7.3 (7.4)
Other revenue (including unbilled) 11.9 (4.3)
Sales for resale (8.7) (33.4)
----- -------
Total $16.6 ($36.1)
===== =======
Electric operating revenues increased for the three months ended
September 30, 1997 primarily due to an increase in other revenue,
sales volume and rate riders, partially offset by a decrease in sales
for resale. The increases in other revenue (primarily unbilled
revenue) and sales volume are a result of warmer weather in September
1997 as compared to the same period in 1996 and increased usage due
to customer growth. The increase in rate rider revenues was due to
an increase in Grand Gulf 1 rate rider revenues as a result of
increased usage related to warmer weather during September 1997. The
decrease in sales for resale is due to a decrease in sales to
associated companies primarily due to changes in the generation
requirements and availability among the domestic utility companies.
Electric operating revenues decreased for the nine months ended
September 30, 1997 primarily as a result of decreased sales for
resale and lower sales volume, partially offset by an increase in
rate rider revenues. The decrease in sales for resale resulted from
a decrease in sales to associated companies primarily due to changes
in the generation requirements and availability among the domestic
utility companies. Sales volume decreased because of milder weather
during the first half of the year. The increase in rate rider
revenues was due to an increase in Grand Gulf 1 rate rider revenues
as a result of increased usage related to warmer weather during
September 1997.
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased slightly for the three months ended
September 30, 1997 primarily due to a decrease in fuel expenses and
other operation and maintenance expenses. These decreases were
largely offset by an increase in purchased power expenses and an
increase in the amortization of Grand Gulf 1 rate deferrals.
Purchased power expenses increased due to a shift from higher priced
fuel to lower priced purchased power. The increase in the
amortization of Grand Gulf 1 rate deferrals is due to an increase in
amortization prescribed in the Grand Gulf 1 rate phase-in plan.
Other operation and maintenance expenses decreased for the three
months ended September 30, 1997 primarily due to a decrease in loss
reserves and rental expense.
Operating expenses decreased for the nine months ended September
30, 1997 primarily due to decreases in fuel and purchased power
expenses, partially offset by an increase in the amortization of
Grand Gulf 1 rate deferrals. Fuel and purchased power expenses
decreased primarily as a result of lower sales volume due to milder
weather in the first half of the year and lower priced purchased
power costs. The increase in the amortization of Grand Gulf 1 rate
deferrals is due to an increase in amortization prescribed in the
Grand Gulf 1 rate phase-in plan.
Other
Miscellaneous other income - net decreased for the three and
nine months ended September 30, 1997 due to reduced Grand Gulf 1
carrying charges as a result of a decline in the deferral balance
which does not impact net income.
For the three months ended September 30, 1997 and 1996 the
effective income tax rates were relatively unchanged. For the nine
months ended September 30, 1997 and 1996 the effective income tax
rates were 41.93% and 45.76%, respectively. The increase is
primarily due to a decrease in regulatory operating reserves which
receive flow through treatment.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $545,849 $529,276 $1,344,199 $1,380,347
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 72,147 84,869 201,494 216,544
Purchased power 123,871 114,106 327,725 334,362
Nuclear refueling outage expenses 7,639 7,087 19,905 22,170
Other operation and maintenance 80,280 88,629 252,081 257,765
Depreciation, amortization, and decommissioning 42,745 42,112 125,529 123,928
Taxes other than income taxes 9,114 8,546 27,643 27,989
Amortization of rate deferrals 61,365 52,608 129,370 119,078
-------- -------- ---------- ----------
Total 397,161 397,957 1,083,747 1,101,836
-------- -------- ---------- ----------
Operating Income 148,688 131,319 260,452 278,511
-------- -------- ---------- ----------
Other Income:
Allowance for equity funds used
during construction - 875 2,572 3,026
Miscellaneous - net 4,257 7,735 14,987 23,865
-------- -------- ---------- ----------
Total 4,257 8,610 17,559 26,891
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 23,368 24,395 71,595 74,162
Other interest - net 1,055 1,211 2,850 3,498
Distributions on preferred securities of subsidiary 1,275 652 3,825 652
Allowance for borrowed funds used
during construction - (522) (1,632) (1,821)
-------- -------- ---------- ----------
Total 25,698 25,736 76,638 76,491
-------- -------- ---------- ----------
Income Before Income Taxes 127,247 114,193 201,373 228,911
Income Taxes 48,996 43,402 75,189 83,140
-------- -------- ---------- ----------
Net Income 78,251 70,791 126,184 145,771
Preferred Stock Dividend Requirements
and Other 2,733 4,359 8,363 13,243
-------- -------- ---------- ----------
Earnings Applicable to Common Stock $75,518 $66,432 $117,821 $132,528
======== ======== ========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $126,184 $145,771
Noncash items included in net income:
Change in rate deferrals/excess capacity-net 122,556 104,544
Depreciation, amortization, and decommissioning 125,529 123,928
Deferred income taxes and investment tax credits (58,694) (50,194)
Allowance for equity funds used during construction (2,572) (3,026)
Changes in working capital:
Receivables (13,783) (37,379)
Fuel inventory 40,975 427
Accounts payable (20,826) (13,901)
Taxes accrued 95,308 54,444
Interest accrued 767 (1,418)
Other working capital accounts (26,638) 25,140
Decommissioning trust contributions (11,129) (11,831)
Provision for estimated losses and reserves 5,878 4,069
Other 16,950 3,633
--------- ---------
Net cash flow provided by operating activities 400,505 344,207
--------- ---------
Investing Activities:
Construction expenditures (101,796) (102,709)
Allowance for equity funds used during construction 2,572 3,026
Nuclear fuel purchases (36,633) (26,064)
Proceeds from sale/leaseback of nuclear fuel 36,553 25,437
--------- ---------
Net cash flow used in investing activities (99,304) (100,310)
--------- ---------
Financing Activities:
Proceeds from the issuance of:
First mortgage bonds 84,064 84,256
Preferred securities of subsidiary trust - 58,168
Retirement of first mortgage bonds (117,587) (112,807)
Redemption of preferred stock (4,000) (4,000)
Dividends paid:
Common stock (97,200) (66,600)
Preferred stock (8,462) (13,342)
--------- ---------
Net cash flow used in financing activities (143,185) (54,325)
--------- ---------
Net increase in cash and cash equivalents 158,016 189,572
Cash and cash equivalents at beginning of period 43,857 11,798
--------- ---------
Cash and cash equivalents at end of period $201,873 $201,370
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $63,660 $69,503
Income taxes $29,011 $77,041
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $12,867 ($8,645)
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $6,914 $5,117
Temporary cash investments - at cost,
which approximates market:
Associated companies 44,193 17,462
Other 150,766 21,278
---------- ----------
Total cash and cash equivalents 201,873 43,857
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.3 million in 1997 and 1996) 96,564 71,144
Associated companies 27,941 45,303
Other 2,965 5,862
Accrued unbilled revenues 113,386 104,764
Fuel inventory - at average cost 16,344 57,319
Materials and supplies - at average cost 80,967 72,976
Rate deferrals 104,488 153,141
Deferred excess capacity 1,305 9,005
Deferred nuclear refueling outage costs 32,384 24,534
Prepayments and other 9,800 7,491
---------- ----------
Total 688,017 595,396
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,211 11,211
Decommissioning trust fund 234,396 203,274
Other - at cost (less accumulated depreciation) 3,915 5,058
---------- ----------
Total 249,522 219,543
---------- ----------
Utility Plant:
Electric 4,687,416 4,578,728
Property under capital leases 55,736 57,869
Construction work in progress 77,270 83,524
Nuclear fuel under capital lease 82,444 79,103
Nuclear fuel - 27,500
---------- ----------
Total 4,902,866 4,826,724
Less - accumulated depreciation and 2,101,433 1,976,204
amortization
---------- ----------
Utility plant - net 2,801,433 2,850,520
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 9,046 75,249
SFAS 109 regulatory asset - net 255,191 244,767
Unamortized loss on reacquired debt 54,714 56,664
Other regulatory assets 76,647 80,257
Other 30,631 31,421
---------- ----------
Total 426,229 488,358
---------- ----------
TOTAL $4,165,201 $4,153,817
========== ==========
See Notes to Financial Statements.
<PAGE>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $17,465 $32,465
Notes payable 667 667
Accounts payable:
Associated companies 57,115 91,205
Other 83,353 97,589
Customer deposits 24,298 21,800
Taxes accrued 149,502 54,194
Accumulated deferred income taxes 48,462 70,506
Interest accrued 28,392 27,625
Co-owner advances 7,858 33,873
Deferred fuel cost 14,643 6,955
Obligations under capital leases 48,995 53,012
Other 25,308 17,967
---------- ----------
Total 506,058 507,858
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 766,843 785,994
Accumulated deferred investment tax credits 105,001 108,307
Obligations under capital leases 89,084 83,940
Other 139,906 113,998
---------- ----------
Total 1,100,834 1,092,239
---------- ----------
Long-term debt 1,243,356 1,255,388
Preferred stock with sinking fund 36,027 40,027
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
Shareholders' Equity:
Preferred stock without sinking fund 116,350 116,350
Common stock, $0.01 par value, authorized
325,000,000 shares; issued and outstanding
46,980,196 shares 470 470
Paid-in capital 590,169 590,169
Retained earnings 511,937 491,316
---------- ----------
Total 1,218,926 1,198,305
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,165,201 $4,153,817
========== ==========
See Notes to Financial Statements.
<PAGE>
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 194.1 $ 187.0 $ 7.1 4
Commercial 105.5 102.4 3.1 3
Industrial 112.6 109.6 3.0 3
Governmental 5.2 5.0 0.2 4
------- ------- ------
Total retail 417.4 404.0 13.4 3
Sales for resale
Associated companies 53.8 68.8 (15.0) (22)
Non-associated companies 67.0 60.7 6.3 10
Other 7.6 (4.3) 11.9 277
------- ------- ------
Total $ 545.8 $ 529.2 $ 16.6 3
======= ======= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,031 1,971 60 3
Commercial 1,391 1,353 38 3
Industrial 1,833 1,759 74 4
Governmental 67 66 1 2
------- ------- ------
Total retail 5,322 5,149 173 3
Sales for resale
Associated companies 2,102 2,855 (753) (26)
Non-associated companies 2,012 1,726 286 17
------- ------- ------
Total 9,436 9,730 (294) (3)
======= ======= ======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 430.7 $ 437.4 ($6.7) (2)
Commercial 254.0 250.4 3.6 1
Industrial 278.4 274.6 3.8 1
Governmental 14.1 13.2 0.9 7
--------- --------- ------
Total retail 977.2 975.6 1.6 -
Sales for resale
Associated companies 176.2 204.2 (28.0) (14)
Non-associated companies 162.2 167.6 (5.4) (3)
Other 28.6 32.9 (4.3) (13)
--------- --------- ------
Total $ 1,344.2 $ 1,380.3 ($36.1) (3)
========= ========= ======
Billed Electric Energy
Sales (Millions of kWh):
Residential 4,640 4,816 (176) (4)
Commercial 3,371 3,387 (16) -
Industrial 4,944 4,850 94 2
Governmental 184 180 4 2
--------- --------- ------
Total retail 13,139 13,233 (94) (1)
Sales for resale
Associated companies 7,982 8,622 (640) (7)
Non-associated companies 5,023 5,434 (411) (8)
--------- --------- ------
Total 26,144 27,289 (1,145) (4)
========= ========= ======
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30,
1997 primarily as a result of a reduction in other income-
miscellaneous due to the reversal of the accrual for the Cajun-River
Bend litigation in September 1996. This decrease was partially offset
by an increase in electric operating revenues and decreases in other
operation and maintenance expenses, interest on long-term debt, and
lower income taxes.
Net income increased for the nine months ended September 30,
1997 primarily due to the $174 million net of tax write-off of River
Bend rate deferrals required by the adoption of SFAS 121 in the first
quarter of 1996. Excluding the effect of the write-off and the third
quarter 1996 reversal of the Cajun-River Bend litigation accrual, net
income for the nine months ended September 30, 1997 would have
increased approximately 2.8% due to a decrease in other operation and
maintenance expenses and reduced interest on long-term debt.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($0.3) ($26.8)
Fuel cost recovery (5.0) 16.9
Sales volume/weather 14.6 18.4
Other revenue (including unbilled) 7.0 (0.1)
Sales for resale (4.0) (19.9)
----- -------
Total $12.3 ($11.5)
===== =======
Electric operating revenues increased for the three months ended
September 30, 1997 primarily due to higher sales volume and increased
other revenue (primarily unbilled revenue). Sales volume increased
primarily due to an increase in sales to industrial customers, in
particular, certain cogeneration customers who purchased electricity
from Entergy Gulf States for less than their production cost.
Unbilled revenue increased as a result of warmer weather in September
1997 as compared to the same period in 1996.
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues decreased for the nine months ended
September 30, 1997 as a result of a decrease in base revenues and
sales for resale, partially offset by increased fuel adjustment
revenues, which do not affect net income, and higher sales volume.
Base revenues decreased primarily due to rate reductions implemented
for Louisiana retail customers in February 1997, aggressive pricing
strategies for targeted customer segments, and a change in the sales
mix from residential customers to industrial customers. Sales for
resale decreased primarily due to decreased sales to non-associated
customers. Fuel adjustment revenues increased due to a PUCT order
that approved recovery of under-recovered fuel expenses. See Note 2
for further discussion. Sales volume increased primarily due to an
increase in sales to certain industrial customers as noted above.
Gas operating revenues increased for the nine months ended
September 30, 1997 due to an increase in the fuel factor granted by
the LPSC. This increase permits recovery of previously deferred gas
costs.
Steam operating revenues decreased for the three and nine months
ended September 30, 1997 primarily due to increased customer
requirements in 1996.
Expenses
Operating expenses increased slightly for the three and nine
months ended September 30, 1997 primarily due to increased purchased
power expenses, partially offset by a decrease in other operation and
maintenance expenses. Purchased power increased due to increased
energy requirements combined with an increase in price. The decrease
in other operation and maintenance expenses is primarily due to a
decrease in the reserve for Cajun's unpaid portion of River Bend
related costs, which is reflected in long-term receivables. Payments
into the registry of the United States District Court for the Middle
District of Louisiana for Entergy Gulf States' portion of expenses
for Big Cajun 2, Unit 3 are expected to be recovered during 1997 as a
part of the settlement of the disputes between Cajun and Entergy.
See Note 1 for further discussion. Amortization of rate deferrals
increased for the nine months ended September 30, 1997 based on the
LPSC-approved River Bend phase-in plan. See Note 2 for further
discussion.
Other
Other income decreased for the three months ended September 30,
1997 due to the decrease in miscellaneous - net resulting from the
reversal of the accrual for Cajun-River Bend litigation in September
1996. In September 1994, Entergy Gulf States recorded a reserve for
the anticipated costs of the Cajun-River Bend litigation. Based on
the Bankruptcy Court's approval of the settlement, the litigation
accrual was reversed, resulting in miscellaneous income in 1996.
Other income increased for the nine months ended September 30,
1997 primarily due to the write-off of River Bend rate deferrals
required by the adoption of SFAS 121 in the first quarter of 1996,
partially offset by the reversal of the accrual for the Cajun-River
Bend litigation as discussed above.
Interest charges decreased for the three and nine months ended
September 30, 1997 due to the retirement of certain high cost long-
term debt. For the three months ended September 30, 1997 and 1996,
the effective income tax rates were relatively unchanged. For the
nine months ended September 30, 1997 and 1996, the effective income
tax rates were 37.36.% and 119.50%, respectively. The decrease is
primarily due to the River Bend SFAS 121 write-off of $194.5 million
in January 1996.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
STATEMENTS OF INCOME (LOSS)
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $584,357 $572,040 $1,490,234 $1,501,707
Natural gas 4,476 4,946 32,387 26,685
Steam products 11,141 15,144 35,102 45,936
-------- -------- ---------- ----------
Total 599,974 592,130 1,557,723 1,574,328
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 152,511 171,451 411,595 413,917
Purchased power 93,208 68,619 238,977 223,213
Nuclear refueling outage expenses 1,569 1,132 6,787 6,064
Other operation and maintenance 93,978 102,333 269,422 296,805
Depreciation, amortization, and decommissioning 53,768 51,417 160,569 154,172
Taxes other than income taxes 25,800 26,837 81,810 78,376
Amortization of rate deferrals 20,775 18,319 61,541 54,281
-------- -------- ---------- ----------
Total 441,609 440,108 1,230,701 1,226,828
-------- -------- ---------- ----------
Operating Income 158,365 152,022 327,022 347,500
-------- -------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 235 705 1,686 1,937
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net 7,029 55,140 15,618 65,770
-------- -------- ---------- ----------
Total 7,264 55,845 17,304 (126,791)
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 40,516 44,583 124,257 137,547
Other interest - net 4,704 10,349 8,420 12,258
Distributions on preferred securities of subsidiary 1,859 - 5,041 -
Allowance for borrowed funds used
during construction (156) (600) (1,395) (1,656)
-------- -------- ---------- ----------
Total 46,923 54,332 136,323 148,149
-------- -------- ---------- ----------
Income Before Income Taxes 118,706 153,535 208,003 72,560
Income Taxes 47,966 62,570 77,700 86,712
-------- -------- ---------- ----------
Net Income (Loss) 70,740 90,965 130,303 (14,152)
Preferred and Preference Stock
Dividend Requirements and Other 5,025 7,212 18,963 21,497
-------- -------- ---------- ----------
Earnings (Loss) Applicable to Common Stock $65,715 $83,753 $111,340 ($35,649)
======== ======== ========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income (loss) $130,303 ($14,152)
Noncash items included in net income (loss):
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals 60,822 54,281
Depreciation, amortization, and decommissioning 160,569 154,172
Deferred income taxes and investment tax credits 22,299 86,063
Allowance for equity funds used during construction (1,686) (1,937)
Changes in working capital:
Receivables (55,099) (24,352)
Fuel inventory 19,761 (11,734)
Accounts payable 26,758 (35,908)
Taxes accrued 60,741 12,664
Interest accrued 6,211 3,591
Deferred fuel (29,208) (53,538)
Other working capital accounts (4,059) (70,058)
Decommissioning trust contributions (5,637) (4,442)
Provision for estimated losses and reserves (16,811) (3,085)
Other 7,586 (22,663)
--------- ---------
Net cash flow provided by operating activities 382,550 263,400
--------- ---------
Investing Activities:
Construction expenditures (96,998) (122,349)
Allowance for equity funds used during construction 1,686 1,937
Nuclear fuel purchases (11,580) (22,193)
Proceeds from sale/leaseback of nuclear fuel 11,580 23,592
--------- ---------
Net cash flow used in investing activities (95,312) (119,013)
--------- ---------
Financing Activities:
Proceeds from the issuance of:
Long-term debt - 780
Preferred securities of subsidiary trust 82,323 -
Retirement of:
First mortgage bonds (57,240) (79,234)
Other long-term debt (50,865) (50,425)
Redemption of preferred and preference stock (93,367) (10,179)
Dividends paid:
Common stock (48,200) -
Preferred and preference stock (16,960) (21,328)
--------- ---------
Net cash flow used in financing activities (184,309) (160,386)
--------- ---------
Net increase (decrease) in cash and cash equivalents 102,929 (15,999)
Cash and cash equivalents at beginning of period 122,406 234,604
--------- ---------
Cash and cash equivalents at end of period $225,335 $218,605
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $118,834 $128,496
Income taxes $2,631 $80
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets $2,129 ($765)
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $11,092 $6,573
Temporary cash investments - at cost,
which approximates market:
Associated companies 44,749 45,234
Other 169,494 70,599
---------- ----------
Total cash and cash equivalents 225,335 122,406
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.0 million in 1997 and 1996) 110,482 87,883
Associated companies 11,623 2,777
Other 42,605 30,758
Accrued unbilled revenues 87,158 75,351
Deferred fuel costs 128,711 99,503
Accumulated deferred income taxes 22,821 56,714
Fuel inventory - at average cost 25,248 45,009
Materials and supplies - at average cost 88,445 86,157
Rate deferrals 45,844 105,456
Prepayments and other 27,130 16,321
---------- ----------
Total 815,402 728,335
---------- ----------
Other Property and Investments:
Decommissioning trust fund 51,243 41,983
Other - at cost (less accumulated depreciation) 38,596 38,358
---------- ----------
Total 89,839 80,341
---------- ----------
Utility Plant:
Electric 7,189,201 7,112,021
Natural Gas 45,399 45,443
Steam products 81,743 81,743
Property under capital leases 69,508 72,800
Construction work in progress 53,712 112,137
Nuclear fuel under capital lease 58,292 49,833
---------- ----------
Total 7,497,855 7,473,977
Less - accumulated depreciation and amortization 2,970,628 2,846,083
---------- ----------
Utility plant - net 4,527,227 4,627,894
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 100,679 120,158
SFAS 109 regulatory asset - net 380,494 372,817
Unamortized loss on reacquired debt 49,690 54,761
Other regulatory assets 87,200 45,139
Long-term receivables 215,040 216,082
Other 227,710 185,921
---------- ----------
Total 1,060,813 994,878
---------- ----------
TOTAL $6,493,281 $6,431,448
========== ==========
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $150,890 $160,865
Accounts payable:
Associated companies 53,514 55,630
Other 114,415 85,541
Customer deposits 31,435 25,572
Taxes accrued 96,888 36,147
Interest accrued 55,862 49,651
Nuclear refueling reserve 16,039 12,354
Obligations under capital leases 34,764 39,110
Other 17,676 18,186
---------- ----------
Total 571,483 483,056
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,207,820 1,200,935
Accumulated deferred investment tax credits 216,320 219,188
Obligations under capital leases 99,011 83,524
Deferred River Bend finance charges 15,419 33,688
Other 553,013 539,752
---------- ----------
Total 2,091,583 2,077,087
---------- ----------
Long-term debt 1,817,316 1,915,346
Preferred stock with sinking fund 75,210 77,459
Preference stock 150,000 150,000
Company - obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 -
Shareholders' Equity:
Preferred stock without sinking fund 47,444 136,444
Common stock, no par value, authorized
200,000,000 shares; issued and outstanding
100 shares 114,055 114,055
Paid-in capital 1,152,575 1,152,689
Retained earnings 388,615 325,312
---------- ----------
Total 1,702,689 1,728,500
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $6,493,281 $6,431,448
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 210.7 $ 211.4 ($ 0.7) -
Commercial 125.3 128.7 (3.4) (3)
Industrial 189.2 186.7 2.5 1
Governmental 8.6 8.7 (0.1) (1)
------- ------- ------
Total retail 533.8 535.5 (1.7) -
Sales for resale
Associated companies 7.6 8.0 (0.4) (5)
Non-associated companies 17.5 21.1 (3.6) (17)
Other 25.5 7.5 18.0 240
------- ------- ------
Total $ 584.4 $ 572.1 $ 12.3 2
======= ======= ======
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,845 2,751 94 3
Commercial 1,935 1,887 48 3
Industrial 4,739 4,393 346 8
Governmental 131 127 4 3
------- ------- ------
Total retail 9,650 9,158 492 5
Sales for resale
Associated companies 181 259 (78) (30)
Non-associated companies 438 535 (97) (18)
------- ------- ------
Total 10,269 9,952 317 3
======= ======= ======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 477.8 $ 488.0 ($ 10.2) (2)
Commercial 337.6 340.5 (2.9) (1)
Industrial 544.1 524.3 19.8 4
Governmental 25.1 23.5 1.6 7
--------- --------- -------
Total retail 1,384.6 1,376.3 8.3 1
Sales for resale
Associated companies 13.1 13.5 (0.4) (3)
Non-associated companies 41.8 61.3 (19.5) (32)
Other 50.7 50.6 0.1 -
--------- --------- -------
Total $ 1,490.2 $ 1,501.7 ($ 11.5) (1)
========= ========= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 6,282 6,396 (114) (2)
Commercial 4,953 4,905 48 1
Industrial 13,459 12,457 1,002 8
Governmental 359 329 30 9
--------- --------- -------
Total retail 25,053 24,087 966 4
Sales for resale
Associated companies 380 399 (19) (5)
Non-associated companies 1,077 1,714 (637) (37)
--------- --------- -------
Total 26,510 26,200 310 1
========= ========= =======
<PAGE>
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30,
1997 primarily as a result of an accrual for fire damages sustained
in late September 1997 at the Little Gypsy fossil plant. Net income
decreased for the nine months ended September 30, 1997 primarily due
to a decrease in electric operating revenues and an increase in
other operation and maintenance expenses, partially offset by lower
income taxes.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($11.8) ($17.7)
Fuel cost recovery 15.9 15.0
Sales volume/weather (7.2) (24.7)
Other revenue (including unbilled) 5.0 4.1
Sales for resale 3.3 (0.9)
----- -------
Total $ 5.2 ($24.2)
===== =======
Electric operating revenues increased for the three months ended
September 30, 1997 primarily due to increases in fuel adjustment
revenues, which do not affect net income, and other revenue
(primarily unbilled revenue). These increases were partially offset
by a decrease in base revenues and lower sales volume. Fuel
adjustment revenues increased due to a change in shifting generation
requirements as a result of the extended refueling outage at
Waterford 3. The increase in unbilled revenue is largely the result
of warmer weather in September 1997 as compared to the same period in
1996. Base revenues decreased due to a base rate reduction that
became effective in the third quarter of 1997. See Note 2 for
further discussion. Sales volume decreased because of the loss of a
large industrial customer as well as substantially lower sales to
another large industrial customer during the current period due to
customer cogeneration.
Electric operating revenues decreased for the nine months ended
September 30, 1997 primarily as a result of a decrease in base
revenues and lower sales volume, partially offset by higher fuel
adjustment revenues, which do not affect net income. Base revenues
decreased due to base rate reductions that became effective in the
third quarter of 1996 and 1997. Sales volume decreased because of
milder weather during the first half of the year and the loss of a
large industrial customer as well as substantially lower sales to
another large industrial customer during the current period due to
customer cogeneration. Fuel adjustment revenues increased due to a
change in shifting generation requirements as a result of the
extended Waterford 3 refueling outage.
<PAGE>
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses increased for the three months ended
September 30, 1997 primarily due to an increase in fuel expense,
partially offset by a reduction in other operation and maintenance
expenses. Fuel expense increased primarily due to shifting
generation requirements resulting from the extended refueling outage
at the Waterford 3 nuclear plant and due to higher gas prices for the
three months ended September 30, 1997. Other operation and
maintenance expenses decreased due to a forced maintenance outage at
Waterford 3 during the third quarter of 1996, partially offset by an
accrual for fire damages sustained in late September 1997.
Operating expenses increased for the nine months ended September
30, 1997 primarily due to increases in fuel and purchased power
expenses and other operation and maintenance expenses, and the impact
of 1996 rate deferrals. Fuel and purchased power expenses increased
primarily due to shifting generation requirements resulting from the
extended refueling outage at the Waterford 3 nuclear plant, partially
offset by lower fuel prices. Other operation and maintenance
expenses increased for the nine months ended September 30, 1997 due
to non-fueling outage related contract work at Waterford 3 primarily
during the second quarter of 1997, as well as maintenance performed
at Waterford 3, and an accrual for fire damage sustained in late
September 1997 at the Little Gypsy fossil plant. Waterford 3
property taxes recorded in 1996 were offset by the recording of the
LPSC-approved rate deferrals for these taxes. See Note 2 in the Form
10-K for further information.
Other
For the three months ended September 30, 1997 and 1996 the
effective income tax rates were 39.70% and 37.66%, respectively. For
the nine months ended September 30, 1997 and 1996 the effective
income tax rates were 40.29% and 36.95%, respectively. These
increases are primarily due to decreased amortization of deferred
income taxes on property fully depreciated for federal income tax
purposes.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $554,486 $549,295 $1,400,732 $1,424,909
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 152,609 125,447 326,588 316,789
Purchased power 113,235 113,676 323,988 314,613
Nuclear refueling outage expenses 5,267 3,977 10,566 11,910
Other operation and maintenance 75,251 82,838 231,637 219,515
Depreciation, amortization, and decommissioning 42,877 41,857 128,343 125,529
Taxes other than income taxes 17,892 19,001 53,712 56,981
Rate deferrals - 607 - (10,768)
Amortization of rate deferrals (621) 6,137 12,131 19,683
-------- -------- ---------- ----------
Total 406,510 393,540 1,086,965 1,054,252
-------- -------- ---------- ----------
Operating Income 147,976 155,755 313,767 370,657
-------- -------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 601 186 1,038 712
Miscellaneous - net (789) 614 (1,706) 1,342
-------- -------- ---------- ----------
Total (188) 800 (668) 2,054
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 27,921 30,411 88,011 92,190
Other interest - net 1,635 1,222 4,846 5,721
Distributions on preferred securities of subsidiary 1,575 1,295 4,725 1,295
Allowance for borrowed funds used
during construction (555) (373) (1,311) (1,204)
-------- -------- ---------- ----------
Total 30,576 32,555 96,271 98,002
-------- -------- ---------- ----------
Income Before Income Taxes 117,212 124,000 216,828 274,709
Income Taxes 46,531 46,698 87,368 101,492
-------- -------- ---------- ----------
Net Income 70,681 77,302 129,460 173,217
Preferred Stock Dividend Requirements
and Other 3,251 6,289 10,097 16,457
-------- -------- ---------- ----------
Earnings Applicable to Common Stock $67,430 $71,013 $119,363 $156,760
======== ======== ========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $129,460 $173,217
Noncash items included in net income:
Change in rate deferrals 5,749 16,991
Depreciation, amortization, and decommissioning 128,343 125,529
Deferred income taxes and investment tax credits (8,136) (24,518)
Allowance for equity funds used during construction (1,038) (712)
Changes in working capital:
Receivables (48,067) (50,545)
Accounts payable (15,502) (8,083)
Taxes accrued 100,900 79,301
Interest accrued (23,166) (10,461)
Other working capital accounts 3,771 301
Decommissioning trust contributions (6,590) (6,593)
Provision for estimated losses and reserves 5,046 6,526
Other 875 (16,386)
--------- ---------
Net cash flow provided by operating activities 271,645 284,567
--------- ---------
Investing Activities:
Construction expenditures (60,071) (75,574)
Allowance for equity funds used during construction 1,038 712
Nuclear fuel purchases (43,332) -
Proceeds from sale/leaseback of nuclear fuel 43,332 -
--------- ---------
Net cash flow used in investing activities (59,033) (74,862)
--------- ---------
Financing Activities:
Proceeds from the issuance of:
First mortgage bonds - 113,994
Preferred securities of subsidiary trust - 67,795
Retirement of:
First mortgage bonds (34,000) (130,000)
Other long-term debt (262) (233)
Redemption of preferred stock (7,500) (67,824)
Changes in short-term borrowings - net (31,066) (75,381)
Dividends paid:
Common stock (111,200) (100,300)
Preferred stock (9,997) (15,584)
--------- ---------
Net cash flow used in financing activities (194,025) (207,533)
--------- ---------
Net increase in cash and cash equivalents 18,587 2,172
Cash and cash equivalents at beginning of period 23,746 34,370
--------- ---------
Cash and cash equivalents at end of period $42,333 $36,542
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $101,334 $103,434
Income taxes ($1,754) $81,700
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $1,877 ($2,077)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $10,477 $1,804
Temporary cash investments - at cost,
which approximates market 31,856 21,942
---------- ----------
Total cash and cash equivalents 42,333 23,746
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 110,004 73,823
Associated companies 14,884 11,606
Other 7,033 7,053
Accrued unbilled revenues 72,507 63,879
Deferred fuel costs 13,051 18,347
Accumulated deferred income taxes - 1,465
Materials and supplies - at average cost 84,535 78,449
Rate deferrals - 5,749
Deferred nuclear refueling outage costs 35,176 5,300
Prepaid income tax 2,403 24,651
Prepayments and other 8,007 10,234
---------- ----------
Total 389,933 324,302
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 60,721 50,481
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 97,476 87,236
---------- ----------
Utility Plant:
Electric 5,080,354 4,997,456
Property under capital leases 232,582 232,582
Construction work in progress 37,214 56,180
Nuclear fuel under capital lease 66,953 38,157
Nuclear fuel 3,067 34,191
---------- ----------
Total 5,420,170 5,358,566
Less - accumulated depreciation and amortization 2,001,376 1,881,847
---------- ----------
Utility plant - net 3,418,794 3,476,719
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 282,043 295,836
Unamortized loss on reacquired debt 34,489 37,552
Other regulatory assets 23,661 30,320
Other 27,341 27,313
---------- ----------
Total 367,534 391,021
---------- ----------
TOTAL $4,273,737 $4,279,278
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $35,300 $34,275
Notes payable - associated companies - 31,066
Accounts payable:
Associated companies 42,800 73,389
Other 71,952 89,550
Customer deposits 61,399 59,070
Taxes accrued 108,290 7,390
Accumulated deferred income taxes 2,006 -
Interest accrued 26,083 49,249
Dividends declared 3,250 3,489
Obligations under capital leases 39,828 28,000
Other 12,573 4,940
---------- ----------
Total 403,481 380,418
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 813,745 831,093
Accumulated deferred investment tax credits 135,682 139,899
Obligations under capital leases 27,124 10,156
Deferred interest - Waterford 3 lease obligation 17,550 16,809
Other 123,875 114,665
---------- ----------
Total 1,117,976 1,112,622
---------- ----------
Long-term debt 1,338,322 1,373,233
Preferred stock with sinking fund 85,000 92,500
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
Shareholders' Equity:
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized
250,000,000 shares; issued and outstanding
165,173,180 shares 1,088,900 1,088,900
Capital stock expense and other (2,321) (2,659)
Retained earnings 71,879 63,764
---------- ----------
Total 1,258,958 1,250,505
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,273,737 $4,279,278
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 222.6 $ 215.7 $ 6.9 3
Commercial 116.8 112.5 4.3 4
Industrial 180.2 194.3 (14.1) (7)
Governmental 9.1 9.2 (0.1) (1)
--------- --------- ------
Total retail 528.7 531.7 (3.0) (1)
Sales for resale
Associated companies 2.7 0.1 2.6 2,600
Non-associated companies 16.4 15.7 0.7 4
Other 6.7 1.8 4.9 272
--------- --------- ------
Total $ 554.5 $ 549.3 $ 5.2 1
========= ========= ======
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,738 2,681 57 2
Commercial 1,502 1,449 53 4
Industrial 3,918 4,602 (684) (15)
Governmental 119 121 (2) (2)
--------- --------- ------
Total retail 8,277 8,853 (576) (7)
Sales for resale
Associated companies 72 2 70 3,500
Non-associated companies 256 257 (1) -
--------- --------- ------
Total 8,605 9,112 (507) (6)
========= ========= ======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 475.4 $ 490.9 ($ 15.5) (3)
Commercial 291.4 289.0 2.4 1
Industrial 538.0 552.4 (14.4) (3)
Governmental 26.2 26.0 0.2 1
--------- --------- ------
Total retail 1,331.0 1,358.3 (27.3) (2)
Sales for resale
Associated companies 3.5 0.8 2.7 338
Non-associated companies 41.5 45.1 (3.6) (8)
Other 24.7 20.7 4.0 19
--------- --------- ------
Total $ 1,400.7 $ 1,424.9 ($24.2) (2)
========= ========= ======
Billed Electric Energy
Sales (Millions of kWh):
Residential 6,042 6,294 (252) (4)
Commercial 3,732 3,697 35 1
Industrial 12,511 13,215 (704) (5)
Governmental 348 346 2 1
--------- --------- ------
Total retail 22,633 23,552 (919) (4)
Sales for resale
Associated companies 98 20 78 390
Non-associated companies 616 770 (154) (20)
--------- --------- ------
Total 23,347 24,342 (995) (4)
========= ========= ======
<PAGE>
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and nine months ended
September 30, 1997 primarily due to an increase in other operation
and maintenance expenses, and a decrease in electric operating
revenues, partially offset by lower income taxes.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.8) ($3.1)
Rate riders (8.2) (25.2)
Fuel cost recovery (11.7) (10.4)
Sales volume/weather 1.6 (2.6)
Other revenue (including unbilled) 8.7 (1.0)
Sales for resale 9.3 2.0
----- -------
Total $(2.1) ($40.3)
===== =======
Electric operating revenues decreased for the three months ended
September 30, 1997 primarily due to decreases in fuel adjustment
revenues, which do not affect net income, and rate rider revenues,
partially offset by increases in sales for resale and other revenue
(primarily unbilled revenue). The decrease in fuel adjustment
revenues is due to an MPSC order, effective May 1, 1997, that changed
fuel recovery pricing to a fixed fuel factor. In connection with an
annual MPSC review, in October 1996, Entergy Mississippi's Grand Gulf
1 rate rider was decreased based on the estimate of costs over the
next year. Therefore, Grand Gulf 1 rate rider revenues for the three
and nine months ended September 30, 1997 were lower than revenues for
the same period in 1996. Sales for resale increased due to an
increase in sales to associated companies primarily due to changes in
generation requirements and availability among the domestic utility
companies. Unbilled revenue increased as a result of increased
generation due to warmer weather in September 1997 as compared to the
same period in 1996.
Electric operating revenues decreased for the nine months ended
September 30, 1997 primarily as a result of a decrease in Grand Gulf
1 rate rider revenues, as discussed above, and fuel adjustment
revenues, which do not affect net income. Fuel adjustment revenues
decreased because of an MPSC order, effective May 1, 1997, that
changed fuel recovery pricing to a fixed fuel factor.
<PAGE>
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and nine months ended
September 30, 1997 primarily due to decreases in fuel expenses and
the amortization of rate deferrals, partially offset by an increase
in purchased power expenses and an increase in other operation and
maintenance expenses. The amortization of rate deferrals decreased
primarily as a result of the under-recovery of Grand Gulf 1 related
costs. Purchased power expenses increased due to a shift from higher
priced fuel to lower priced purchased power. Other operation and
maintenance expenses increased due to an increase in contract labor
and loss reserves. The increase in contract labor is due to
maintenance and plant outage expenses incurred in the three and nine
months ended September 30, 1997. Loss reserves expense increased as a
result of increased litigation reserves.
Rate deferrals reducing operating expenses in 1996 and 1997
represent the deferral of Entergy Mississippi's portion of the
proposed System Energy rate increase. See Note 2 for further
discussion.
Other
For the three and nine months ended September 30, 1997 and 1996
the effective income tax rates were relatively unchanged.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $294,983 $297,118 $708,203 $748,499
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses 72,379 73,838 138,928 161,664
Purchased power 71,441 66,875 218,015 202,919
Other operation and maintenance 32,227 30,702 95,704 87,179
Depreciation and amortization 10,739 10,007 32,120 30,086
Taxes other than income taxes 12,058 11,965 33,471 32,698
Rate deferrals (6,670) (6,971) (20,573) (19,494)
Amortization of rate deferrals 49,977 56,006 94,617 110,998
-------- -------- -------- --------
Total 242,151 242,422 592,282 606,050
-------- -------- -------- --------
Operating Income 52,832 54,696 115,921 142,449
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction - 369 560 1,012
Miscellaneous - net 399 145 662 914
-------- -------- -------- --------
Total 399 514 1,222 1,926
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 9,798 10,905 31,211 33,461
Other interest - net 1,154 1,021 3,477 2,895
Allowance for borrowed funds used
during construction (20) (297) (482) (818)
-------- -------- -------- --------
Total 10,932 11,629 34,206 35,538
-------- -------- -------- --------
Income Before Income Taxes 42,299 43,581 82,937 108,837
Income Taxes 14,964 15,376 27,851 37,889
-------- -------- -------- --------
Net Income 27,335 28,205 55,086 70,948
Preferred Stock Dividend Requirements
and Other 1,129 1,185 3,258 3,825
-------- -------- -------- --------
Earnings Applicable to Common Stock $26,206 $27,020 $51,828 $67,123
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $55,086 $70,948
Noncash items included in net income:
Change in rate deferrals 107,134 94,908
Depreciation and amortization 32,120 30,086
Deferred income taxes and investment tax credits (29,761) (33,412)
Allowance for equity funds used during construction (560) (1,012)
Changes in working capital:
Receivables (18,818) (27,423)
Fuel inventory 5,011 5
Accounts payable 5,316 3,093
Taxes accrued 38,807 17,582
Interest accrued (7,751) (5,693)
Other working capital accounts (12,506) 3,856
Change in other regulatory assets (29,915) (10,055)
Other (3,155) 3,751
--------- ---------
Net cash flow provided by operating activities 141,008 146,634
--------- ---------
Investing Activities:
Construction expenditures (37,378) (63,291)
Allowance for equity funds used during construction 560 1,012
--------- ---------
Net cash flow used in investing activities (36,818) (62,279)
--------- ---------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds 64,827 -
Retirement of:
General and refunding mortgage bonds (96,000) (26,000)
First mortgage bonds (25,000)
Other long-term debt (15) (15)
Redemption of preferred stock (14,500) (9,876)
Changes in short-term borrowings - net (7,132) 15,308
Dividends paid:
Common stock (53,400) (45,400)
Preferred stock (3,156) (3,815)
--------- ---------
Net cash flow used in financing activities (109,376) (94,798)
--------- ---------
Net decrease in cash and cash equivalents (5,186) (10,443)
Cash and cash equivalents at beginning of period 9,498 16,945
--------- ---------
Cash and cash equivalents at end of period $4,312 $6,502
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $41,044 $40,296
Income taxes $11,670 $48,092
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $4,312 $2,384
Special deposits - 7,114
---------- ----------
Total cash and cash equivalents 4,312 9,498
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 50,397 44,809
Associated companies 10,215 4,382
Other 563 2,014
Accrued unbilled revenues 57,691 49,383
Fuel inventory - at average cost 1,650 6,661
Materials and supplies - at average cost 19,968 17,567
Rate deferrals 139,958 142,504
Prepayments and other 18,941 7,434
---------- ----------
Total 303,695 284,252
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,813 7,923
---------- ----------
Total 13,344 13,454
---------- ----------
Utility Plant:
Electric 1,678,658 1,633,484
Construction work in progress 36,565 47,373
---------- ----------
Total 1,715,223 1,680,857
Less - accumulated depreciation and amortization 661,954 635,754
---------- ----------
Utility plant - net 1,053,269 1,045,103
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals - 104,588
SFAS 109 regulatory asset - net 18,849 11,813
Unamortized loss on reacquired debt 8,617 9,254
Other regulatory assets 76,224 46,309
Other 6,325 6,693
---------- ----------
Total 110,015 178,657
---------- ----------
TOTAL $1,480,323 $1,521,466
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $20 $96,015
Notes payable - associated companies 43,121 50,253
Accounts payable:
Associated companies 35,778 32,878
Other 26,117 23,701
Customer deposits 27,307 26,258
Taxes accrued 65,289 26,482
Accumulated deferred income taxes 57,660 58,634
Interest accrued 13,158 20,909
Other 3,133 3,065
---------- ----------
Total 271,583 338,195
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 230,789 249,522
Accumulated deferred investment tax credits 24,292 25,422
Other 15,713 19,445
---------- ----------
Total 270,794 294,389
---------- ----------
Long-term debt 464,106 399,054
Preferred stock with sinking fund - 7,000
Shareholder's Equity:
Preferred stock without sinking fund 50,381 57,881
Common stock, no par value, authorized
15,000,000 shares; issued and outstanding
8,666,357 shares 199,326 199,326
Capital stock expense and other (59) (143)
Retained earnings 224,192 225,764
---------- ----------
Total 473,840 482,828
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $1,480,323 $1,521,466
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 120.9 $ 127.4 ($ 6.5) (5)
Commercial 80.5 86.3 (5.8) (7)
Industrial 44.3 51.2 (6.9) (13)
Governmental 7.3 8.2 (0.9) (11)
------- ------- -------
Total retail 253.0 273.1 (20.1) (7)
Sales for resale
Associated companies 27.8 18.5 9.3 50
Non-associated companies 6.5 6.5 - -
Other 7.7 (1.0) 8.7 870
------- ------- -------
Total $ 295.0 $ 297.1 ($ 2.1) (1)
======= ======= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,517 1,479 38 3
Commercial 1,125 1,076 49 5
Industrial 806 831 (25) (3)
Governmental 94 100 (6) (6)
------- ------- -------
Total retail 3,542 3,486 56 2
Sales for resale
Associated companies 715 502 213 42
Non-associated companies 126 149 (23) (15)
------- ------- -------
Total 4,383 4,137 246 6
======= ======= =======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 264.8 $ 287.6 ($ 22.8) (8)
Commercial 206.9 215.3 (8.4) (4)
Industrial 127.8 136.0 (8.2) (6)
Governmental 20.4 22.3 (1.9) (9)
------- ------- -------
Total retail 619.9 661.2 (41.3) (6)
Sales for resale
Associated companies 49.5 45.2 4.3 10
Non-associated companies 15.9 18.2 (2.3) (13)
Other 22.9 23.9 (1.0) (4)
------- ------- -------
Total $ 708.2 $ 748.5 ($ 40.3) (5)
======= ======= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,338 3,506 (168) (5)
Commercial 2,778 2,684 94 4
Industrial 2,279 2,260 19 1
Governmental 251 263 (12) (5)
------- ------- -------
Total retail 8,646 8,713 (67) (1)
Sales for resale
Associated companies 1,145 1,073 72 7
Non-associated companies 309 433 (124) (29)
------- ------- -------
Total 10,100 10,219 (119) (1)
======= ======= =======
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and nine months ended
September 30, 1997 primarily due to a decrease in electric and gas
operating revenues and an increase in taxes other than income taxes,
partially offset by lower income taxes.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues and Sales",
"Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and
nine months ended September 30, 1997 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.2) ($7.5)
Fuel cost recovery (5.9) (8.5)
Sales volume/weather - (3.4)
Other revenue (including unbilled) (0.8) (1.6)
Sales for resale 0.8 3.7
----- -------
Total $(9.1) ($17.3)
===== =======
Electric operating revenues decreased for the three and nine
months ended September 30, 1997 primarily due to decreases in base
revenues and fuel adjustment revenues, partially offset for the nine
months ended September 30, 1997 by an increase in sales for resale.
Fuel adjustment revenues, which do not impact net income, decreased
because of lower gas prices. Base revenues decreased due to rate
reductions implemented during the second quarter of 1997. The
increase in sales for resale is the result of an increase in electric
sales to associated companies primarily due to changes in the
generation requirements and availability among the domestic utility
companies. Weather adjusted sales volume decreased for the nine
months ended September 30, 1997 due to milder weather in the first
half of the year.
Gas operating revenues decreased for the three and nine months
ended September 30, 1997 due to a lower unit purchase price for gas
purchased for resale and a reduction in sales. Milder weather in the
first half of the year is partially responsible for the reduction in
sales.
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and nine months ended
September 30, 1997 because of decreases in fuel expenses and the
write-off of certain rate deferrals in 1996, partially offset by an
increase in taxes other than income taxes and the amortization of
rate deferrals. Also contributing to the decrease in operating
expenses for the nine months ended September 30, 1997 were decreases
in purchased power expenses. The decreases in fuel and purchased
power expenses are the result of lower gas prices. Rate deferrals
recorded in connection with the deferral of least cost planning
charges were written off in the third quarter of 1996, causing a
decrease in operating expenses during 1997 as compared to 1996.
Taxes other than income taxes increased because of higher franchise
taxes resulting from a December 1996 Council order increasing Entergy
New Orleans' annual franchise fee from 2.5% to 5% of gross revenues.
The increase in the amortization of rate deferrals for the three and
nine months ended September 30, 1997 is primarily a result of
increased over-recovery of Grand Gulf 1 related costs in 1997
compared to 1996. In addition, other operation and maintenance
expenses increased for the three months ended September 30, 1997
primarily due to an increase in loss reserves.
Other
For the three months ended September 30, 1997 and 1996 the
effective income tax rates were 40.02% and 36.26%, respectively. For
the nine months ended September 30, 1997 and 1996 the effective
income tax rates were 42.55% and 35.31%, respectively. These
increases are primarily due to decreased amortization of deferred
income taxes on property fully depreciated for federal income tax
purposes.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $126,901 $136,018 $309,050 $326,402
Natural gas 13,039 14,919 65,649 79,644
-------- -------- -------- --------
Total 139,940 150,937 374,699 406,046
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 28,146 37,080 96,586 110,100
Purchased power 46,958 44,904 119,922 124,945
Other operation and maintenance 19,443 16,404 52,125 51,893
Depreciation and amortization 5,477 4,931 16,068 14,913
Taxes other than income taxes 11,448 7,445 28,940 21,065
Rate deferrals (1,718) 2,597 (5,299) (188)
Amortization of rate deferrals 12,090 9,257 30,106 19,639
-------- -------- -------- --------
Total 121,844 122,618 338,448 342,367
-------- -------- -------- --------
Operating Income 18,096 28,319 36,251 63,679
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 99 79 259 234
Miscellaneous - net (27) (652) (7) 410
-------- -------- -------- --------
Total 72 (573) 252 644
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 3,429 3,632 10,488 11,644
Other interest - net 485 298 1,064 900
Allowance for borrowed funds used
during construction (68) (62) (194) (184)
-------- -------- -------- --------
Total 3,846 3,868 11,358 12,360
-------- -------- -------- --------
Income Before Income Taxes 14,322 23,878 25,145 51,963
Income Taxes 5,732 8,657 10,699 18,347
-------- -------- -------- --------
Net Income 8,590 15,221 14,446 33,616
Preferred Stock Dividend Requirements
and Other 242 241 724 723
-------- -------- -------- --------
Earnings Applicable to Common Stock $8,348 $14,980 $13,722 $32,893
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $14,446 $33,616
Noncash items included in net income:
Change in rate deferrals 28,987 27,189
Depreciation and amortization 16,068 14,913
Deferred income taxes and investment tax credits (1,690) (2,269)
Allowance for equity funds used during construction (259) (234)
Changes in working capital:
Receivables (801) (11,732)
Accounts payable (1,323) (8,004)
Taxes accrued 12,233 2,243
Interest accrued (2,426) (1,902)
Other working capital accounts (16,874) (16,611)
Other (11,570) (10,241)
--------- ---------
Net cash flow provided by operating activities 36,791 26,968
--------- ---------
Investing Activities:
Construction expenditures (7,652) (22,009)
Allowance for equity funds used during construction 259 234
--------- ---------
Net cash flow used in investing activities (7,393) (21,775)
--------- ---------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds - 39,608
Retirement of:
First mortgage bonds (12,000) (23,250)
General and refunding mortgage bonds - (30,000)
Dividends paid:
Common stock (26,000) (34,000)
Preferred stock (965) (724)
--------- ---------
Net cash flow used in financing activities (38,965) (48,366)
--------- ---------
Net decrease in cash and cash equivalents (9,567) (43,173)
Cash and cash equivalents at beginning of period 17,510 49,746
--------- ---------
Cash and cash equivalents at end of period $7,943 $6,573
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $3,731 $13,875
Income taxes - net $4,309 $18,752
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $2,384 $1,015
Temporary cash investments - at cost,
which approximates market:
Associated companies 1,260 7,435
Other 4,299 9,060
---------- ----------
Total cash and cash equivalents 7,943 17,510
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1997 and 1996) 28,868 27,430
Associated companies 818 714
Other 2,724 1,764
Accrued unbilled revenues 15,363 17,064
Deferred electric fuel and resale gas costs 11,886 7,290
Materials and supplies - at average cost 11,458 9,904
Rate deferrals 37,531 37,692
Prepayments and other 7,513 7,157
---------- ----------
Total 124,104 126,525
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
---------- ----------
Utility Plant:
Electric 524,335 503,061
Natural gas 122,700 122,700
Construction work in progress 5,686 18,247
---------- ----------
Total 652,721 644,008
Less - accumulated depreciation and amortization 361,017 347,790
---------- ----------
Utility plant - net 291,704 296,218
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 70,672 99,498
SFAS 109 regulatory asset - net 3,470 6,051
Unamortized loss on reacquired debt 1,483 1,647
Other regulatory assets 12,184 15,908
Other 922 890
---------- ----------
Total 88,731 123,994
---------- ----------
TOTAL $507,798 $549,996
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $- $12,000
Accounts payable:
Associated companies 18,060 18,757
Other 13,503 14,130
Customer deposits 19,423 18,974
Taxes accrued 13,437 1,204
Accumulated deferred income taxes 10,774 5,584
Interest accrued 2,899 5,325
Provision for rate refund 7,349 19,465
Other 2,821 1,521
---------- ----------
Total 88,266 96,960
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 62,066 72,895
Accumulated deferred investment tax credits 7,544 7,984
Accumulated provision for property insurance 15,487 15,666
Other 14,885 24,713
---------- ----------
Total 99,982 121,258
---------- ----------
Long-term debt 168,937 168,888
Shareholders' Equity:
Preferred stock without sinking fund 19,780 19,780
Common Shareholder's Equity:
Common stock, $4 par value, authorized
10,000,000 shares; issued and outstanding
8,435,900 shares 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings subsequent to the elimination of
the accumulated deficit on November 30, 1988 60,795 73,072
---------- ----------
Total 150,613 162,890
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $507,798 $549,996
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 55.3 $ 59.1 ($ 3.8) (6)
Commercial 38.3 43.8 (5.5) (13)
Industrial 6.3 6.8 (0.5) (7)
Governmental 16.6 17.4 (0.8) (5)
------- ------- -------
Total retail 116.5 127.1 (10.6) (8)
Sales for resale
Associated companies 0.8 0.2 0.6 300
Non-associated companies 2.8 2.6 0.2 8
Other 6.8 6.1 0.7 11
------- ------- -------
Total $ 126.9 $ 136.0 ($ 9.1) (7)
======= ======= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 761 749 12 2
Commercial 610 612 (2) -
Industrial 128 131 (3) (2)
Governmental 285 290 (5) (2)
------- ------- -------
Total retail 1,784 1,782 2 -
Sales for resale
Associated companies 22 5 17 340
Non-associated companies 51 52 (1) (2)
------- ------- -------
Total 1,857 1,839 18 1
======= ======= =======
Nine Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 111.2 $ 124.6 ($ 13.4) (11)
Commercial 107.2 113.1 (5.9) (5)
Industrial 18.2 18.6 (0.4) (2)
Governmental 43.1 43.5 (0.4) (1)
------- ------- -------
Total retail 279.7 299.8 (20.1) (7)
Sales for resale
Associated companies 7.8 2.5 5.3 212
Non-associated companies 6.4 8.0 (1.6) (20)
Other 15.2 16.1 (0.9) (6)
------- ------- -------
Total $ 309.1 $ 326.4 ($ 17.3) (5)
======= ======= =======
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,521 1,591 (70) (4)
Commercial 1,576 1,581 (5) -
Industrial 367 363 4 1
Governmental 745 732 13 2
------- ------- -------
Total retail 4,209 4,267 (58) (1)
Sales for resale
Associated companies 247 63 184 292
Non-associated companies 112 178 (66) (37)
------- ------- -------
Total 4,568 4,508 60 1
======= ======= =======
<PAGE>
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income for the three months ended September 30, 1997
remained relatively unchanged as compared to the same period in 1996.
Net income increased slightly for the nine months ended September 30,
1997 primarily as a result of lower interest charges.
Significant factors affecting the results of operations and
causing variances between the three and nine months ended September
30, 1997 and 1996 are discussed under "Revenues", "Expenses", and
"Other" below.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt allocable
to its investment in Grand Gulf 1. See Note 2 herein for a
discussion of System Energy's proposed rate increase.
Expenses
Operating expenses increased for the three and nine months ended
September 30, 1997 due to higher nuclear refueling outage expenses
and higher depreciation, amortization, and decommissioning expenses.
These increases were partially offset for the nine months ended
September 30, 1997 by lower interest charges. Nuclear refueling
outage expenses increased due to costs that were deferred from the
November 1996 outage, which are now being amortized over an 18-month
period beginning December 1996. Prior to this outage, such costs
were expensed as incurred and no such expenses were incurred during
the nine months ended September 30, 1996. The increase in
depreciation, amortization, and decommissioning expense is due to the
reversal of the regulatory asset set up to defer the depreciation
associated with the sale and leaseback in 1989 of a portion of Grand
Gulf 1. The depreciation was deferred to match the collection of
lease principal and revenues with the depreciation of the asset.
Other
Interest charges decreased for the nine months ended September
30, 1997 due to the refinancing of higher cost long-term debt in
1996. For the three and nine months ended September 30, 1997 and
1996 the effective income tax rates were relatively unchanged.
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $160,573 $154,467 $477,255 $471,260
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 12,270 12,148 36,728 37,159
Nuclear refueling outage expenses 4,202 - 11,826 -
Other operation and maintenance 28,431 28,231 77,228 76,563
Depreciation, amortization, and decommissioning 36,238 32,212 110,951 96,225
Taxes other than income taxes 6,619 6,606 19,825 20,211
-------- -------- -------- --------
Total 87,760 79,197 256,558 230,158
-------- -------- -------- --------
Operating Income 72,813 75,270 220,697 241,102
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 1,169 184 1,730 831
Miscellaneous - net 2,323 2,540 5,564 4,006
-------- -------- -------- --------
Total 3,492 2,724 7,294 4,837
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 30,079 30,759 91,940 105,733
Other interest - net 1,720 1,824 5,331 6,522
Allowance for borrowed funds used
during construction (761) (178) (1,318) (815)
-------- -------- -------- --------
Total 31,038 32,405 95,953 111,440
-------- -------- -------- --------
Income Before Income Taxes 45,267 45,589 132,038 134,499
Income Taxes 20,818 20,840 59,151 62,838
-------- -------- -------- --------
Net Income $24,449 $24,749 $72,887 $71,661
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $72,887 $71,661
Noncash items included in net income:
Depreciation, amortization, and decommissioning 110,951 96,225
Deferred income taxes and investment tax credits (30,168) (20,929)
Allowance for equity funds used during construction (1,730) (831)
Changes in working capital:
Receivables (8,110) (16,001)
Accounts payable 5,380 19,152
Taxes accrued 6,146 52,537
Interest accrued 169 (6,458)
Other working capital accounts 14,423 6,977
Decommissioning trust contributions (14,208) (13,809)
FERC Settlement - refund obligation (3,351) (2,959)
Provision for estimated losses and reserves 30,303 36,922
Other 18,304 1,260
--------- ---------
Net cash flow provided by operating activities 200,996 223,747
--------- ---------
Investing Activities:
Construction expenditures (25,403) (14,316)
Allowance for equity funds used during construction 1,730 831
Nuclear fuel purchases (39) (44,554)
Proceeds from sale/leaseback of nuclear fuel 39 43,971
--------- ---------
Net cash flow used in investing activities (23,673) (14,068)
--------- ---------
Financing Activities:
Proceeds from the issuance of:
First mortgage bonds - 233,656
Other long-term debt - 133,933
Retirement of:
First mortgage bonds (10,000) (325,101)
Other long-term debt (7,319) (92,700)
Changes in short-term borrowings - net - (2,990)
Common stock dividends paid (84,000) (69,700)
--------- ---------
Net cash flow used in financing activities (101,319) (122,902)
--------- ---------
Net increase in cash and cash equivalents 76,004 86,777
Cash and cash equivalents at beginning of period 92,315 240
--------- ---------
Cash and cash equivalents at end of period $168,319 $87,017
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $89,681 $113,251
Income taxes $77,016 $26,523
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($564) ($973)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $209 $26
Temporary cash investments - at cost,
which approximates market:
Associated companies 38,107 41,600
Other 130,003 50,689
---------- ----------
Total cash and cash equivalents 168,319 92,315
Accounts receivable:
Associated companies 78,171 71,337
Other 3,798 2,522
Materials and supplies - at average cost 64,185 66,302
Deferred nuclear refueling outage costs 12,357 24,005
Prepayments and other 3,313 4,929
---------- ----------
Total 330,143 261,410
---------- ----------
Other Property and Investments:
Decommissioning trust fund 78,861 62,223
---------- ----------
Utility Plant:
Electric 3,015,458 2,994,445
Electric plant under leases 451,785 447,409
Construction work in progress 28,646 41,362
Nuclear fuel under capital lease 56,247 83,558
---------- ----------
Total 3,552,136 3,566,774
Less - accumulated depreciation and amortization 1,060,889 974,472
---------- ----------
Utility plant - net 2,491,247 2,592,302
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 249,294 264,758
Unamortized loss on reacquired debt 52,986 57,785
Other regulatory assets 194,735 207,214
Other 14,598 15,601
---------- ----------
Total 511,613 545,358
---------- ----------
TOTAL $3,411,864 $3,461,293
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $70,000 $10,000
Accounts payable:
Associated companies 26,714 18,245
Other 15,747 18,836
Taxes accrued 73,969 67,823
Interest accrued 34,364 34,195
Obligations under capital leases 42,445 28,000
Other 1,348 2,306
---------- ----------
Total 264,587 179,405
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 578,198 624,020
Accumulated deferred investment tax credits 101,040 103,647
Obligations under capital leases 13,802 55,558
FERC Settlement - refund obligation 49,488 52,839
Other 212,576 165,517
---------- ----------
Total 955,104 1,001,581
---------- ----------
Long-term debt 1,341,848 1,418,869
Common Shareholder's Equity:
Common stock, no par value, authorized
1,000,000 shares; issued and outstanding
789,350 shares 789,350 789,350
Retained earnings 60,975 72,088
---------- ----------
Total 850,325 861,438
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $3,411,864 $3,461,293
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Cajun - River Bend (Entergy Corporation and Entergy Gulf States)
Entergy Gulf States and Cajun, respectively, own 70% and 30%
undivided interests in River Bend (operated by Entergy Gulf States),
and 42% and 58% undivided interests in Big Cajun 2, Unit 3 (operated
by Cajun). These relationships have spawned a number of long-
standing disputes and claims between the parties. An agreement
setting forth terms for the resolution of all such disputes was
reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the
RUS, and was approved by the United States District Court for the
Middle District of Louisiana (District Court) on August 26, 1996
(Cajun Settlement). On September 6, 1996, the Committee of Unsecured
Creditors in the Cajun bankruptcy proceeding filed a Notice of Appeal
to the United States Court of Appeals for the Fifth Circuit (Fifth
Circuit), objecting that the order approving the settlement was
separate from the approval of a plan of reorganization and,
therefore, improper. On August 5, 1997, the Fifth Circuit ruled that
the District Court's order approving the settlement was proper.
Management believes that the Cajun Settlement will be consummated
prior to the end of 1997. See Note 9 of the Form 10-K for additional
information regarding the Cajun litigation, Cajun's bankruptcy
proceedings, and related filings.
The Cajun Settlement includes, but is not limited to, the
following elements: (i) the RUS was given the option to become the
transferee of Cajun's interest in River Bend, sell it to a third
party, or cause it to be transferred to Entergy Gulf States at no
cost; (ii) Cajun will set aside a total of $125 million for its share
of the decommissioning costs of River Bend; (iii) Cajun will transfer
certain transmission assets to Entergy Gulf States; (iv) Cajun and
Entergy Gulf States will settle transmission disputes and release
each other from claims for payment under transmission arrangements,
as discussed under "Cajun - Transmission Service" below; (v) all
funds paid by Entergy Gulf States into the registry of the District
Court will be returned to Entergy Gulf States; (vi) Cajun will be
released from its unpaid past, present, and future liability for
River Bend costs and expenses; and (vii) all remaining litigation
between Cajun and Entergy Gulf States will be dismissed. Based on
the District Court's approval of the Cajun Settlement, a litigation
accrual established in 1994 for possible losses associated with the
Cajun-River Bend litigation was reversed in September 1996.
Cajun has not paid its full share of capital costs, operating
and maintenance expenses, and other costs for repairs and
improvements to River Bend since 1992. Cajun's unpaid portion of
River Bend operating and maintenance expenses (including nuclear
fuel) and capital costs for the nine months ended September 30, 1997
was approximately $50.7 million. The cumulative cost to Entergy Gulf
States resulting from Cajun's failure to pay its full share of River
Bend-related costs, reduced by the proceeds from the sale by Entergy
Gulf States of Cajun's share of River Bend power and payments into
the registry of the District Court for Entergy Gulf States' portion
of expenses for Big Cajun 2, Unit 3, was $3.9 million as of September
30, 1997. Cajun's unpaid portion of the River Bend related costs is
reflected in long-term receivables which are substantially reserved
for in other deferred credits. As discussed above, the Cajun
Settlement will conclude all disputes regarding the non-payment by
Cajun of River Bend operating and maintenance expenses. Cajun
continues to pay its share of decommissioning costs for River Bend.
On October 7, 1997, the RUS elected not to become the
transferee of Cajun's 30% interest in River Bend. Accordingly,
under the terms of the Settlement, the Cajun River Bend interest will
be transferred by Cajun's Trustee in Bankruptcy to Entergy Gulf
States at no cost. The transfer is subject to necessary regulatory
approvals, including approval of the NRC. The settlement with the
RUS also provides that Cajun will fund its decommissioning obligation
of $125 million. The regulatory and accounting treatment of the
plant to be transferred will be determined as soon as the transfer
date and conditions are confirmed.
Cajun - Transmission Service (Entergy Corporation and Entergy Gulf
States)
Entergy Gulf States and Cajun are parties to FERC proceedings
relating to transmission service charge disputes. As a result of the
proposed Cajun Settlement, FERC has dismissed or placed in abeyance
various proceedings pending before it, to which Cajun or the Cajun
bankruptcy trustee is a party, that would be resolved by the Cajun
Settlement.
Under Entergy Gulf States' interpretation of a 1992 FERC order,
as modified by FERC's orders issued on August 3, 1995, and October 2,
1995, and as agreed to by the Cajun bankruptcy trustee, Cajun would
owe Entergy Gulf States approximately $74.6 million as of September
30, 1997. Entergy Gulf States further estimates that if it were to
prevail in its May 1992 motion for rehearing and on certain other
issues decided adversely to Entergy Gulf States in the February 1995,
August 1995, and October 1995 FERC orders, which Entergy Gulf States
has appealed, Cajun would owe Entergy Gulf States approximately
$167.3 million as of September 30, 1997. If Cajun were to prevail in
its May 1992 motion for rehearing to FERC, and if Entergy Gulf States
were not to prevail in its May 1992 motion for rehearing to FERC, and
if Cajun were to prevail in appealing FERC's August and October 1995
orders, Entergy Gulf States estimates it would owe Cajun
approximately $120.8 million as of September 30, 1997. The above
amounts are exclusive of a $7.3 million payment by Cajun on December
31, 1990, which the parties agreed to apply to the disputed
transmission service charges. Pending FERC's ruling on the May 1992
motions for rehearing, Entergy Gulf States has continued to bill
Cajun utilizing the historical billing methodology and has recorded
underpaid transmission charges, including interest, in the amount of
$149.5 million as of September 30, 1997. This amount is reflected in
long-term receivables with an offsetting reserve in other deferred
credits. FERC has determined that the collection of the pre-petition
debt of Cajun is an issue properly decided in the bankruptcy
proceeding. Refer to "Cajun - River Bend" above for a discussion of
the Cajun Settlement. See Note 9 in the Form 10-K for additional
information regarding these FERC proceedings and FERC orders issued
as a result of such proceedings.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
On January 13, 1997, Entergy Gulf States filed a declaratory
judgment action in the U.S. Bankruptcy Court in which the Cajun
bankruptcy is pending, seeking a ruling that Entergy Gulf States
would not be liable for damages to certain coal suppliers for Big
Cajun 2, Unit 3, if the Cajun bankruptcy trustee were to reject their
coal contracts as a part of a plan of reorganization in the
bankruptcy proceeding. In its pleading, Entergy Gulf States took the
position that it was not a party to, and had no liability under,
those coal contracts.
On February 12, 1997, the coal suppliers and the Cajun
bankruptcy trustee filed a response in the declaratory judgment
action and made certain counterclaims and crossclaims. The coal
suppliers contended that Entergy Gulf States' declaratory judgment
action should be dismissed and, in the alternative, argued that Cajun
is Entergy Gulf States' agent in the procurement of coal for Big
Cajun 2, Unit 3, and that Entergy Gulf States is a party to and has
liability under the coal supply contracts.
On September 4, 1997, the U.S. Bankruptcy Court ruled that
Entergy Gulf States is not liable for the Cajun coal contracts. The
coal suppliers have subsequently appealed this decision to the
District Court.
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 Form 10-K for information on the domestic
utility companies' and System Energy's construction expenditures
(excluding nuclear fuel), for the years 1997, 1998, and 1999 and long-
term debt and preferred stock maturities and cash sinking fund
requirements for the period 1997-1999.
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 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,
River Bend, Waterford 3, and Grand Gulf 1.
The FASB issued an exposure draft of a proposed SFAS (which
proposed a 1997 effective date) in February 1996 regarding the
recognition, measurement and classification of decommissioning costs
for nuclear power plants. The proposed SFAS would require
measurement of the liability for closure and removal of long-lived
assets (including decommissioning) based on discounted future cash
flows. Those future cash flows should be determined by estimating
current costs and adjusting for inflation, efficiencies that may be
gained from experience with similar activities, and consideration of
reasonable future advances in technology.
After receiving comments on the exposure draft, the FASB has
decided that the effective date for the proposed SFAS will be later
than 1997, although a final effective date has not yet been
announced. If current electric utility industry accounting practices
with respect to nuclear decommissioning and other closure costs are
changed, annual provisions for such costs could increase, the
estimated cost for decommissioning/closure could be recorded as a
liability rather than as accumulated depreciation, and trust fund
income from decommissioning trusts could be reported as investment
income rather than as a reduction to decommissioning expense.
ANO Matters (Entergy Corporation and Entergy Arkansas)
Cracks in certain steam generator tubes at ANO 2 were discovered
and repaired during an outage in March 1992. Further inspections and
repairs were conducted at subsequent refueling and mid-cycle outages,
including the most recent refueling outage in May 1997. Turbine
modifications were installed in May 1997 to restore most of the
output lost due to steam generator fouling and tube plugging. The
unit may be approaching the current limit for the number of steam
generator tubes that can be plugged with the unit in operation. If
the established limit is reached during a future outage, it could
become necessary for Entergy Operations to insert sleeves in steam
generator tubes that were previously plugged. On October 25, 1996,
Entergy Corporation's Board of Directors authorized Entergy
Operations to negotiate a contract for the fabrication and
replacement of the steam generators at ANO 2. Entergy estimates the
cost of fabrication and replacement of the steam generators to be
approximately $150 million. Entergy Operations has entered into a
contract, with certain cancellation provisions, for the design and
fabrication of replacement steam generators. A letter of intent has
been issued for the installation of the replacement steam generators.
It is anticipated that the steam generators will be installed during
a planned refueling outage in 2000. Entergy Operations periodically
meets with the NRC to discuss the results of inspections of the steam
generator tubes, as well as the timing of future inspections.
Environmental Issues
(Entergy Arkansas)
In May 1995, Entergy Arkansas was named as a defendant in a suit
by Reynolds Metals Company (Reynolds) in the U.S. District Court for
the Eastern District of Arkansas, seeking to recover a share of the
costs associated with the clean-up of hazardous substances at a site
south of Arkadelphia, Arkansas. Reynolds alleges that it has spent
$11.2 million to clean up the site, and that the site was
contaminated with PCBs for which Entergy Arkansas bears some
responsibility. Entergy Arkansas, voluntarily, at its expense,
completed remediation at a nearby substation site and believes that
it has no liability for contamination at that portion of the site
that is subject to the Reynolds suit and is contesting the lawsuit.
Entergy Arkansas filed a Motion for Summary Judgment on June 30, 1997
requesting that the case be dismissed. On July 29, 1997, the Court
granted Entergy Arkansas' Motion for Summary Judgment and dismissed
Reynolds' lawsuit. See "Environmental Regulation" in Item 1 of Part
I of the Form 10-K for additional information on the PCB
contamination at the two former Reynolds plant sites in Arkansas to
which Entergy Arkansas had supplied power.
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially
responsible party (PRP) for the clean-up of certain hazardous waste
disposal sites. Entergy Gulf States is currently negotiating with the
EPA and state authorities regarding the clean-up of certain of these
sites. As of September 30, 1997, a remaining recorded liability of
$19.8 million existed relating to the clean-up of the 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 the sites where Entergy Gulf States has been designated
as a PRP by the EPA and related litigation.
(Entergy Louisiana)
During 1993, the Louisiana Department of Environmental Quality
issued new rules for solid waste regulation, including regulation of
wastewater impoundments. Entergy Louisiana has determined that
certain of its power plant waste water impoundments were affected by
these regulations and chose to upgrade or close them. A remaining
recorded liability in the amount of $6.7 million existed at September
30, 1997, for waste water upgrades and closures to be completed by
the end of 1997. Cumulative expenditures relating to the upgrades
and closures of waste water impoundments were $7.1 million as of
September 30, 1997.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
transactions for the sale and leaseback of undivided interests
(aggregating approximately 9.3%) in Waterford 3. In July 1997,
Entergy Louisiana caused the lessors to issue $307,632,000 aggregate
principal amount of Waterford 3 Secured Lease Obligation Bonds, 8.09%
Series due 2017, to refinance the outstanding bonds originally issued
to finance the purchase of the undivided interests by the lessors.
The lease payments will be reduced to reflect the lower interest
costs. Upon the occurrence of certain events, Entergy Louisiana may
be obligated to pay amounts sufficient to permit the Owner
Participants to withdraw from the lease transactions, and Entergy
Louisiana may be required to assume the outstanding bonds issued by
the Owner Trustee to finance, in part, its acquisition of the
undivided interests in Waterford 3. See Note 10 to the Form 10-K and
Note 4 herein for further information.
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 September 30, 1997. See Note
9 to the Form 10-K for further information.
Employment Litigation
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See Note 9 to the Form 10-K for further information relating to
lawsuits filed by former employees asserting they were wrongfully
terminated and/or discriminated against on the basis of age, race,
and/or sex.
(Entergy Corporation, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Louisiana and Entergy New Orleans
are defendants in numerous lawsuits filed in Louisiana state court on
behalf of approximately 147 plaintiffs who claim that they were
illegally terminated from their jobs due to discrimination on the
basis of age. The plaintiffs have requested that the court certify
the matter as a class action. On August 13, 1997, the court
certified the case as a class action. The court decision to certify
a class action has been appealed to the Louisiana Fifth Circuit Court
of Appeal. No assurance can be given as to the timing or outcome of
these proceedings.
(Entergy Corporation and Entergy Arkansas)
Entergy Corporation and Entergy Arkansas are defendants in a
number of lawsuits filed in federal court on behalf of a total of
approximately 62 plaintiffs who claim they were illegally terminated
from their jobs due to discrimination on the basis of age or race.
The first of these lawsuits, originally involving 29 plaintiffs,
was tried before a jury beginning in April 1997. Settlements were
reached with two of the plaintiffs prior to the trial. On May 1,
1997, the jury rendered findings as to 22 of the plaintiffs
indicating that Entergy had no liability to them for discrimination.
The jury did find that Entergy had intentionally discriminated
against the remaining 5 plaintiffs on the basis of age. As a result,
these plaintiffs will be awarded damages equal to twice their back
pay plus lost future wages and attorneys' fees.
A trial date for another suit involving 18 plaintiffs,
originally scheduled for May 1997, has been continued with no new
date set. Another of the suits is set for trial in November 1997.
No trial dates have been set for the remaining cases.
(Entergy Corporation and Entergy Gulf States)
Entergy Corporation and Entergy Gulf States were defendants in a
lawsuit involving approximately 176 plaintiffs filed in state court
in Texas by former employees who claim that they lost their jobs as a
result of the Merger. The plaintiffs in these cases asserted various
claims, including discrimination on the basis of age, race, and/or
sex. The court made a preliminary ruling that each plaintiff's claim
should be tried separately. However, all of these claims were
settled before reaching trial in June 1997.
Catalyst Technologies, Inc. (Entergy Corporation)
On August 8, 1997, a jury in the Civil District Court of Orleans
Parish, Louisiana, returned a verdict against Entergy Enterprises, a
wholly-owned non-utility subsidiary of Entergy Corporation, in the
amount of $346 million. Catalyst Technologies, Inc. (CTI) alleged in
its lawsuit that Entergy Enterprises had agreed to transfer computer
software to CTI but breached its obligation to do so, and claimed
damages in an amount equaling its purported lost profits. On
September 23, 1997, the judge in the case entered a judgment in the
amount of the verdict, plus accrued interest from the date of the
plaintiff's original demand in the amount of approximately $118
million, which continues to accrue at a rate of approximately $88,000
per day. The judgment in favor of CTI currently is the subject of
post-trial motions in which Entergy Enterprises seeks, in the
alternative, a judgment notwithstanding the verdict, a new trial or a
substantial reduction of the amount awarded to CTI.
Entergy Enterprises contended in the trial that it was never
obligated to transfer any technology to CTI because CTI never
fulfilled the conditions necessary to give rise to such an
obligation. Moreover, Entergy Enterprises contended that CTI's claim
for lost profits was totally speculative, having been made by a start-
up company that has never engaged in any substantial business and
having arisen in connection with a product that has never been
marketed or sold and has never generated any revenue or profit for
Entergy Enterprises. Based on these facts and the advice of counsel,
management continues to believe that there are a number of strong
legal arguments in support of Entergy Enterprises' position, that the
judgment in favor of CTI is contrary to the facts and applicable law,
and that either the case will be reversed or the judgment will be
reduced to an amount that would not be material to Entergy
Corporation. Subject to the outcome of the post-trial motions, which
were the subject of oral argument before the court on November 5,
1997, Entergy Enterprises will appeal the judgment of the trial
court. Refer to "Other Regulation and Litigation" in Item 1 of the
Form 10-K for information regarding the original petition filed by
CTI.
On September 11, 1997, Entergy initiated a declaratory judgment
action against CTI in the Delaware Chancery Court seeking a
determination that Entergy would not be liable to CTI for the
judgment entered against Entergy Enterprises by the Orleans Parish
Civil District Court. On October 14, 1997, CTI filed a motion to
dismiss the complaint. This action is pending.
On September 30, 1997, CTI filed a new lawsuit against Entergy
Corporation, Entergy Services, Entergy Enterprises and certain
individuals who are, or at one time were, directors of those
corporations. In summary, the suit claims that CTI suffered damages
as a result of actions on the part of Entergy that allegedly caused
the individual defendants to breach their fiduciary duties owed to
Entergy Enterprises and, indirectly, to CTI as Entergy Enterprises'
judgment creditor. In particular, the CTI claim asserts that the
defendants have wrongfully caused Entergy Enterprises' assets to be
depleted. Entergy Corporation, Entergy Services, Entergy
Enterprises, and the individual defendants deny any such wrongdoing
and will vigorously contest this new lawsuit, which Entergy believes
is without merit.
Australian Franchise Taxes (Entergy Corporation)
On August 27, 1997, the Federal Court of Australia upheld a
decision by the Australian Commissioner of taxation that franchise
taxes paid by a resident electricity distribution business were not
deductible for Australian income tax purposes. This decision is
currently on appeal by this electricity distribution business.
Management is currently analyzing the impact of this decision on
CitiPower, which also incurs such franchise taxes. Management
estimates the exposure to CitiPower, should this decision be upheld
or alternative planning strategies be unavailable, is approximately
$26 million for the periods prior to September 30, 1997.
NOTE 2. RATE AND REGULATORY MATTERS
River Bend (Entergy Corporation and Entergy Gulf States)
In 1988, the PUCT granted Entergy Gulf States a permanent
increase in annual revenues of $59.9 million resulting from the
inclusion in rate base of approximately $1.6 billion of company-wide
River Bend plant investment and approximately $182 million of related
Texas retail jurisdiction deferred River Bend costs (Allowed
Deferrals). At the same time, the PUCT disallowed as imprudent $63.5
million of company-wide River Bend plant costs and placed in
abeyance, with no finding as to prudence, approximately $1.4 billion
of company-wide River Bend plant investment and approximately $157
million of Texas retail jurisdiction deferred River Bend operating
and carrying costs (Abeyed Deferrals).
The PUCT's order has been the subject of several appellate
proceedings, culminating in an appeal to the Texas Supreme Court
(Supreme Court). On January 31, 1997, the Supreme Court issued an
opinion reversing the PUCT's order and remanding the case to the PUCT
for further proceedings. The Supreme Court found that the PUCT had
prejudiced Entergy Gulf States' rights by attempting to defer a
ruling on the abeyed plant costs and incorrectly determined the
amount of federal income tax expense that should have been allowed in
rates. The Supreme Court ruled that the PUCT could choose either to
conduct hearings and take further evidence or to decide the case on
the original evidence. On February 18, 1997, the Texas Office of
Public Utility Counsel filed a motion for rehearing of the Supreme
Court's decision, arguing that the Supreme Court's remand should have
instructed the PUCT as to how the case should be dealt with on
remand. On July 31, 1997, the Supreme Court overruled the motion for
rehearing and issued its mandate that the case be returned to the
PUCT for further deliberations. The case has been docketed at the
PUCT and Entergy Gulf States has filed a motion asking that the case
be consolidated with its rate proceeding filed in November 1996 now
pending at the PUCT. On November 4, 1997, the PUCT denied the motion
to consolidate the remanded issues with the rate proceeding, but has
put both the abeyed plant costs and the federal income tax expense
issues on an expedited schedule.
As of September 30, 1997, the River Bend plant costs disallowed
for retail ratemaking purposes in Texas and the River Bend plant
costs held in abeyance totaled (net of taxes and depreciation)
approximately $12 million and $259 million, respectively.
As a result of the application of SFAS 121, Entergy Gulf States
wrote off Abeyed Deferrals of $169 million, net of tax, effective
January 1, 1996. In light of the continuing proceedings before the
PUCT and the Texas Supreme Court's January 31, 1997 decision, Entergy
Gulf States has made no write-offs or reserves for the River Bend
plant-related costs. At this time, management and legal counsel are
unable to predict the amount of the abeyed and previously disallowed
River Bend plant costs, if any, that may ultimately be allowed in
Entergy Gulf States' Texas retail rates.
In prior proceedings involving other utilities, the PUCT has
held that the original cost of nuclear power plants will be
recoverable in electric rates to the extent those costs were
prudently incurred. In another proceeding Entergy Gulf States has
previously filed with the PUCT, a cost reconciliation study prepared
by Sandlin Associates, management consultants with expertise in the
cost analysis of nuclear power plants, which supports the
reasonableness of the River Bend costs held in abeyance by the PUCT.
This reconciliation study determined that approximately 82% of the
River Bend cost increase above the amount included by the PUCT in
rate base was a result of changes in federal nuclear safety
requirements, and provided other support for the remainder of the
abeyed amounts. In particular, there have been four other rate
proceedings in Texas involving nuclear power plants. Disallowed
investment in the plants ranged from 0% to 15%. Each case was
unique, and the disallowances in each were made for different
reasons. Appeals of two of these PUCT decisions are currently
pending. Based upon the PUCT's prior decisions, management believes
that River Bend construction costs were prudently incurred and that
it is reasonably possible that it will recover through rates, or
otherwise through means such as a deregulated asset plan, all or
substantially all of the abeyed River Bend plant costs. In the event
of an adverse ruling in this case, a net of tax write-off, as of
September 30, 1997, of up to $271 million could be required.
System Agreement (Energy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
On March 3, 1995, a FERC ALJ issued an opinion holding that the
practice of including the out-of-service units in the reserve
equalization calculations during the period 1987 through 1993 was not
permitted by Service Schedule MSS-1 and, therefore, constituted a
violation of the System Agreement. However, the ALJ found that the
violation was in good faith and had benefited the customers of
Entergy as a whole. Accordingly, the ALJ recommended that no
retroactive refunds should be ordered. The ALJ also held that the
System Agreement should be amended to allow out-of-service units to
be included in reserve equalization as proposed in an offer of
settlement filed by Entergy on February 16, 1994. On August 5, 1997,
the FERC issued an Opinion and Order affirming the initial decision
of the ALJ. On September 3, 1997, the LPSC and the MPSC filed a
request for rehearing of FERC's August 5, 1997 decision. This
request remains pending.
On March 14, 1995, the LPSC filed a complaint with FERC alleging
that the System Agreement results in unjust and unreasonable rates
and requested that FERC order a hearing on this matter. In May 1995,
the LPSC amended its original complaint, asserting that the System
Agreement should be revised to exclude curtailable load from the cost
allocation determination due to conflicts with federal policies under
PURPA and with Entergy's system planning philosophy. On August 5,
1996, FERC dismissed the LPSC's complaint and amended complaint. On
September 30, 1996, FERC granted the LPSC's request for rehearing,
solely for the purpose of affording FERC additional time for
consideration of the matters raised on rehearing. On September 12,
1997, the FERC denied the LPSC's request for rehearing on the FERC's
order dismissing the LPSC's complaint and amended complaint.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In October 1996, Entergy Arkansas filed a proposal with the APSC
designed to achieve an orderly transition to retail electric
competition in Arkansas. Entergy Arkansas supplemented its proposal
with a May 1, 1997 filing and additional testimony in response to the
other parties' testimonies. The proposal included a rate decrease
totaling $158 million over a two-year period beginning January 1998.
On October 9, 1997, Entergy Arkansas and other parties to the
proceeding submitted a settlement agreement to the APSC. The proposed
settlement provides for more than $200 million in rate reductions.
The proposal allows Entergy Arkansas to accelerate, beginning in
1999, the recovery of purchased power costs associated with Entergy
Arkansas' allocation of Grand Gulf 1 plant investment, pending FERC
approval. The $200 million reduction includes approximately $170
million associated with the termination of the Grand Gulf deferrals,
a reduction which was part of an earlier settlement agreement with
the APSC. The settlement also provides for a Transition Cost Account
which will utilize any excess earnings above the allowed return on
equity to offset stranded costs when customer choice occurs. The
agreement calls for the APSC to hold a hearing in 2001 to review
Entergy Arkansas' potential stranded costs and to evaluate the
magnitude of stranded costs and the mechanism in place to address
those stranded costs. In addition, the settlement includes the
opening of a generic docket by the APSC in 1998 to take testimony
regarding transition to retail electric competition, with the findings
from that docket to be turned over to the Arkansas legislature in
October 1998. The APSC held a hearing on October 17, 1997 to consider
the settlement agreement and is expected to issue a decision with
respect to the settlement agreement by mid-December 1997.
Filings with the PUCT (Entergy Corporation and Entergy Gulf States)
In December 1995, Entergy Gulf States filed a petition with the
PUCT for reconciliation of fuel and purchased power expenses for the
period January 1, 1994, through June 30, 1995. Entergy Gulf States
believes that there was an under-recovered fuel balance, including
interest, of $22.4 million as of June 1995. Hearings were concluded
in October 1996, and in April 1997 the PUCT issued an order which
approved recovery of approximately $18.8 million of the under-
recovered fuel balance, including interest. In June 1997, the PUCT
issued a subsequent order based on a rehearing, which reduced the
approved recovery to $18.5 million. Entergy Gulf States has appealed
portions of the PUCT's order to the Texas District Court. No
assurance can be given as to the timing or outcome of these appeals.
In accordance with the Merger agreement, Entergy Gulf States
filed a rate proceeding with the PUCT in November 1996. In April
1996, certain cities served by Entergy Gulf States (Cities)
instituted investigations of the reasonableness of Entergy Gulf
States' rates. In May 1996, the Cities agreed to forego their
pending investigation based on the assurance that any rate decrease
ordered in the November 1996 filing will be retroactive to June 1,
1996, and will accrue interest until refunded. The agreement further
provides that no base rate increase will be retroactive. Subsequent
to the November 1996 filing, the Cities passed ordinances reducing
Entergy Gulf States' rates by $43.6 million. Entergy Gulf States has
appealed these ordinances to the PUCT, and these appeals have been
consolidated in the pending rate proceeding. Included in the
November 1996 filing was a proposal to achieve an orderly transition
to retail electric competition in Texas, similar to the filing
described below that Entergy Gulf States made with the LPSC. This
filing with the PUCT is being litigated in four phases as follows:
(i) fuel factor/fuel reconciliation phase, of which Entergy Gulf
States believes there was an under-recovered fuel balance of $41.4
million, including interest, for the period July 1, 1995 through June
30, 1996; (ii) revenue requirement phase; (iii) cost allocation/rate
design phase; and (iv) competitive issues phase. Hearings on the
first two phases have been completed though additional hearings may
occur regarding the second phase. A supplemental filing with respect
to the fourth phase was made with the PUCT on April 4, 1997,
outlining a comprehensive market reform proposal calling for the
establishment of retail competition, service quality standards, a
regional power exchange, and an independent system operator. Entergy
Gulf States requested from the PUCT a reciprocal commitment to
provide an opportunity for the full recovery of prudently incurred
investments previously approved by regulators. The PUCT had scheduled
hearings on the transition to competition to begin November 5, 1997,
although the Commission has not issued an order with respect to the
two completed phases.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
On May 31, 1995, Entergy Gulf States filed its second required
post-Merger earnings analysis with the LPSC. Hearings on this review
were held in December 1995. On October 4, 1996, the LPSC issued an
order requiring a $33.3 million annual base rate reduction and a $9.6
million refund. One component of the rate reduction removes from
base rates approximately $13.4 million annually of costs that will be
recovered in the future through the fuel adjustment clause. On
October 23, 1996, Entergy Gulf States appealed the LPSC's order and
obtained an injunction to stay the order, except insofar as it
requires the $13.4 million reduction, which Entergy Gulf States
implemented in November 1996. In addition, pursuant to an October
1996 settlement with the LPSC, Entergy Gulf States will be allowed to
recover $8.1 million annually related to certain gas transportation
and storage facilities costs. This amount will be applied as an
offset against any refund that may be required by a final judgment in
Entergy Gulf States' appeal of the second post-Merger earnings review
order.
On May 31, 1996, Entergy Gulf States filed its third required
post-Merger earnings analysis with the LPSC. Based on this earnings
filing, on June 1, 1996, Entergy Gulf States implemented a $5.3
million annual rate reduction. Hearings on this filing concluded in
March 1997. An additional rate reduction may be required upon the
issuance by the LPSC of a final rate order which is expected by the
end of 1997.
On May 30, 1997, Entergy Gulf States filed its fourth post-
Merger earnings analysis with the LPSC. This filing showed a revenue
deficiency such that no rate reduction is warranted. Entergy Gulf
States' filing will be subject to further review by the LPSC.
LPSC Fuel Cost Review
In September 1996, the LPSC completed the second phase of its
review of Entergy Gulf States' fuel costs, which covered the period
October 1991 through December 1994 (Phase II). On October 7, 1996,
the LPSC issued an order requiring a $34.2 million refund. The
ordered refund includes a disallowance of $14.3 million of capital
costs (including interest) related to certain gas transportation and
storage facilities, which were recovered through the fuel clause, and
which have been refunded pursuant to the October 1996 LPSC
Settlement. Entergy Gulf States will be permitted to recover these
costs in the future through base rates. On October 23, 1996, Entergy
Gulf States appealed and received an injunction to stay this order,
except insofar as the order requires the $14.3 million refund. On
September 19, 1997, the District Court reversed the LPSC's order with
respect to several disallowances associated with the operation of
River Bend, and affirmed the LPSC's order with respect to the
remainder of the ordered disallowances. The economic effect of the
reversal of certain disallowances pursuant to the District Court's
order is not yet determined. It is expected that appeals will be
filed with the Louisiana Supreme Court. See "LPSC Fuel Cost Review"
and "October 1996 LPSC Settlement" in Note 2 of the financial
statements in the Form 10-K for more information.
(Entergy Corporation and Entergy Louisiana)
On May 30, 1997, Entergy Louisiana made its annual formula rate
plan filing with the LPSC for the 1996 test year. This filing showed
the necessity to reduce rates by approximately $27.8 million.
Additionally, in order to reflect certain Waterford 3 related items
(property tax and termination of the phase-in plan) that are
addressed outside the formula rate plan, the filing showed the
necessity to additionally reduce rates approximately $26.7 million.
These two reductions produced a total reduction of approximately
$54.6 million which was implemented beginning in the first filing
cycle of July 1997. The May 30 filing is the final filing in the two
year period of the formula rate plan. There has been no
determination by the LPSC as to whether the formula rate plan should
be extended, modified, or terminated.
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
In September 1996, Entergy Gulf States and Entergy Louisiana
filed proposals with the LPSC designed to achieve an orderly
transition to retail electric competition in Louisiana, while
protecting certain classes of ratepayers from bearing the burden of
cost shifting. The proposals do not increase rates for any customer
class. However, these proposals do provide for a universal service
charge for customers that remain connected to Entergy Gulf States' or
Entergy Louisiana's electric facilities but choose to purchase their
electricity from another source. In addition, the proposals include
a base rate freeze, which would be put into effect for seven years in
the Louisiana areas serviced by Entergy Gulf States and Entergy
Louisiana. Although these proposals allow for the complete recovery
of the remaining plant investment associated with River Bend and
Waterford 3 as of December 31, 1995, over a seven-year period, the
NRC operating licenses for these plants permit continued operation
until the years 2025 and 2024, respectively. Hearings on these
proposals have been delayed until 1998.
In February 1997, the LPSC identified certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals that will be
addressed in those companies' existing rate dockets, and other issues
that will be addressed in an ongoing generic regulatory proceeding
examining electric utility industry restructuring.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
On March 15, 1997, Entergy Mississippi filed its annual earnings
review with the MPSC under its formula rate plan for the 1996 test
year. In April 1997, the MPSC issued an order approving a
prospective rate reduction of $11.2 million. This rate reduction
went into effect May 1, 1997.
Entergy Mississippi has initiated discussions with the MPSC
regarding an orderly transition to a more competitive market for
electricity. In August 1996, Entergy Mississippi filed a proposal
with the MPSC for a rate rider to assure recovery of all Grand Gulf
costs incurred to serve customers. The rider would maintain current
rates for electric service provided by Entergy Mississippi and would
apply to customers within Entergy Mississippi's service area who
obtain electricity in the future from a source other than Entergy
Mississippi. Entergy Mississippi designed this rider to assure that
commitments made under the current system of regulation are honored
and that cost burdens are not unfairly transferred from departing
customers to those who remain on the Entergy Mississippi system. On
August 22, 1996, the MPSC remanded this proposal and established a
generic docket to consider competition for retail electric service.
Hearings on this docket concluded in April 1997. In early July the
MPSC issued an order directing the Mississippi Public Utilities Staff
to submit a report outlining a plan for restructuring the electric
utility industry in Mississippi. On November 3, 1997, the
Mississippi Public Utilities Staff submitted to the MPSC a proposed
transition plan for retail competition in the electric industry in
Mississippi. The plan represents the staffs' current position on how
retail competition can be implemented in Mississippi and includes an
implementation schedule in which retail competition would begin on
January 1, 2001. The plan assumes the passage of necessary enabling
legislation in 1999. The plan also provides for a transition period,
from January 1, 2001, through December 31, 2004, for the recovery
of any allowed stranded costs through a non-bypassable charge.
Parties will file comments and reply comments on the plan during
January and February of 1998 and a hearing will be conducted by the
MPSC in April 1998.
Filings with the Council (Entergy Corporation, Entergy New Orleans
and Entergy Louisiana)
In March 1997, the Council established new dockets regarding
electric and gas utility service competition in the City of New
Orleans. The dockets will address competitive issues, including
competition, stranded costs, consumer savings, cost shifting, and
potential conflicts among federal, state, and local regulators, as
such issues relate to electric and gas service. Comments were filed
by interested parties in April 1997. Public hearings on these issues
were held in May, July and October of 1997.
The Council issued a resolution in February 1997 indicating that
it will conduct an investigation of Entergy New Orleans' allowed rate
of return, base rates, and adjustment clauses. The Council conducted
hearings in April 1997 on the issue of rate of return, and directed
Entergy New Orleans to make a cost of service and revenue requirement
filing on May 1, 1997. That filing was later deferred until
September 1997. In July 1997, Entergy New Orleans and the Council
agreed to implement an $18 million annual reduction in base rates
effective May 1, 1997, even though an allowed rate of return had not
yet been determined by the Council.
Entergy New Orleans made its cost of service and revenue
requirement filing in conjunction with its transition to competition
plan on September 17, 1997. On November 6, 1997, the Council severed
the traditional ratemaking issues from the transition filings and
established a procedure schedule for the second phase of the rate
proceeding, pursuant to which hearings will be conducted in July
1998. Additionally, the Council ordered Entergy New Orleans to file
unbundled gas rates, in preparation for an investigation of issues
relating to gas industry competition. The electric transition to
competition filing is generally similar to those filed for the other
domestic utility companies. It includes a rate cap coupled with a
continuing right of the Council to conduct reviews of Entergy New
Orleans' earnings, an offer to seek authority from FERC for
accelerated recovery of Grand Gulf purchased power obligations, and
implementation of a non-bypassable universal service charge for all
existing customers, together with functional unbundling of electric
rates. Entergy New Orleans' transition filing will be subject to
further review by the Council. A procedural schedule on that filing
has not been set, although public comment has been requested by the
Council.
Proposed Rate Increase
(System Energy)
System Energy filed an application with FERC on May 12, 1995,
for a $65.5 million rate increase. The request seeks 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. The request also
includes a proposed change in the accounting recognition of nuclear
refueling outage costs from that of expensing those costs as incurred
to the deferral and amortization method described in Note 1 in the
Form 10-K with respect to Entergy Arkansas. On December 12, 1995,
System Energy implemented a $65.5 million rate increase, subject to
refund. Management has decided to record a reserve for a portion of
the rate increase. Hearings on System Energy's request began in
January 1996 and were completed in February 1996. On July 11, 1996,
the ALJ issued an initial decision in this proceeding that agreed
with certain of System Energy's proposals, including the change in
accounting for nuclear refueling outage costs, while rejecting a
proposed increase in return on common equity and recommending a
slight decrease. The ALJ also rejected the proposed change in the
decommissioning cost methodology. The decision of the ALJ is
preliminary and may be modified in the final decision from FERC which
is expected at any time. Management is unable to predict the final
outcome of the rate increase request or the amount of any refunds in
excess of reserves that may be required.
(Entergy Mississippi)
Entergy Mississippi's allocation of the proposed System Energy
wholesale rate increase is $21.6 million annually. In July 1995,
Entergy Mississippi filed a schedule with the MPSC that defers the
retail recovery of the System Energy rate increase. The deferral
plan, which was approved by the MPSC, began in December 1995, the
effective date of the System Energy rate increase, and will end after
the issuance of a final order by FERC. The final amount of the
deferred rate increase is to be amortized over 48 months beginning in
October 1998.
(Entergy New Orleans)
Entergy New Orleans' allocation of the proposed System Energy
wholesale rate increase is $11.1 million annually. In February 1996,
Entergy New Orleans filed a plan with the Council to defer 50% of the
amount of the System Energy rate increase. The deferral began in
February 1996 and will end after the issuance of a final order by
FERC.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the nine months ended September 30, 1997, Entergy
Corporation issued 1,187,916 shares of its previously repurchased
common stock, reducing the amount held as treasury stock by
approximately $34 million. Included in the foregoing were 813,161
shares of common stock issued at a value of $21.5 million in
connection with the acquisition of the security monitoring company,
Ranger American, during the three months ended September 30, 1997.
Entergy Corporation issued the remaining shares to meet the
requirements of its various stock plans. In addition, Entergy
Corporation received proceeds of $230.2 million from the issuance of
8,975,033 shares of common stock under its dividend reinvestment and
stock purchase plan during the nine months ended September 30, 1997.
NOTE 4. LONG-TERM DEBT
(Entergy Corporation)
See Note 7 of the Form 10-K for a discussion of the Entergy
London Investments (formally Entergy Power UK plc) credit facility.
Approximately BPS1.03 billion ($1.66 billion) of variable rate
borrowings were outstanding under this facility as of September 30,
1997. The weighted average interest rate on the borrowings
outstanding as of September 30, 1997 was 8.77%.
Entergy London Investments entered into several interest rate
swaps to reduce the impact of interest rate changes on its debt
related to the London Electricity acquisition. The interest rate
swap agreements involve the exchange of floating rate interest
payments for fixed rate interest payments over the life of the
agreements. Entergy London Investments recognizes interest expense
currently based on the fixed rate of interest resulting from use of
these swap agreements. If the counterparties to an interest rate
swap agreement were to default on contractual payments, Entergy
London Investments could be exposed to increased costs related to
replacing the original agreement. However, Entergy London
Investments does not anticipate nonperformance by any counterparty to
any interest rate swap in effect at September 30, 1997. At September
30, 1997, Entergy London Investments was a party to a notional amount
of BPS600 million of interest rate swaps with maturity dates ranging
from March 1999 to September 2001.
An Entergy Corporation subsidiary signed an agreement with
several banks on January 5, 1996, to obtain a revolving credit
facility for the acquisition of CitiPower. The subsidiary entered
into several interest rate swaps to reduce the impact of interest
rate changes on its debt related to the CitiPower acquisition. See
Note 7 of the Form 10-K for a discussion of the credit facility and
the interest rate swap agreements. The interest rate swap agreements
involve the exchange of floating rate interest payments for fixed
rate interest payments over the life of the agreements. Interest
expense is recognized currently based on the fixed rate of interest
resulting from use of these swap agreements.
On September 2, 1997, CitiPower entered into an additional
interest rate swap agreement with a notional amount of 32 million
Australian dollars and maturity dates ranging from February 1999 to
December 2009.
Entergy enters into interest rate swaps as part of its overall
risk management strategy and does not hold or issue material amounts
of derivative financial instruments for trading purposes. Entergy
accounts for its interest rate swaps in accordance with the concepts
established in SFAS 80, "Accounting for Futures Contracts", and
various EITF pronouncements. If the interest rate swaps were to be
sold or terminated, any resulting gain or loss would be deferred and
amortized over the remaining life of the debt instrument being hedged
by the interest rate swaps. If the debt instrument being hedged by
the interest rate swaps were to be extinguished, any resulting gain
or loss attributable to the swaps would be recognized in the period
in which the debt was extinguished.
(Entergy Corporation and Entergy Louisiana)
Entergy Louisiana is the lessee of three separate undivided
interests in Waterford 3 under three separate, but substantially
identical, long-term net leases. The lessors under such leases
acquired the undivided interests (aggregating approximately 9.3%) in
Waterford 3 from Entergy Louisiana in three separate sale-leaseback
transactions that occurred in 1989. Approximately 87.7% of the
aggregate consideration paid by the lessors for their respective
undivided interests was provided to the lessors from the issuance of
Waterford 3 Secured Lease Obligation Bonds (Initial Series Bonds) in
1989. In July 1997, Entergy Louisiana caused the lessors to issue
$307,632,000 aggregate principal amount of Waterford 3 Secured Lease
Obligation Bonds, 8.09% Series due 2017, to refinance the outstanding
bonds originally issued to finance the purchase of the undivided
interests by the lessors. The lease payments will be reduced to
reflect the lower interest costs.
Upon the occurrence of certain events, Entergy Louisiana may be
obligated to pay amounts sufficient to permit the Owner Participants
to withdraw from the lease transactions, and Entergy Louisiana may be
required to assume the outstanding bonds issued by the Owner Trustee
to finance, in part, its acquisition of the undivided interests in
Waterford 3. See Note 10 to the Form 10-K for further information.
(Entergy Gulf States)
On November 1, 1997, Entergy Gulf States retired $75 million of
its 6.99% Series First Mortgage Bonds upon maturity.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On September 26, 1997, Entergy Corporation's Board of Directors
declared a common stock dividend of 45 cents per share, payable on
December 1, 1997, to holders of record on November 12, 1997.
NOTE 6. ACCOUNTING ISSUES (Entergy Corporation)
New Accounting Standard - In March 1997, the FASB issued SFAS
128, "Earnings per Share", effective for financial statements for
periods ending after December 15, 1997. This statement will simplify
the computation of earnings per share for many companies by
eliminating calculation provisions which were required by the prior
earnings per share standard, Accounting Principles Board Opinion 15.
The adoption of SFAS 128 is not expected to have a material effect on
the calculation of earnings per share for Entergy Corporation.
In May and July 1997, the EITF of the FASB met regarding EITF
Issues No. 97-4, "Deregulation of the Pricing of Electricity - Issues
Related to the Application of SFAS 71, "Accounting for the Effects of
Certain Types of Regulation"", and how SFAS 101, "Regulated
Enterprises - Accounting for the Discontinuation of Application of
FASB Statement No. 71", should be applied to a portion of an entity
subject to such a plan. As a result of these meetings, a consensus
was reached that SFAS 71 should be discontinued at a date no later
than when the details of the transition to competition plan for all
or a portion of the entity subject to such plan are known.
Additionally, the EITF reached a consensus that stranded costs which
are to be recovered through cash flows derived from another portion
of the entity which continues to apply SFAS 71 should not be written
off; rather, they should be considered regulatory assets of the
segment which will continue to apply SFAS 71.
NOTE 7. ACQUISITION OF LONDON ELECTRICITY (Entergy Corporation)
On December 18, 1996, Entergy Corporation made a formal cash
offer to acquire London Electricity for $2.1 billion. London
Electricity is a regional electric company serving approximately two
million customers in the metropolitan area of London, England. The
offer was approved by authorities in the UK, and, as of February 7,
1997, the offer was made unconditional. Entergy Corporation, through
Entergy London Investments, now controls 100% of the common shares of
London Electricity. Entergy Corporation has included the results of
operations of London Electricity in its results of operations
beginning February 1, 1997, based on management's determination that
effective control was achieved on that date. The acquisition was
financed with $1.7 billion of debt that is non-recourse to Entergy
Corporation and $392 million of equity provided by Entergy
Corporation from available cash and borrowings under its $300 million
line of credit.
The cost of the London Electricity license is being amortized on
a straight-line basis over a 40-year period beginning February 1,
1997. As of September 30, 1997, the unamortized balance of the
license was approximately $1.3 billion, which is based on a
preliminary purchase price allocation.
In accordance with the purchase method of accounting, the three
and nine months ended September 30, 1997 results of operations for
Entergy Corporation reported in its Statements of Consolidated Income
and Cash Flows do not reflect London Electricity's results of
operations for any period prior to February 1, 1997. The pro forma
combined revenues, net income, and earnings per common share of
Entergy Corporation presented below give effect to the acquisition as
if it had occurred on January 1, 1997 and 1996, respectively. This
pro forma information is not necessarily indicative of the results of
operations that would have occurred had the acquisition been
consummated for the period for which it is being given effect. The
three months ended September 30, 1996 pro forma information is not
available for comparative purposes.
For the Nine Months Ending:
September 30, 1997(b) September 30, 1996(a)
(In Millions of U.S. Dollars, Except
Share Data)
Operating revenues $ 7,243 $ 7,118
Net income $ 381 $ 450
Earnings per average common share $ 1.42 $ 1.73
(a) - Net Income in 1996 includes the $174 million net of tax
write-off of River Bend rate deferrals pursuant to SFAS 121.
(b) - On July 31, 1997, the British government enacted into law a
one-time "windfall profits tax" on privatized industries,
including regional electric utilities such as London Electricity.
London Electricity's liability is approximately BPS140 million
(approximately $234 million), which will not be deductible for UK
corporation tax purposes. Payment of the tax is required in two
equal installments, the first due on December 1, 1997, and the
second due one year later. The government also decreased the
corporation tax rate in the UK from 33% to 31%, effective as of
April 1, 1997. In accordance with SFAS 109, "Accounting for Income
Taxes", this reduction in UK corporation tax rates resulted in a
one-time reduction in income tax expense of approximately $65
million during the quarter ended September 30, 1997.
__________________________________
In the opinion of Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy, the accompanying unaudited condensed
financial statements contain all adjustments (consisting primarily of
normal recurring accruals and reclassifying previously reported
amounts to conform to current classifications) necessary for a fair
statement of the results for the interim periods presented. However,
the business of Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans is subject to
seasonal fluctuations, with the peak period occurring during the
summer months. The results for the interim periods presented should
not be used as a basis for estimating results of operations for a
full year.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Employment Litigation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)
See "Employment Litigation" in Item 1 of Part I of the Form 10-K
for information relating to lawsuits filed by former employees
asserting they were wrongfully terminated and/or discriminated
against due to age, race, and/or sex. See "Employment Litigation" in
Note 1 herein for developments that have occurred since the filing of
the Form 10-K.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun - Coal Contracts" in Note 1 herein for developments
that have occurred since the filing of the Form 10-K.
Catalyst Technologies, Inc. (Entergy Corporation)
See "Catalyst Technologies, Inc." in Item 1 of Part I of the
Form 10-K for information relating to the lawsuit filed by Catalyst
Technologies, Inc. See "Catalyst Technologies, Inc." in Note 1
herein for developments that have occurred since the filing of the
Form 10-K.
Service Area Dispute (Entergy Corporation and Entergy Mississippi)
On October 11, 1994, twelve Mississippi cities filed a complaint
in state court against Entergy Mississippi and eight electric power
associations seeking a judgment from the court declaring
unconstitutional certain Mississippi statutes that establish the
procedure that must be followed before a municipality can acquire the
facilities and certificate rights of a utility serving in the
municipality. Specifically, the suit requests that the court declare
unconstitutional certain 1987 amendments to the Mississippi Public
Utilities Act that require that the MPSC cancel a utility's
certificate to serve in the municipality before a municipality may
acquire a utility's facilities located in the municipality. The suit
also requests that the court find that Mississippi municipalities can
serve any consumer in the boundaries of the municipality and within
one mile thereof. On January 6, 1995, Entergy Mississippi and the
other defendants filed motions to dismiss. In October 1995, the
state court dismissed the complaint. The plaintiffs appealed the
dismissal to the Mississippi Supreme Court. On September 11, 1997,
the Mississippi Supreme Court affirmed the decision of the lower
court finding in favor of Entergy Mississippi and dismissing the
municipalities' complaint. A petition for rehearing filed by the
municipalities on September 24, 1997 is pending before the
Mississippi Supreme Court. See "Service Area Dispute" in Item 1 of
Part I of the Form 10-K for more information.
Federal Income Tax Audit (Entergy Corporation, Entergy Louisiana, and
System Energy)
In August 1994, Entergy Corporation received an IRS report
covering the federal income tax audit of Entergy Corporation and
subsidiaries for the years 1988 - 1990. The report asserted an $80
million tax deficiency for the 1990 consolidated federal income tax
returns related primarily to the utilization of accelerated
investment tax credits associated with Waterford 3 and Grand Gulf 1.
Changes to the initial report, made in the IRS appeal process,
reduced the assessment to $58 million. In March 1997, Entergy
Corporation received notification that the IRS National Office had
resolved the audit in Entergy's favor and that no additional tax
payments would be due.
Taxes Paid Under Protest (Entergy Corporation and Entergy Louisiana)
Since the mid-1980's, Entergy Louisiana and the tax authorities
of St. Charles Parish, Louisiana (Parish), the parish in which
Waterford 3 is located, have disputed use taxes on nuclear fuel paid
under protest by Entergy Louisiana. Entergy Louisiana has been
successful in lawsuits in the Parish with regard to recovering these
taxes, plus interest, and also with regard to Parish lease tax issues
pertaining to fuel financing arrangements. In June 1995, Entergy
Louisiana received a favorable decision from the Louisiana Fifth
Circuit Court of Appeal that confirmed that no such use and lease
taxes are due. In May 1997, the Parish and Entergy Louisiana settled
all pending use and lease tax litigation. This settlement includes
returns to Entergy Louisiana of additional payments under protest on
nuclear fuel and the dismissal of nuclear fuel related suits against
Entergy Louisiana and/or the fuel lessors. The suits by Entergy
Louisiana with regard to state use tax paid under protest on nuclear
fuel are still pending.
Union Pacific
In October 1997, Entergy Arkansas and Entergy Services filed a
civil suit against Union Pacific Railroad Company (Union Pacific) in
the United States District Court for the Middle District of
Louisiana. This suit, which seeks damages in excess of $1 million
and the termination of coal shipping contracts with Union Pacific,
maintains that Union Pacific has failed to meet its contractual
obligations to ship coal to Entergy Arkansas' two large coal-fired
plants and that such failure has resulted in a very low level of coal
inventory at those plants. The low inventory level has impaired
Entergy Arkansas' ability to generate electricity from these plants.
Item 5. Other Information
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, September 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 2.28 3.11(b) 2.32 2.56 2.93 2.72
Entergy Gulf States 1.72 1.54 .36(c) 1.86 1.47 2.19
Entergy Louisiana 2.79 3.06 2.91 3.18 3.16 2.80
Entergy Mississippi 2.37 3.79(b) 2.12 2.92 3.40 2.94
Entergy New Orleans 2.66 4.68(b) 1.91 3.93 3.51 1.99
System Energy 2.04 1.87 1.23 2.07 2.21 2.32
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, September 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 1.86 2.54(b) 1.97 2.12 2.44 2.39
Entergy Gulf States (a) 1.37 1.21 .29(c) 1.54 1.19 1.82
Entergy Louisiana 2.18 2.39 2.43 2.60 2.64 2.46
Entergy Mississippi 1.97 3.08(b) 1.81 2.51 2.94 2.59
Entergy New Orleans 2.36 4.12(b) 1.73 3.56 3.22 1.80
(a) "Preferred Dividends" in the case of Entergy Gulf States
also include dividends on preference stock.
(b) Earnings for the year ended December 31, 1993, include $81
million, $52 million, and $18 million for Entergy Arkansas,
Entergy Mississippi, and Entergy New Orleans, respectively,
related to the change in accounting principle to provide
for the accrual of estimated unbilled revenues.
(c) Earnings for the year ended December 31, 1994, for Entergy
Gulf States were not adequate to cover fixed charges and
combined fixed charges and preferred dividends by $144.8
million and $197.1 million, respectively.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
23(a) - Consent of Sandlin Associates.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of September 30, 1997.
27(b) - Financial Data Schedule for Entergy Arkansas as of
September 30, 1997.
27(c) - Financial Data Schedule for Entergy Gulf States as of
September 30, 1997.
27(d) - Financial Data Schedule for Entergy Louisiana as of
September 30, 1997.
27(e) - Financial Data Schedule for Entergy Mississippi as of
September 30, 1997.
27(f) - Financial Data Schedule for Entergy New Orleans as of
September 30, 1997.
27(g) - Financial Data Schedule for System Energy as of
September 30, 1997.
99(a) - Entergy Arkansas Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(b) - Entergy Gulf States Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(c) - Entergy Louisiana Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(d) - Entergy Mississippi Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 99(g) - Annual Reports on Form 10-K of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the fiscal year ended December
31, 1996, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
** 99(h) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the quarter ended March 31,
1997, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
** 99(i) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the quarter ended June 30, 1997,
portions of which are incorporated herein by reference
as described elsewhere in this document (filed with
the SEC in File Nos. 1-11299, 1-10764, 1-2703, 1-8474,
0-320, 0-5807, and 1-9067, respectively).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended September 30, 1997, which list, prepared in
accordance with Item 102 of Regulation S-T of the SEC,
immediately precedes the exhibits being filed with this
report on Form 10-Q for the quarter ended September 30,
1997.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation, Entergy Arkansas, and Entergy Gulf
States
A current report on Form 8-K, dated October 9, 1997,
was filed with the SEC on October 10, 1997, reporting
information under Item 5. "Other Events".
Entergy Corporation
A current report on Form 8-K, dated September 23,
1997, was filed with the SEC on October 1, 1997,
reporting information under Item 5. "Other Events".
Entergy Corporation
A current report on Form 8-K, dated August 8, 1997,
was filed with the SEC on August 11, 1997, reporting
information under Item 5. "Other Events".
EXPERTS
The statements attributed to Sandlin Associates regarding the
analysis of River Bend construction costs of Entergy Gulf States in
Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial
Statements, "Rate and Regulatory Matters", have been reviewed by such
firm and are included herein upon the authority of such firm as
experts.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Louis E. Buck
Louis E. Buck
Vice President, Chief Accounting
Officer and Assistant Secretary
(For each Registrant and for each as
Principal Accounting Officer)
Date: November 13, 1997
Exhibit 23(a)
CONSENT
We consent to the reference to our firm under the
heading "Experts" in the Quarterly Report on Form 10-Q being
filed on or about the date hereof by Entergy Corporation,
Entergy Arkansas, Inc., Entergy Gulf States, Inc. ("Entergy
Gulf States"), Entergy Louisiana, Inc., Entergy Mississippi,
Inc., Entergy New Orleans, Inc., and System Energy
Resources, Inc. We further consent to the incorporation by
reference of such reference to our firm into Entergy Gulf
States' Registration Statements on Form S-3 (File Numbers 33-
49739 and 33-51181), Form S-8 (File Numbers 2-76551 and 2-
98011) and on Form S-2 (File Number 333-17911) of such
reference and Statements.
/s/ L. S. Sandlin
SANDLIN ASSOCIATES
Management Consultants
Pasco, Washington
November 13, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Corporation and Subsidiaries financial statements for the quarter ended
September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000065984
<NAME> ENTERGY CORPORATION
<SUBSIDIARY>
<NUMBER> 023
<NAME> ENTERGY CORPORATION AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 18,130,096
<OTHER-PROPERTY-AND-INVEST> 1,065,703
<TOTAL-CURRENT-ASSETS> 3,293,730
<TOTAL-DEFERRED-CHARGES> 4,620,647
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 27,110,176
<COMMON> 2,434
<CAPITAL-SURPLUS-PAID-IN> 4,546,564
<RETAINED-EARNINGS> 2,246,729
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,779,017
346,237
334,454
<LONG-TERM-DEBT-NET> 9,394,235
<SHORT-TERM-NOTES> 387,229
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 273,675
0
<CAPITAL-LEASE-OBLIGATIONS> 239,098
<LEASES-CURRENT> 169,568
<OTHER-ITEMS-CAPITAL-AND-LIAB> 9,186,663
<TOT-CAPITALIZATION-AND-LIAB> 27,110,176
<GROSS-OPERATING-REVENUE> 7,021,430
<INCOME-TAX-EXPENSE> 273,243
<OTHER-OPERATING-EXPENSES> 5,542,708
<TOTAL-OPERATING-EXPENSES> 5,542,708
<OPERATING-INCOME-LOSS> 1,478,722
<OTHER-INCOME-NET> (180,532)
<INCOME-BEFORE-INTEREST-EXPEN> 1,298,190
<TOTAL-INTEREST-EXPENSE> 646,562
<NET-INCOME> 378,385
41,405
<EARNINGS-AVAILABLE-FOR-COMM> 336,980
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,574,715
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Arkansas' financial statements for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000007323
<NAME> ENTERGY ARKANSAS
<SUBSIDIARY>
<NUMBER> 001
<NAME> ENTERGY ARKANSAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,801,433
<OTHER-PROPERTY-AND-INVEST> 249,522
<TOTAL-CURRENT-ASSETS> 688,017
<TOTAL-DEFERRED-CHARGES> 426,229
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,165,201
<COMMON> 470
<CAPITAL-SURPLUS-PAID-IN> 590,169
<RETAINED-EARNINGS> 511,937
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,102,576
36,027
116,350
<LONG-TERM-DEBT-NET> 1,243,356
<SHORT-TERM-NOTES> 667
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17,465
0
<CAPITAL-LEASE-OBLIGATIONS> 89,084
<LEASES-CURRENT> 48,995
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,510,681
<TOT-CAPITALIZATION-AND-LIAB> 4,165,201
<GROSS-OPERATING-REVENUE> 1,344,199
<INCOME-TAX-EXPENSE> 126,184
<OTHER-OPERATING-EXPENSES> 1,083,747
<TOTAL-OPERATING-EXPENSES> 1,083,747
<OPERATING-INCOME-LOSS> 260,452
<OTHER-INCOME-NET> 17,559
<INCOME-BEFORE-INTEREST-EXPEN> 278,011
<TOTAL-INTEREST-EXPENSE> 76,638
<NET-INCOME> 126,184
8,363
<EARNINGS-AVAILABLE-FOR-COMM> 117,821
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 400,505
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy Gulf
States' financial statements for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000044570
<NAME> ENTERGY GULF STATES
<SUBSIDIARY>
<NUMBER> 006
<NAME> ENTERGY GULF STATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,527,227
<OTHER-PROPERTY-AND-INVEST> 89,839
<TOTAL-CURRENT-ASSETS> 815,402
<TOTAL-DEFERRED-CHARGES> 1,060,813
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,439,281
<COMMON> 114,055
<CAPITAL-SURPLUS-PAID-IN> 1,152,575
<RETAINED-EARNINGS> 388,615
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,655,245
225,210
47,444
<LONG-TERM-DEBT-NET> 1,817,316
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 150,890
0
<CAPITAL-LEASE-OBLIGATIONS> 99,011
<LEASES-CURRENT> 34,764
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,463,401
<TOT-CAPITALIZATION-AND-LIAB> 6,493,281
<GROSS-OPERATING-REVENUE> 1,557,723
<INCOME-TAX-EXPENSE> 77,700
<OTHER-OPERATING-EXPENSES> 1,230,701
<TOTAL-OPERATING-EXPENSES> 1,230,701
<OPERATING-INCOME-LOSS> 327,022
<OTHER-INCOME-NET> 17,304
<INCOME-BEFORE-INTEREST-EXPEN> 344,326
<TOTAL-INTEREST-EXPENSE> 136,323
<NET-INCOME> 130,303
18,963
<EARNINGS-AVAILABLE-FOR-COMM> 111,340
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 382,550
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Louisiana's financial statements for the quarter ended September 30, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000060527
<NAME> ENTERGY LOUISIANA
<SUBSIDIARY>
<NUMBER> 012
<NAME> ENTERGY LOUISIANA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,418,794
<OTHER-PROPERTY-AND-INVEST> 97,476
<TOTAL-CURRENT-ASSETS> 389,933
<TOTAL-DEFERRED-CHARGES> 367,534
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,273,737
<COMMON> 1,088,900
<CAPITAL-SURPLUS-PAID-IN> (2,321)
<RETAINED-EARNINGS> 71,879
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,158,458
85,000
100,500
<LONG-TERM-DEBT-NET> 1,338,322
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,300
0
<CAPITAL-LEASE-OBLIGATIONS> 27,124
<LEASES-CURRENT> 39,828
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,489,205
<TOT-CAPITALIZATION-AND-LIAB> 4,273,737
<GROSS-OPERATING-REVENUE> 1,400,732
<INCOME-TAX-EXPENSE> 87,368
<OTHER-OPERATING-EXPENSES> 1,086,965
<TOTAL-OPERATING-EXPENSES> 1,086,965
<OPERATING-INCOME-LOSS> 313,767
<OTHER-INCOME-NET> (668)
<INCOME-BEFORE-INTEREST-EXPEN> 313,099
<TOTAL-INTEREST-EXPENSE> 96,271
<NET-INCOME> 129,460
10,097
<EARNINGS-AVAILABLE-FOR-COMM> 119,363
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 271,645
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Mississippi's financial statements for the quarter ended September 30, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000066901
<NAME> ENTERGY MISSISSIPPI
<SUBSIDIARY>
<NUMBER> 016
<NAME> ENTERGY MISSISSIPPI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,053,269
<OTHER-PROPERTY-AND-INVEST> 13,344
<TOTAL-CURRENT-ASSETS> 303,695
<TOTAL-DEFERRED-CHARGES> 110,015
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,480,323
<COMMON> 199,326
<CAPITAL-SURPLUS-PAID-IN> (59)
<RETAINED-EARNINGS> 224,192
<TOTAL-COMMON-STOCKHOLDERS-EQ> 423,459
0
50,381
<LONG-TERM-DEBT-NET> 464,106
<SHORT-TERM-NOTES> 43,121
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 20
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 499,236
<TOT-CAPITALIZATION-AND-LIAB> 1,480,323
<GROSS-OPERATING-REVENUE> 708,203
<INCOME-TAX-EXPENSE> 27,851
<OTHER-OPERATING-EXPENSES> 592,282
<TOTAL-OPERATING-EXPENSES> 592,282
<OPERATING-INCOME-LOSS> 115,921
<OTHER-INCOME-NET> 1,222
<INCOME-BEFORE-INTEREST-EXPEN> 117,143
<TOTAL-INTEREST-EXPENSE> 34,206
<NET-INCOME> 55,086
3,258
<EARNINGS-AVAILABLE-FOR-COMM> 51,828
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 141,008
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy New
Orleans' financial statements for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000071508
<NAME> ENTERGY NEW ORLEANS
<SUBSIDIARY>
<NUMBER> 017
<NAME> ENTERGY NEW ORLEANS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 291,704
<OTHER-PROPERTY-AND-INVEST> 3,259
<TOTAL-CURRENT-ASSETS> 124,104
<TOTAL-DEFERRED-CHARGES> 88,731
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 507,798
<COMMON> 33,744
<CAPITAL-SURPLUS-PAID-IN> 36,294
<RETAINED-EARNINGS> 60,795
<TOTAL-COMMON-STOCKHOLDERS-EQ> 130,833
0
19,780
<LONG-TERM-DEBT-NET> 168,937
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 188,248
<TOT-CAPITALIZATION-AND-LIAB> 507,798
<GROSS-OPERATING-REVENUE> 374,699
<INCOME-TAX-EXPENSE> 10,699
<OTHER-OPERATING-EXPENSES> 338,448
<TOTAL-OPERATING-EXPENSES> 338,448
<OPERATING-INCOME-LOSS> 36,251
<OTHER-INCOME-NET> 252
<INCOME-BEFORE-INTEREST-EXPEN> 36,503
<TOTAL-INTEREST-EXPENSE> 11,358
<NET-INCOME> 14,446
724
<EARNINGS-AVAILABLE-FOR-COMM> 13,722
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 36,791
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from System
Energy's financial statements for the quarter ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000202584
<NAME> SYSTEM ENERGY RESOURCES
<SUBSIDIARY>
<NUMBER> 018
<NAME> SYSTEM ENERGY RESOURCES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,491,247
<OTHER-PROPERTY-AND-INVEST> 78,861
<TOTAL-CURRENT-ASSETS> 330,143
<TOTAL-DEFERRED-CHARGES> 511,613
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,411,864
<COMMON> 789,350
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 60,975
<TOTAL-COMMON-STOCKHOLDERS-EQ> 850,325
0
0
<LONG-TERM-DEBT-NET> 1,341,848
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 70,000
0
<CAPITAL-LEASE-OBLIGATIONS> 13,802
<LEASES-CURRENT> 42,445
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,093,444
<TOT-CAPITALIZATION-AND-LIAB> 3,411,864
<GROSS-OPERATING-REVENUE> 477,255
<INCOME-TAX-EXPENSE> 59,151
<OTHER-OPERATING-EXPENSES> 256,558
<TOTAL-OPERATING-EXPENSES> 256,558
<OPERATING-INCOME-LOSS> 220,697
<OTHER-INCOME-NET> 7,294
<INCOME-BEFORE-INTEREST-EXPEN> 227,991
<TOTAL-INTEREST-EXPENSE> 95,953
<NET-INCOME> 72,887
0
<EARNINGS-AVAILABLE-FOR-COMM> 72,887
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 200,996
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99(a)
Entergy Arkansas, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
<TABLE>
<CAPTION>
September30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest Charges 124,101 119,591 110,814 115,337 106,716 106,674
Interest applicable to rentals 17,657 16,860 19,140 18,158 19,121 18,390
-------------------------------------------------------------------
Total fixed charges, as defined 141,758 136,451 129,954 133,495 125,837 125,064
Preferred dividends, as defined (a) 32,195 30,334 23,234 27,636 24,731 17,281
-------------------------------------------------------------------
Combined fixed charges and preferred $173,953 $166,785 $153,188 $161,131 $150,568 $142,345
dividends, as defined ===================================================================
Earnings as defined:
Net Income $130,529 $205,297 $142,263 $136,666 $157,798 138,211
Add:
Provision for income taxes:
Total 50,590 82,337 29,220 72,081 84,445 76,494
Fixed charges as above 141,758 136,451 129,954 133,495 125,837 125,064
-------------------------------------------------------------------
Total earnings, as defined $322,877 $424,085 $301,437 $342,242 $368,080 $339,769
===================================================================
Ratio of earnings to fixed charges,
as defined 2.28 3.11 2.32 2.56 2.93 2.72
===================================================================
Ratio of earnings to combined fixed
charges and preferred dividends,
as defined 1.86 2.54 1.97 2.12 2.44 2.39
===================================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred
dividend requirement by one hundred percent (100%) minus the income tax rate.
</TABLE>
<PAGE>
Exhibit 99(b)
Entergy Gulf States, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
<TABLE>
<CAPTION>
September 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest charges 248,416 210,599 204,134 200,224 192,465 180,378
Interest applicable to rentals 23,759 23,455 21,539 16,648 14,887 15,187
------------------------------------------------------------------
Total fixed charges, as defined 272,175 234,054 225,673 216,872 207,352 195,565
Preferred dividends, as defined (a) 69,617 65,299 52,210 44,651 48,690 40,186
------------------------------------------------------------------
Combined fixed charges and preferred $341,792 $299,353 $277,883 $261,523 $256,042 $235,751
dividends, as defined ==================================================================
Earnings as defined:
Income (loss) from continuing operations
before extraordinary items and
the cumulative effect of accounting changes $139,413 $69,462 ($82,755) $122,919 ($3,887) 140,568
Add:
Income Taxes 55,860 58,016 (62,086) 63,244 102,091 93,079
Fixed charges as above 272,175 234,054 225,673 216,872 207,352 195,565
------------------------------------------------------------------
Total earnings, as defined (b) $467,448 $361,532 $80,832 $403,035 $305,556 $429,212
==================================================================
Ratio of earnings to fixed charges,
as defined 1.72 1.54 0.36 1.86 1.47 2.19
==================================================================
Ratio of earnings to combined fixed charges
and preferred dividends, as defined 1.37 1.21 0.29 1.54 1.19 1.82
==================================================================
- --------------------------------------------
(a) "Preferred dividends," as defined by SE regulation S-K, are computed by dividing the preferred dividend
requirement by one hundred percent (100%) minus the income tax rate.
(b) Earnings for the year ended December 31, 1994, for GSU were not adequate to cover fixed charges combined
fixed charges and preferred dividends by $144.8 million and $197.1 million, respectively.
</TABLE>
<PAGE>
Exhibit 99(c)
Entergy Louisiana, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
<TABLE>
<CAPTION>
December 31, September 30,
1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 141,513 136,957 136,444 136,901 132,412 130,788
Interest applicable to rentals 9,363 8,519 8,332 9,332 10,601 9,019
--------------------------------------------------------------
Total fixed charges, as defined 150,876 145,476 144,776 146,233 143,013 139,807
Preferred dividends, as defined (a) 42,026 40,779 29,171 32,847 28,234 19,045
--------------------------------------------------------------
Combined fixed charges and preferred $192,902 $186,255 $173,947 $179,080 $171,247 $158,852
dividends, as defined ==============================================================
Earnings as defined:
Net Income $182,989 $188,808 $213,839 $201,537 $190,762 $147,005
Add:
Provision for income taxes:
Total Taxes 87,037 110,813 63,288 117,114 118,559 104,435
Fixed charges as above 150,876 145,476 144,776 146,233 143,013 139,807
--------------------------------------------------------------
Total earnings, as defined $420,902 $445,097 $421,903 $464,884 $452,334 $391,247
==============================================================
Ratio of earnings to fixed charges,
as defined 2.79 3.06 2.91 3.18 3.16 2.80
==============================================================
Ratio of earnings to combined fixed
charges and preferred dividends,
as defined 2.18 2.39 2.43 2.60 2.64 2.46
==============================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
requirement by one hundred percent (100%) minus the income tax rate.
</TABLE>
<PAGE>
Exhibit 99(d)
Entergy Mississippi, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
<TABLE>
<CAPTION>
September 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 64,066 55,359 52,764 51,635 48,007 46,339
Interest applicable to rentals 521 1,264 1,716 2,173 2,165 2,299
--------------------------------------------------------
Total fixed charges, as defined 64,587 56,623 54,480 53,808 50,172 48,638
Preferred dividends, as defined (a) 12,823 12,990 9,447 9,004 7,720 6,493
--------------------------------------------------------
Combined fixed charges and preferred
dividends, as defined $77,410 $69,613 $63,927 $62,812 $57,892 $55,131
========================================================
Earnings as defined:
Net Income $65,036 $101,743 $48,779 $68,667 $79,210 63,348
Add:
Provision for income taxes:
Total income taxes 23,147 55,993 12,476 34,877 41,107 31,069
Fixed charges as above 64,587 56,623 54,480 53,808 50,172 48,638
---------------------------------------------------------
Total earnings, as defined $152,770 $214,359 $115,735 $157,352 $170,489 $143,055
=========================================================
Ratio of earnings to fixed charges, 2.37 3.79 2.12 2.92 3.40 2.94
as defined
=========================================================
Ratio of earnings to combined fixed
charges and preferred dividends,
as defined 1.97 3.08 1.81 2.51 2.94 2.59
=========================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred
dividend requirement by one hundred percent (100%) minus the income tax rate.
</TABLE>
<PAGE>
Exhibit 99(e)
Entergy New Orleans, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed
Charges and Preferred Dividends
<TABLE>
<CAPTION>
December 31, September 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 24,648 20,494 17,562 17,183 16,304 15,312
Interest applicable to rentals 444 544 1,245 916 831 991
--------------------------------------------------------------
Total fixed charges, as defined 25,092 21,038 18,807 18,099 17,135 16,303
Preferred dividends, as defined (a) 3,214 2,952 2,071 1,964 1,549 1,691
--------------------------------------------------------------
Combined fixed charges and preferred
dividends, as defined $28,306 $23,990 $20,878 $20,063 $18,684 $17,994
==============================================================
Earnings as defined:
Net Income $26,424 $47,709 $13,211 $34,386 $26,776 $7,606
Add:
Provision for income taxes:
Total 16,065 31,938 4,600 20,467 16,216 8,568
Fixed charges as above 25,092 21,038 18,807 18,099 17,135 16,303
--------------------------------------------------------------
Total earnings, as defined $67,581 $100,685 $36,618 $72,952 $60,127 $32,477
==============================================================
Ratio of earnings to fixed charges,
as defined 2.69 4.79 1.95 4.03 3.51 1.99
==============================================================
Ratio of earnings to combined fixed
charges and preferred dividends,
as defined 2.39 4.20 1.75 3.64 3.22 1.80
==============================================================
- ------------------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
requirement by one hundred percent (100%) minus the income tax rate.
(b) Earnings for the twelve months ended December 31, 1991 include the $90 million effect of the 1991 NOPSI
Settlement.
</TABLE>
<TABLE>
<CAPTION>
Exhibit 99(f)
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
December 31, September 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 204,541 190,938 176,504 151,512 143,720 128,736
Interest applicable to rentals 6,265 6,790 7,546 6,475 6,223 5,958
--------------------------------------------------------------------
Total fixed charges, as defined $210,806 $197,728 $184,050 $157,987 $149,943 $134,694
====================================================================
Earnings as defined:
Net Income $130,141 $93,927 $5,407 $93,039 $98,668 $99,894
Add:
Provision for income taxes:
Total 88,853 78,552 36,838 75,493 82,121 78,434
Fixed charges as above 210,806 197,728 184,050 157,987 149,943 134,694
--------------------------------------------------------------------
Total earnings, as defined $429,800 $370,207 $226,295 $326,519 $330,732 $313,022
====================================================================
Ratio of earnings to fixed charges, as defined 2.04 1.87 1.23 2.07 2.21 2.32
====================================================================
</TABLE>
