_________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-27031 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 840-2734
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
1600 Perdido Building
New Orleans, Louisiana 70112
Telephone (504) 670-3674
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_________________________________________________________________________
<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 July 31, 2000
Entergy Corporation ($0.01 par value) 222,903,941
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc. separately file this
combined Quarterly Report on Form 10-Q. Information contained herein
relating to any individual company is filed by such company on its own
behalf. Each company reports herein only as to itself and makes no other
representations whatsoever as to any other company. This combined
Quarterly Report on Form 10-Q supplements and updates the Annual Report
on Form 10-K for the calendar year ended December 31, 1999, and the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed
by the individual registrants with the SEC, and should be read in
conjunction therewith.
Forward Looking Information
The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: Investors are
cautioned that forward-looking statements contained herein with respect
to the revenues, earnings, performance, strategies, prospects and other
aspects of the business of Entergy Corporation, Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi,
Inc., Entergy New Orleans, Inc., System Energy Resources, Inc., and their
affiliated companies may involve risks and uncertainties. A number of
factors could cause actual results or outcomes to differ materially from
those indicated by such forward-looking statements. These factors
include, but are not limited to, risks and uncertainties relating to:
the effects of weather, the performance of generating units and
transmission systems, the possession of nuclear materials, fuel prices
and availability, the effects of regulatory decisions and changes in law,
litigation, capital spending requirements, the onset of competition,
advances in technology, changes in accounting standards, corporate
restructuring and changes in capital structure, consummation of the
business combination with FPL Group, Inc., movements in the markets
for electricity and other energy-related commodities, changes in interest
rates and in financial and foreign currency markets generally, changes in
corporate strategies, and other factors.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2000
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 3
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 8
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 14
Consolidated Statements of Income 21
Consolidated Statements of Cash Flows 22
Consolidated Balance Sheets 24
Consolidated Statements of Retained Earnings,
Comprehensive Income, and Paid-In Capital 26
Selected Operating Results 27
Entergy Arkansas, Inc.:
Results of Operations 28
Income Statements 31
Statements of Cash Flows 33
Balance Sheets 34
Selected Operating Results 36
Entergy Gulf States, Inc.:
Results of Operations 37
Income Statements 40
Statements of Cash Flows 41
Balance Sheets 42
Selected Operating Results 44
Entergy Louisiana, Inc.:
Results of Operations 45
Income Statements 47
Statements of Cash Flows 49
Balance Sheets 50
Selected Operating Results 52
Entergy Mississippi, Inc.:
Results of Operations 53
Income Statements 55
Statements of Cash Flows 57
Balance Sheets 58
Selected Operating Results 60
Entergy New Orleans, Inc.:
Results of Operations 61
Income Statements 63
Statements of Cash Flows 65
Balance Sheets 66
Selected Operating Results 68
System Energy Resources, Inc.:
Results of Operations 69
Income Statements 70
Statements of Cash Flows 71
Balance Sheets 72
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 74
Part II:
Item 1. Legal Proceedings 85
Item 4. Submission of Matters to a Vote of
Security Holders 86
Item 5. Other Information 87
Item 6. Exhibits and Reports on Form 8-K 88
Signature 90
<PAGE>
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
AFUDC Allowance for Funds Used During Construction
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam
Electric Generating Station (nuclear), owned
by Entergy Arkansas
APSC Arkansas Public Service Commission
Board Board of Directors of Entergy Corporation
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., an electric distribution
company serving Melbourne, Australia and
surrounding suburbs, which was acquired by
Entergy effective January 5, 1996, and was
sold by Entergy effective December 31, 1998
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
EWG Exempt wholesale generator under PUHCA
Entergy Entergy Corporation and its various direct
and indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc., an Arkansas
corporation
Entergy Corporation Entergy Corporation, a Delaware corporation
Entergy Gulf States Entergy Gulf States, Inc., a Texas
corporation (including wholly owned
subsidiaries - Varibus Corporation, GSG&T,
Inc., Prudential Oil & Gas, Inc., and
Southern Gulf Railway Company)
Entergy Louisiana Entergy Louisiana, Inc., a Louisiana
corporation
Entergy Mississippi Entergy Mississippi, Inc., a Mississippi
corporation
Entergy New Orleans Entergy New Orleans, Inc., a Louisiana
corporation
FERC Federal Energy Regulatory Commission
FUCO Exempt foreign utility company under PUHCA
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 1999 of Entergy,
Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy
FPL Group FPL Group, Inc., a Florida Corporation and
parent company of Florida Power & Light
Company
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear
Generation Plant
Independence Independence Steam Electric Station (coal),
owned 16% by Entergy Arkansas, 25% by
Entergy Mississippi, and 7% by Entergy Power
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy London Investments plc,
effective February 1, 1997, and was sold by
Entergy effective December 4, 1998
LPSC Louisiana Public Service Commission
Merger The business combination transaction
pursuant to which the outstanding shares of
FPL Group and the outstanding shares of
Entergy Corporation will be converted into
the right to receive 1.00 and 0.585 shares,
respectively, of a new company
Merger Agreement Agreement and Plan of Merger dated July 30,
2000 by and between FPL Group, Entergy
Corporation, WCB Holding Corporation, Ranger
Acquisition Corporation and Ring Acquisition
Corporation
MPSC Mississippi Public Service Commission
MW Megawatt(s)
<PAGE>
Abbreviation or Acronym Term
NRC Nuclear Regulatory Commission
Pilgrim Pilgrim Nuclear Station, 670 MW facility
located in Plymouth, Massachusetts purchased
in July 1999 from Boston Edison by Entergy's
non-utility nuclear power business
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935,
as amended
River Bend River Bend Nuclear Generation Plant
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., an Arkansas
corporation
UK The United Kingdom of Great Britain and
Northern Ireland
Unit Power Sales
Agreement Agreement, dated as of June 10, 1982, as
amended and approved by FERC, among Entergy
Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy, relating to the sale of capacity and
energy from System Energy's share of Grand
Gulf 1
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
White Bluff White Bluff Steam Electric Generating
Station, 57% owned by Entergy Arkansas
<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 for a
discussion of the increasing competitive pressures facing Entergy and
the electric utility industry, as well as market risks and other
significant issues affecting Entergy. Set forth below are recent
updates to the information contained therein.
Business Combination With FPL Group
On July 30, 2000, Entergy Corporation and FPL Group entered
into a Merger Agreement, providing for a business combination that
results in the creation of a new company. Each outstanding share
of FPL Group common stock will be converted into the right to receive
one share of the new company's common stock, and each outstanding
share of Entergy Corporation common stock will be converted into the
right to receive 0.585 of a share of the new company's common stock.
It is expected that FPL Group's shareholders will own approximately
57% of the common equity of the new company and Entergy's
shareholders will own approximately 43%. The initial board of
directors of the new company will consist of eight directors
designated by FPL Group and seven directors designated by Entergy.
The new company will be given a new name that will be agreed upon
between the Boards of Directors of FPL and Entergy prior to the
consummation of the Merger. The new company will maintain its
principal corporate offices and headquarters in Juno Beach, Florida,
and will maintain its utility headquarters in New Orleans, Louisiana.
The Merger Agreement generally allows Entergy to continue business
in the ordinary course consistent with past practice and contains
certain restrictions on Entergy's capital activities, including
restrictions on the issuance of securities, capital expenditures,
dispositions, incurrence or guarantee of indebtedness, and trading or
marketing of energy. Entergy generally will be permitted to take
actions pursuant to restructuring legislation in the domestic
utility companies' jurisdictions of operation and reorganize its
transmission business. Under certain circumstances, if the Merger
Agreement is terminated, a termination fee of $215 million may be
payable by one of the parties. Both the FPL Group and Entergy
Boards of Directors unanimously approved the Merger. The Merger is
conditioned, among other things, upon approvals of the shareholders
of FPL Group and Entergy and the receipt of required regulatory
approvals of various local, state, and federal regulatory agencies
and commissions, including the SEC and FERC. Entergy and FPL Group
will seek to consummate the Merger by late 2001.
Reference is made to Entergy's Form 8-K dated July 31, 2000,
which attached copies of the Merger Agreement and a joint press
release of Entergy and FPL Group announcing the execution of the
Merger Agreement, and Entergy's Form 8-K dated August 3, 2000, which
described the terms of the Merger Agreement and attached preliminary
pro-forma financial statements of the new company.
Domestic Transition to Competition
State Regulatory and Legislative Activity
Arkansas
In April 1999, the Arkansas legislature enacted a law providing
for competition in the electric utility industry through retail open
access on January 1, 2002. When retail open access is achieved, the
generation operations will become a competitive business, but
transmission and distribution operations will continue to be
regulated. The APSC may delay implementation of retail open access,
but not beyond June 30, 2003.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
The implementation of the Arkansas retail open access law
through rulemakings and company filings is ongoing. Rulemakings
associated with energy service provider licensing rules and affiliate
rules have been completed. In June 2000, the APSC declared that
billing would become a competitive service at the beginning of retail
open access. Entergy Arkansas filed a functional, but not corporate,
unbundling plan with the APSC on August 8, 2000.
The plan initially establishes separate business units for
distribution, generation, and a new retail energy service provider.
The plan contemplates the transfer of transmission assets to the
Transco discussed in the Form 10-K at "MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS." The
functional unbundling plan is tentative because the regulatory
requirements to implement the retail open access law have not been
finalized, and changes to the plan are possible.
Texas
In June 1999, the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open
access. The law provides for retail open access by most electric
utilities, including Entergy Gulf States, on January 1, 2002. When
retail open access is achieved, the generation business and a new
retail electricity provider function will become competitive
businesses, but transmission and distribution operations will
continue to be regulated. The new retail electricity provider
function will be the primary point of contact with customers for most
services beyond initiation of electric service and restoration of
service following outages.
In January 2000, as required by the Texas restructuring
legislation, Entergy Gulf States filed a business separation plan
with the PUCT, which was amended in June 2000. The plan provides
that, by January 2002, Entergy Gulf States will be divided into a
Texas distribution company, a Texas transmission company, a Texas
generation company, a Texas retail electricity provider, and a
Louisiana company that will encompass distribution, generation, and
transmission operations. In July 2000, the PUCT issued an interim
order to approve the amended business separation plan. The plan
provides that the Louisiana company would retain the liability for
all debt obligations of Entergy Gulf States and that the property of
the Texas companies would be released from the lien of Entergy Gulf
States' mortgage. Each of the Texas companies would assume a portion
of Entergy Gulf States' debt obligations, which assumptions would not
act to release the Louisiana company's obligations. Each of the
Texas companies would also grant a lien on properties in favor of the
Louisiana company to secure its obligations to the Louisiana company
in respect of the assumed obligations. In addition, under the plan
Entergy Gulf States will refinance or retire existing debt through
2004. Regulatory approvals from FERC, the SEC, and the LPSC will be
required before the business separation plan can be implemented.
Remaining business separation issues in Texas will be addressed in
the unbundled costs proceeding before the PUCT. The LPSC has opened
a docket to identify the changes in corporate structure of Entergy
Gulf States, and their potential impact on Louisiana retail
ratepayers, resulting from restructuring in Texas and Arkansas.
Entergy Gulf States filed testimony in that proceeding in August 2000
and hearings are scheduled in February 2001.
Pursuant to the Texas restructuring legislation, Entergy Gulf
States filed its separated business cost data and proposed
transmission, distribution, and competition tariffs with the PUCT on
March 31, 2000. This filing also included a proposal for a
performance-based enhancement to the authorized rate of return on
equity. Management does not agree with the arbitrary level of return
on equity set by PUCT rules (200 basis points over the cost of a
distribution utility's debt) and is seeking a higher return in its
separated cost filing. At a pre-hearing conference held in April
2000, a procedural schedule for the case was established, calling for
a hearing in January 2001. Management cannot predict the outcome of
this proceeding. In connection with unbundled cost filings made by
all Texas investor owned utilities, the PUCT has opened a "generic
docket" to determine issues that may be resolved on an industry-wide
basis, including incentive mechanisms to enhance the authorized rate
of return, before the individual utility hearings begin. See Note 2
to the financial statements for further information on this filing.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Mississippi
In May 2000, after two years of studies and hearings, the MPSC
announced that it was suspending its docket studying the opening of
the state's retail electricity markets to competition. The MPSC
based its decision on its finding that competition could raise the
electric rates paid by residential and small commercial customers.
The final decision ultimately lies with the Mississippi Legislature,
which has adjourned its 2000 session.
Federal Regulatory Activity
See "Part I, Item 1, Competition" in the Form 10-K for a
discussion of changes that may result from retail competition and
unbundling.
In April 2000, the LPSC and the Council filed a complaint with
FERC seeking revisions to the System Agreement that they allege are
necessary to accommodate the introduction of retail competition in
Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas
provide utility service, and to protect Entergy's Louisiana customers
from any adverse impact that may occur due to the introduction of
such retail competition in some jurisdictions but not others. The
LPSC and the Council request that FERC immediately institute a
proceeding to permit changes to be adopted prior to January 1, 2002,
and request, among other things, that FERC cap certain of the System
Agreement obligations of Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans and fix these companies' access to pool energy at
the average level existing for the three years prior to the date that
retail access is initiated in Texas and Arkansas. Alternatively, the
LPSC and the Council request that FERC require Entergy to provide
wholesale power contracts to these companies to satisfy their energy
requirements at costs no higher than would have been incurred if
retail competition were not implemented. The LPSC and the Council
request that the relief be made available for at least eight years
after implementation of retail competition or the withdrawal of
Entergy Arkansas and Entergy Gulf States from the System Agreement,
or until retail access is implemented in Louisiana and New Orleans.
In addition, among other things, the LPSC and the Council assert in
their complaint that:
o unless the requested relief is granted, the restructuring
legislation adopted in Texas and Arkansas, to the extent such
legislation requires, or has the effect of, altering the rights of
parties under the System Agreement, will result in violations of the
interstate commerce clause, the due process clause, and the
impairment of contracts clause in the U.S. Constitution; and
o the failure of the domestic utility companies to honor a right
of first refusal with respect to any sale of generating capacity and
associated energy under the System Agreement, and any attempt to
eliminate such right of first refusal from the System Agreement,
would violate the Federal Power Act and constitute a breach of the
System Agreement.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
In June 2000, Entergy's domestic utility companies filed
proposed amendments to the System Agreement with FERC to facilitate
the implementation of retail competition in Arkansas and Texas and to
provide for continued equalization of costs among the domestic
utilities in Louisiana and Mississippi. The amendments provide the
following:
o cessation of participation in all aspects of the System
Agreement, other than those related to transmission equalization, for
any jurisdictional division of a domestic utility operating in a
jurisdiction that initiates retail access;
o certain sections of the System Agreement will no longer apply to
the sales of generating capacity, whether through the sale of the
asset or the output thereof, by a domestic utility operating in a
jurisdiction that has established a date by which it will implement
retail access; and
o modification of the service schedule developed to track changes
in energy costs resulting from the Entergy-Gulf States Utilities
merger to include one final true-up of fuel costs upon cessation of
one company's participation in the System Agreement, which thereafter
will no longer be applicable for any purpose.
Entergy believes that the proceedings relating to the proposed
amendments serve as a response to the complaint by the LPSC and the
Council and anticipates that the proceedings would be consolidated.
In response to Entergy's proposal, the LPSC and the Council have
requested that FERC dismiss the proposed amendments and proceed with
the complaint proceedings. Several other parties have also
intervened in the proceeding. In the event that the proceedings
relating to the proposed amendments proceed, the LPSC and the Council
have asserted that the charges to the domestic utility companies
under the Unit Power Sales Agreement need to be reconsidered.
Entergy has requested an expedited hearing on the proposed amendments
and that FERC issue a final decision by October 1, 2001. A
procedural schedule has not been established. Neither the timing,
nor the ultimate outcome of these proceedings at FERC can be
predicted at this time.
For a discussion of FERC's August 2000 order in the System
Energy proposed rate increase proceeding, see Note 2 to the financial
statements.
State and Local Rate Regulation
The domestic utility companies' retail and wholesale rate
matters and other regulatory proceedings are discussed more
thoroughly in Note 2 to the financial statements in the Form 10-K.
In June 2000, the LPSC approved a settlement between Entergy
Gulf States and the LPSC staff to refund $83 million resolving refund
issues in Entergy Gulf States' second, third, fourth, and fifth post-
Merger earnings reviews filed with the LPSC relating to the period
January 1, 1994 through December 31, 1997. This refund, for which
adequate reserves have been made, will occur over a three-month
period beginning July 2000. In May 2000, Entergy Gulf States filed
its seventh required post-Merger earnings analysis with the LPSC.
This filing will be subject to review by the LPSC and may result in a
change in rates. Entergy Gulf States also is proposing that the
allowed return on common equity be increased to 11.60%. A schedule
for this proceeding has not yet been established by the LPSC.
In May 2000, the LPSC ordered Entergy Louisiana to refund an
additional $6.4 million based on its fourth annual performance-based
rate plan filed with the LPSC in April 1999 for the 1998 test year.
The refund, for which an adequate reserve has been established, was
effective April 2000. In May 2000, Entergy Louisiana submitted its
fifth annual performance-based rate plan filing for the 1999 test
year. The filing indicated that a $24.8 million base rate reduction
might be appropriate for implementation effective August 2000.
Entergy Louisiana is proposing to increase prospectively the allowed
return on common equity from 10.5% to 11.6%, which would reduce the
amount of any rate reduction. This filing will be subject to review
by the LPSC. A procedural schedule has not yet been established by
the LPSC in this proceeding.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Continued Application of SFAS 71 and Stranded Cost Exposure
See "Continued Application of SFAS 71 and Stranded Cost
Exposure" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a
discussion of the potential effects of discontinuation of SFAS 71 for
the generation portion of Entergy's business as well as Entergy's
exposure to stranded costs.
Because management believes that definitive outcomes have not
yet been determined regarding the transition to competition in any of
Entergy's jurisdictions, the regulated operations of the domestic
utility companies and System Energy continue to apply SFAS 71.
The restructuring laws enacted in Arkansas and Texas provide an
opportunity for the recovery of stranded costs following review and
approval by the APSC or the PUCT. Nearly all of Entergy's exposure
to stranded costs involves commitments that were approved by
regulators. The actual amount of costs and obligations that will be
identified as stranded will be determined in regulatory proceedings.
The outcome of the Texas and Arkansas stranded cost proceedings
cannot be predicted and will depend upon a number of variables,
including the timing of stranded cost determination, the values
attributable to certain strandable assets, and the assumptions
concerning future market prices for electricity.
In June 2000, Entergy Arkansas filed an application to continue
the stranded cost mitigation efforts agreed upon in the 1997
settlement agreement approved by the APSC. These mitigation efforts
include the funding of a transition cost account with excess earnings
to offset future stranded costs and the accelerated amortization of
Entergy Arkansas' share of the Grand Gulf purchased power obligation
under the Unit Power Sales Agreement. The filing included an updated
stranded cost estimate intended to support Entergy Arkansas'
recommendation that the mitigation efforts continue. The filing
presents an estimated range of stranded costs based upon the
comparison of possible generation asset market values to the
generation assets' book values and contractual obligations. The
range of possible generation asset market values used in the estimate
was determined using generation asset sales in other jurisdictions.
The estimated range of stranded costs in Arkansas set forth in the
filing is $254 million to $1.64 billion.
Entergy Gulf States included an estimate of its Texas stranded
costs in its March 31, 2000 separated costs filing with the PUCT.
Using the model established by the PUCT staff, Entergy Gulf States'
estimate of Texas stranded costs is $117.2 million. Entergy Gulf
States disagrees with certain of the assumptions and estimates
included in the PUCT model and believes that the model understates
actual stranded costs. The model offsets potential strandable costs
against mitigating factors, including the estimated fair value of
existing generation plants, to determine an estimated stranded cost
figure. The model, however, does not include estimated River Bend
decommissioning costs. The Texas cost filing is discussed more
thoroughly in Note 2 to the financial statements.
Market Risks Disclosure
In May 2000, to mitigate currency exchange rate risk, Entergy
entered into separate foreign currency forward contracts to hedge
the U.S. dollar equivalent amounts of its net equity investments to
be made in the Saltend and Damhead Creek projects located in the
United Kingdom. The forward contracts are in the notional amounts
of BPS48 million and BPS36.1 million for Saltend and Damhead Creek,
respectively. The forward contract for Saltend matured in July 2000
when the equity investment was made and locked in an average spot
rate of $1.48338 to BPS1. The forward contract for Damhead Creek
will mature in October 2000 and locks in an average spot rate of
$1.48424 to BPS1. The banks obligated on these forward contracts
are rated by Standard & Poor's at A-1 or above on their short-term
obligations.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operations
Net cash flow provided by (used in) operations for Entergy, the
domestic utility companies, and System Energy for the six months
ended June 30, 2000 and 1999 was as follows:
Six Months Ended Six Months Ended
Company June 30, 2000 June 30, 1999
(In Millions)
Entergy $737.8 $591.3
Entergy Arkansas $109.7 $121.0
Entergy Gulf States $105.6 $ 91.7
Entergy Louisiana $ 77.2 $154.7
Entergy Mississippi $(35.9) $ 55.5
Entergy New Orleans $ 16.9 $ 19.9
System Energy $325.1 $175.0
Entergy's consolidated cash flow from operations increased
primarily due to its competitive businesses providing $88.7 million
to consolidated operating cash flow compared with using $60.8 million
for the six months ended June 30, 2000 and 1999, respectively. The
increase is primarily due to:
o net income from operations of Pilgrim; and
o less cash used by the power marketing and trading business.
Pilgrim was purchased in July 1999 and provided positive operating
cash flow in the six months ended June 30, 2000 compared to no cash
flow in the six months ended June 30, 1999. The power marketing and
trading business had net income for the six months ended June 30,
2000 compared to a net loss in 1999, which caused this business to
provide operating cash flow in 2000 whereas it had used operating
cash flow in 1999.
The operating cash flows of the domestic utility companies and
System Energy were affected by the following money pool activity for
the six months ended June 30, 2000:
o System Energy's operating cash flow increased primarily due to
payments received from affiliated companies; and
o Entergy Louisiana and Entergy Mississippi used proceeds from
debt issuances in 2000 to pay off borrowings from the money pool and
create receivables from the money pool, resulting in an overall
decrease in their respective operating cash flows.
The money pool is an inter-company funding arrangement designed to
reduce the domestic utility companies' and System Energy's dependence
on external short-term borrowings. The money pool provides a means
by which, on a daily basis, the excess funds of Entergy Corporation,
the domestic utility companies, and System Energy may be used by the
domestic utilities or System Energy when they have short-term cash
requirements. See "Capital Resources" below for a discussion of the
limitations on these borrowings.
Operating cash flows for the domestic utility companies were
also affected by increased use of cash related to deferred fuel
costs.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Investing Activities
Net cash used in investing activities increased for the six
months ended June 30, 2000 due to increased construction expenditures
in 2000. The increased construction expenditures were primarily due
to:
o spending on customer service and reliability improvements by the
domestic utility companies;
o construction of the Saltend and Damhead Creek power plants by
Entergy's global power development business; and
o construction costs of turbines incurred by Entergy's global
power development business.
The maturity of other temporary investments combined with the
proceeds from the sale of the Freestone power project provided cash
from investing activities in 2000. These sources of cash, however,
were largely offset by the proceeds from the sales of Entergy
Security, Inc. in January 1999 and Entergy Power Edesur Holdings and
several telecommunications businesses in June 1999.
Financing Activities
Net cash provided by financing activities increased for the six
months ended June 30, 2000 primarily due to:
o the issuance of debt at Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and Entergy Mississippi;
o additional borrowings under the Entergy Corporation credit
facility in 2000 compared to repayments on that facility for the six
months ended June 30, 1999;
o increased borrowings under the credit facilities for the
construction of the Saltend and Damhead Creek power projects by
Entergy's global power development business; and
o a reduction in the retirement of long-term debt.
Partially offsetting the overall increase in cash provided was
the increased repurchase of Entergy Corporation common stock and the
redemption of Entergy Gulf States' preference stock in 2000.
Business Combination With FPL Group
Entergy Corporation and FPL Group entered into a Merger
Agreement on July 30, 2000. See "MANAGEMENT'S FINANCIAL DISCUSSION
AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" for a
description of the Merger. The Merger Agreement generally allows
Entergy to continue business in the ordinary course consistent with
past practice and contains certain restrictions on Entergy's
activities, including restrictions on the issuance of securities,
capital expenditures, dispositions, incurrence or guarantee of
indebtedness, and trading or marketing of energy. Entergy does not
believe that these covenants will constrain its capital investment
plan. Under certain circumstances, if the Merger Agreement is
terminated, a termination fee of $215 million may be payable by
one of the parties. In addition, under the terms of the Merger
Agreement, Entergy will use its commercially reasonable efforts to
purchase in open market transactions $430 million of shares of its
common stock prior to the closing of the Merger.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Entergy's sources of funds to meet its capital requirements
include:
o internally generated funds;
o cash on hand;
o debt or preferred stock issuances;
o bank financing under new or existing facilities;
o short-term borrowings; and
o sales of assets.
Entergy requires capital resources for:
o construction and other capital expenditures;
o debt and preferred stock maturities;
o common stock repurchases;
o capital investments;
o funding of subsidiaries; and
o dividend and interest payments.
Management provides more information on construction expenditures,
capital investments, and long-term debt and preferred stock
maturities in Notes 5, 6, 7, and 9 to the financial statements in the
Form 10-K.
Sources of Capital Resources
All of the domestic utility companies have issued debt in 2000,
including an issuance by Entergy New Orleans in July 2000. The net
proceeds of these issuances have been or will be used for general
corporate purposes, including capital expenditures, the retirement of
short-term indebtedness, and, in the case of Entergy Gulf States, the
mandatory redemption of preference stock. See Note 4 to the
financial statements for details regarding issuances of debt in 2000.
All debt and common and preferred stock issuances require prior
regulatory approval. Preferred stock and debt issuances are subject
to issuance tests set forth in corporate charters, bond indentures,
and other agreements. The domestic utility companies may also
establish special purpose trusts or limited partnerships as financing
subsidiaries for the purpose of issuing preferred securities.
The domestic utility companies and System Energy expect to
continue refinancing or redeeming higher cost debt and preferred
stock prior to maturity, to the extent market conditions and interest
and dividend rates are favorable.
Short-term borrowings by the domestic utility companies and
System Energy are limited to amounts authorized by the SEC. The
current SEC-authorized limit of $1.078 billion for these companies is
effective through November 30, 2001. Borrowings from the money pool
and external borrowings combined may not exceed the SEC-authorized
limit. As of June 30, 2000, only Entergy New Orleans had borrowings
outstanding from the money pool, in the amount of $2.8 million.
Other Entergy subsidiaries have SEC authorization to borrow from
Entergy Corporation through the money pool, or from external sources,
in an aggregate principal amount up to $265 million. These companies
had $117.6 million of outstanding borrowings from the money pool as
of June 30, 2000. Some of these borrowings are restricted as to use
and are collateralized by certain assets.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In May 2000, Entergy Corporation amended its 364-day bank credit
facility, increasing the capacity from $250 million to $500 million,
of which $435 million of borrowings were outstanding as of June 30,
2000. Proceeds from this credit facility were used for general
corporate purposes, for working capital needs, and to repay the $120
million 364-day term loan discussed in "MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the
Form 10-K.
Uses of Capital Resources
Entergy's global power development business is currently
constructing two combined-cycle gas turbine merchant power plants,
Saltend and Damhead Creek, in the UK. These projects are discussed
in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND
CAPITAL RESOURCES" in the Form 10-K. The financing of the
construction of these two power plants is discussed in Note 7 to the
financial statements in the Form 10-K. Saltend was originally
scheduled for commercial operations in January 2000, but is now
expected to be complete by the end of 2000. The engineering,
procurement, and construction contract with the construction
contractor and the turbine manufacturer provides for liquidated
damages for lost operating margin and incremental costs. For the six
months ended June 30, 2000, Entergy recorded liquidated damages for
lost operating margins of $32.9 million ($23 million net of tax).
In October 1999, Entergy's global power development business
obtained an option to acquire twenty-four GE7FA advanced technology
gas turbines, four steam turbines, and eight GE7EA advanced
technology gas turbines. The financing of these turbines is
discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K. In the sale of
the Freestone power project, Entergy sold the rights to acquire four
of the GE7FA turbines and two of the steam turbines.
In March 2000, Entergy's non-utility nuclear business signed an
agreement, subject to regulatory approvals, to purchase the New York
Power Authority's (NYPA) 825 MW James A. FitzPatrick nuclear power
plant located near Oswego, New York and NYPA's 980 MW Indian Point 3
nuclear power plant located in Westchester County, New York.
Management expects to close the acquisition during the fourth quarter
of 2000. Entergy will pay NYPA $50 million in cash at the closing of
the purchase, plus seven annual installments of approximately $108
million commencing one year from the date of the closing, and eight
annual installments of $20 million commencing eight years from the
date of the closing. Entergy currently projects that these
installments will be paid primarily from the proceeds of the sale of
power from the plants and that Entergy will provide an additional
$100 million of funding. Pursuant to the terms of the agreement with
NYPA, the installment payments due by Entergy to NYPA must be secured
by a letter of credit from an eligible financial institution. This
letter of credit may be secured, in whole or in part, by an Entergy
guarantee. Subject to certain conditions, Entergy's non-utility
nuclear business has agreed to pay NYPA up to $10 million annually
for up to 10 years, beginning on the second anniversary date of such
acquisition, if Entergy acquires ownership of the Indian Point 2
nuclear power plant located in Westchester County, New York. If
Entergy acquires the Nine Mile Point nuclear power plants (referred
to in the following paragraph), it will pay NYPA up to $2 million
annually for up to 10 years, commencing on the second anniversary
date of such acquisition. NYPA also will be paid $2.5 million
annually, for up to twenty years, by Entergy if the NRC grants an
extension of the current nuclear operating licenses for the plants.
These payments would commence on the first anniversary of the
expiration of the respective current licenses and would continue
during the extension period.
In December 1999, Entergy's non-utility nuclear business signed
an agreement with Rochester Gas and Electric Corporation (RG&E) to
lease and operate the Nine Mile Point 1 and 2 nuclear power plants,
totaling 1,754 MW, located in Scriba, New York. Nine Mile Point 1 is
owned by Niagara Mohawk Power Corporation (NiMo), and Nine Mile Point
2 is co-owned by RG&E, NiMo, New York State Electric & Gas
Corporation (NYSEG), Long Island Lighting Company doing business as
LIPA, and Central Hudson Gas & Electric Corporation. The lease and
operating agreement is subject to RG&E's acquisition of NiMo and
NYSEG's ownership interests in the plants under RG&E's right of first
refusal and is subject to approval by the New York Public Service
Commission (NYPSC). NiMo and NYSEG initiated a proceeding before the
NYPSC seeking authorization for the sale of their ownership interests
in Nine Mile Point 1 and 2 to a third party. Entergy intervened in
the proceedings, but on April 25, 2000, NiMo and NYSEG moved to
withdraw the request for authority to transfer their interests in the
Nine Mile plants on the grounds that there are multiple parties who
wish to acquire them. The NYPSC encouraged the owners of the Nine
Mile plants to determine the market
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
value of the plants through an open bid process, which will likely
take place during the fall of 2000. Entergy expects to participate
in the bidding to acquire the Nine Mile plants, or will seek a
contract to lease and operate them.
In May 2000, Entergy and Koch Industries, Inc. agreed to form a
new joint venture company to be called Entergy-Koch L.P. Entergy
will contribute to the venture its power marketing and trading
business in the United States and the United Kingdom as well as
approximately $350 million in cash. Of the $350 million, management
expects approximately $200 million will be funded with debt that is
non-recourse to Entergy Corporation, and approximately $150 million
will be provided by Entergy from available cash. Koch Industries,
Inc. will contribute to the venture its 10,000-mile Koch Gateway
Pipeline, gas storage facilities including the Bistineau storage
facility near Shreveport, Louisiana, and Koch Energy Trading, which
markets and trades electricity, gas, weather derivatives and other
energy-related commodities and services. The parties will have equal
ownership interests in Entergy-Koch L.P., which will be governed by
an eight-member board of directors. Entergy will have the right to
appoint four members of the board. The venture, which will require
prior approval from FERC and from the SEC under PUHCA, is expected to
become operational near the end of 2000.
In June 2000, Entergy announced a plan with The Shaw Group Inc.
to form a new joint venture to be called Entergy-Shaw. The joint
venture will provide management, engineering, procurement,
construction, and commissioning services for electric power plants.
Entergy-Shaw plans to operate in the rapidly growing electric power
generation market, including providing services for Entergy's power
development plans in North America and Europe. Entergy-Shaw is
developing a market-driven reference plant design that is expected to
reduce power plant capital costs significantly, while also reducing
construction, commissioning, and operating risks. Entergy and Shaw
will each own a 50% interest in the joint venture. Entergy does not
expect to make a material capital contribution to this joint venture.
Entergy's ability to invest in domestic and foreign generation
businesses is subject to the SEC's regulations under PUHCA. These
regulations limit the total amount that Entergy may invest in
domestic and foreign generation businesses to 50 percent of
consolidated retained earnings at the time an investment is made. In
June 2000, the SEC issued an order that allows Entergy's EWG and FUCO
investments to increase from 50% to 100% of Entergy's consolidated
retained earnings. Entergy's ability to issue guarantees to its non-
utility companies is currently limited by the SEC to a total of $750
million. Entergy currently has an application pending before the SEC
to increase this limit by $2 billion.
Under PUHCA, the SEC imposes a limit equal to 15% of
consolidated capitalization on the amount that may be invested in
"energy-related" businesses without specific SEC approval. Entergy
has made investments in energy-related businesses, including power
marketing and trading. Entergy's available capacity to make
additional investments at June 30, 2000 was approximately $1.8
billion. Management expects the available capacity to be partially
reduced by Entergy's anticipated investment in Entergy-Koch L.P.
In the six months ended June 30, 2000, Entergy Corporation paid
$139.6 million in cash dividends on its common stock and received
dividend payments totaling $338.8 million from subsidiaries.
Declarations of dividends on Entergy's common stock are made at the
discretion of the Board. The Board evaluates the level of dividends
based upon Entergy's earnings and financial strength. Dividend
restrictions are discussed in Note 8 to the financial statements in
the Form 10-K. Under the Merger Agreement Entergy can continue to
pay dividends at existing levels with increases permitted up to 5% of
the amount of the previous twelve-month period.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In October 1998, the Board approved a plan for the repurchase of
Entergy common stock through December 31, 2001 to fulfill the
requirements of various compensation and benefit plans. This stock
repurchase plan provides for purchases in the open market of up to 5
million shares for an aggregate consideration of up to $250 million.
In July 1999, the Board approved the commitment of up to an
additional $750 million for the repurchase of Entergy common stock
through December 31, 2001. Shares are purchased on a discretionary
basis. As of June 30, 2000, Entergy has repurchased 24.7 million
shares for an aggregate amount of $636.5 million under these
authorizations. As discussed previously, under the terms of the July
30, 2000 Merger Agreement between Entergy and FPL Group, Entergy will
use its commercially reasonable efforts to purchase in open market
transactions $430 million of shares of its common stock prior to the
close of the Merger.
Entergy issues shares under its Dividend Reinvestment and Stock
Purchase Plan and other compensation and benefit plans. See Note 3
to the financial statements for stock repurchases and issuances made
during the six months ended June 30, 2000.
See Notes 4, 5, 6, 7, 9, and 10 to the financial statements in
the Form 10-K for further discussion of Entergy's capital and
refinancing requirements and available lines of credit.
Entergy Corporation and System Energy
Pursuant to the Capital Funds Agreement, Entergy Corporation has
agreed to supply System Energy with sufficient capital to:
o maintain System Energy's equity capital at a minimum of 35% of
its total capitalization (excluding short-term debt);
o permit the continued commercial operation of Grand Gulf 1;
o pay in full all System Energy indebtedness for borrowed money
when due; and
o enable System Energy to make payments on specific System Energy
debt, under supplements to the agreement assigning System Energy's
rights in the agreement as security for the specific debt.
The Capital Funds Agreement and other Grand Gulf 1-related
agreements are more thoroughly discussed in Note 9 to the financial
statements in the Form 10-K.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's results of operations are discussed in two business
categories, "Domestic Utility Companies and System Energy" and
"Competitive Businesses". Domestic Utility Companies and System
Energy is Entergy's predominant business segment, contributing 79%
and 78% of Entergy's operating revenue for the three and six months
ended June 30, 2000, respectively, and 76% and 77% of its net income
for the three and six months ended June 30, 2000, respectively.
Competitive Businesses include the following segments discussed in
Note 6 to the financial statements: "Power Marketing and Trading"
and "All Other". "All other" principally includes global power
development, non-utility nuclear power, and the parent holding
company, Entergy Corporation. The elimination of power marketing and
trading mark-to-market profits on intercompany power transactions is
also included in "All Other".
Net Income
Entergy Corporation's consolidated net income increased for the
three and six months ended June 30, 2000 compared to the three and
six months ended June 30, 1999 primarily due to:
o overall increases of $12.1 million and $16.8 million in net
income for the three and six months ended June 30, 2000,
respectively, from the domestic utility companies and System Energy,
primarily due to a decrease in reserves recorded in 2000 for potential
rate actions and a decrease in interest and other charges at System
Energy. The overall increases in net income were partially offset by
increases in other operation and maintenance expenses at the domestic
utility companies and an increase in the effective income tax rate;
and
o increases in net income of $20.0 million and $25.4 million for
the three and six months ended June 30, 2000, respectively, from
competitive businesses, primarily resulting from the operation of
Pilgrim and liquidated damages received from the Saltend contractor
as compensation for lost operating margin from the Saltend plant due
to construction delays. The increases were partially offset by an
increase in the effective tax rate. Pilgrim did not generate any
revenues for Entergy in the six months ended June 30, 1999 because
Entergy did not acquire it until July 1999.
Consolidated net income also increased for the six months ended
June 30, 2000 due to an increase in net income of $29.3 million for
the power marketing and trading business primarily resulting from
improved trading results and higher summer 2000 forward electricity
prices affecting the mark-to-market valuation.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Domestic Utility Companies and System Energy
Revenues and Sales
The changes in electric operating revenues associated with the
domestic utility companies for the three and six months ended June
30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($52.5) ($76.3)
Rate riders (4.8) (10.6)
Fuel cost recovery 97.4 198.7
Sales volume/weather 6.9 24.9
Other revenue (including unbilled) (1.5) 16.9
Sales for resale 6.1 12.3
----- ------
Total $51.6 $165.9
===== ======
Base revenues
Base revenues decreased for the three and six months ended June
30, 2000 primarily due to the reversal of regulatory reserves
associated with the accelerated amortization of accounting order
deferrals in 1999 in conjunction with the Texas rate settlement at
Entergy Gulf States. The net income effect of this reversal was
largely offset by the amortization of rate deferrals in 1999
discussed below. Base revenues also decreased for the six months
ended June 30, 2000 due to provisions for potential rate refunds at
Entergy Louisiana.
The decrease was partially offset by reserves of $33 million
recorded in 1999 for actual and potential refunds to Louisiana and
Texas retail customers at Entergy Gulf States.
Rate riders
Rate rider revenues do not affect net income because they are
offset by specific incurred expenses.
Rate rider revenues decreased for the three and six months ended
June 30, 2000 as a result of the decreased ANO Decommissioning and
Grand Gulf 1 riders at Entergy Arkansas, both of which became
effective in January 2000.
Fuel cost recovery
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that is offset by specific incurred
fuel costs.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the three and six
months ended June 30, 2000 due to:
o an increased fuel factor implemented in September 1999 in Texas
for Entergy Gulf States;
o a fuel surcharge implemented in January 2000 in Texas for
Entergy Gulf States;
o an increase in the energy cost recovery rate that became
effective in April 2000 at Entergy Arkansas;
o higher fuel costs at Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans due to the increased market price of gas; and
o an increase in the energy cost recovery rate at Entergy
Mississippi that became effective in January 2000.
Sales volume/weather
Sales volume increased for the three and six months ended June
30, 2000 due to more favorable weather as well as increased usage by
industrial customers at Entergy Gulf States and Entergy Louisiana.
Other revenue (including unbilled)
Other revenue increased for the six months ended June 30, 2000
primarily due to increased unbilled revenue volume and the addition
of unbilled revenue for wholesale customers in Arkansas to the
unbilled balance, partially offset by the effect of a change in
estimate on unbilled revenues in the second quarter of 1999. The
changed estimate more closely aligned the fuel component of unbilled
revenues with regulatory treatment.
Sales for resale
Sales for resale increased for the three and six months ended
June 30, 2000 due to increased generation and subsequent sales from
River Bend in 2000 at Entergy Gulf States as a result of a refueling
outage in the second quarter of 1999.
Sales for resale also increased for the six months ended June
30, 2000 due to increased nuclear generation compared with 1999 at
Entergy Arkansas, coupled with an increase in the market price of
energy.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased $93.1 million and
$222.6 million for the three and six months ended June 30, 2000,
respectively, primarily due to:
o a shift from lower priced coal to higher priced gas and
purchased power at Entergy Arkansas due to scheduled maintenance
outages;
o an increase in the market prices of purchased power and gas in
2000;
o a shift to higher priced purchased power at Entergy Louisiana
due to a planned outage at Waterford 3 in June 2000 and reduced gas
generation; and
o increased nuclear fuel expense in the second quarter of 2000 due
to a scheduled outage at Entergy Gulf States in the second quarter of
1999.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel and purchased power expenses also increased for the six
months ended June 30, 2000 primarily due to an adjustment of Entergy
Gulf States' Texas jurisdiction deferred fuel balance as a result of
the fuel reconciliation settlement with the PUCT. The increase was
also due to a shift from lower priced coal to higher priced purchased
power and gas at Entergy Gulf States as a result of scheduled outages
in the first quarter of 2000. These increases were partially offset
by an adjustment that increased the deferred fuel balance at Entergy
Arkansas.
Other operation and maintenance
Other operation and maintenance expenses increased $38.0 million
and $20.4 million for the three and six months ended June 30, 2000,
respectively, primarily due to:
o maintenance and planned outages for Entergy Louisiana at
Waterford 3 and certain fossil plants;
o the capitalization of costs associated with return-to-service
generation projects in 1999 for Entergy Arkansas, Entergy Louisiana,
and Entergy New Orleans;
o increased environmental reserves at Entergy Louisiana; and
o an increase in customer service expenses, such as vegetation
management at Entergy Arkansas and Entergy Louisiana.
The increases were partially offset by the following at Entergy
Gulf States:
o decreased general plant maintenance in 2000; and
o decreased environmental and injuries and damages reserves in
2000.
Amortization of rate deferrals
Amortization of rate deferrals decreased $80 million for the
three and six months ended June 30, 2000 primarily due to the large
reduction in the rate deferral balance resulting from the PUCT's
approval in June 1999 of the Texas rate settlement at Entergy Gulf
States.
Other
Other income
Other income decreased $8.1 million and $6.6 million for the
three and six months ended June 30, 2000, respectively, due to the
reversal of the provision for abeyed River Bend plant costs at
Entergy Gulf States in 1999, which exceeded the write-down of the
plant, as the result of the June 1999 PUCT approval of the settlement
agreement.
Interest charges
Interest on long-term debt decreased $8.1 million for the six
months ended June 30, 2000 primarily due to the retirement and
refinancing of certain long-term debt at Entergy Gulf States, Entergy
Louisiana, and System Energy in 1999.
Other interest decreased $22.7 million and $15.7 million for the
three and six months ended June 30, 2000, respectively, due to an
adjustment in 1999 at System Energy to the interest recorded for the
potential refund to customers of its proposed rate increase pending
at FERC.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Competitive Businesses
Revenues and Sales
Competitive business revenues decreased approximately $229
million and $172 million for the three and six months ended June 30,
2000, respectively. The decrease was primarily due to a decrease in
revenue from the power marketing and trading business resulting from
decreased electricity and gas trading volumes.
Partially offsetting the decrease in 2000 was the increase in
revenues for the non-utility nuclear business. For the three and six
months ended June 30, 2000, the non-utility nuclear business had
increased revenues of $60 million and $120 million, respectively,
primarily from the operation of Pilgrim, which was purchased in July
1999.
Although revenues for the power marketing and trading business
decreased, the power marketing and trading business had an increase
in net income of $29.3 million for the six months ended June 30, 2000
due to:
o decreased purchased power expenses as discussed below;
o improved trading performance; and
o higher summer 2000 forward market electricity prices affecting
the mark-to-market valuation.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses decreased $289 million and
$320 million for the three and six months ended June 30, 2000,
respectively. The decrease is attributable to decreased electricity
and gas trading volumes in the power marketing and trading business.
The overall decrease was partially offset by an increase in fuel and
purchased power expenses related to the operation of Pilgrim.
Other operation and maintenance
Other operation and maintenance expenses increased $28 million
for the six months ended June 30, 2000. The increase is primarily
attributable to expenses incurred by the non-utility nuclear business
from the operation of Pilgrim.
Other
Other income
Other income increased $25 million and $17 million for the three
and six months ended June 30, 2000, respectively, due to the
following:
o liquidated damages of $32.9 million ($23.0 million net of tax)
received from the Saltend contractor as compensation for lost
operating margin from the plant due to construction delays;
o a $20.5 million ($13.3 million net of tax) gain on the sale in
June 2000 of the global power development business' investment in the
Freestone project located in Fairfield, Texas; and
o an increase in interest and dividend income in 2000.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Partially offsetting these increases were the following in 1999:
o a $26.7 million ($17 million net of tax) gain on the sale of
Entergy Power Edesur Holdings in June;
o a $12.9 million ($8 million net of tax) gain on sale of the
Entergy Hyperion Telecommunications in June;
o a $12.5 million ($.6 million net of tax) gain on the sale of
Entergy Security, Inc. in January; and
o a $7.6 million ($4.9 million net of tax) favorable adjustment to
the final sale price of CitiPower in January.
Interest charges
Other interest charges increased $10 million and $16 million for
the three and six months ended June 30, 2000, respectively, primarily
due to the accretion of the decommissioning liability associated with
Pilgrim and higher interest expense from increased borrowings on
Entergy Corporation's short-term credit facility.
Income Taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 37.9% and 29.2%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
39.6% and 31.8%, respectively. The increase was primarily due to the
recognition in 1999 of deferred tax benefits related to the expected
utilization of foreign tax credits resulting in lower income taxes.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $1,664,688 $1,613,136 $3,017,570 $2,851,719
Natural gas 28,396 22,149 74,292 59,880
Steam products - 7,254 - 15,550
Competitive businesses 444,704 673,865 857,418 1,029,177
-----------------------------------------------------
TOTAL 2,137,788 2,316,404 3,949,280 3,956,326
-----------------------------------------------------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 464,436 490,871 962,190 893,844
Purchased power 502,521 676,827 872,064 1,050,626
Nuclear refueling outage expenses 16,629 17,135 35,186 36,820
Other operation and maintenance 450,223 410,707 827,634 778,338
Decommissioning 6,169 10,758 17,106 23,432
Taxes other than income taxes 83,540 83,053 163,158 166,121
Depreciation and amortization 178,749 176,707 357,025 361,549
Other regulatory credits - net (5,900) (2,372) (20,506) (18,970)
Amortization of rate deferrals 7,883 88,767 15,279 97,180
-----------------------------------------------------
TOTAL 1,704,250 1,952,453 3,229,136 3,388,940
-----------------------------------------------------
OPERATING INCOME 433,538 363,951 720,144 567,386
-----------------------------------------------------
OTHER INCOME
Allowance for equity funds used during
construction 8,041 7,348 15,735 12,759
Gain on sale of assets 21,057 40,718 21,574 61,301
Miscellaneous - net 73,651 40,064 102,633 60,016
-----------------------------------------------------
TOTAL 102,749 88,130 139,942 134,076
-----------------------------------------------------
INTEREST AND OTHER CHARGES
Interest on long-term debt 118,462 120,164 232,121 242,695
Other interest - net 23,369 36,942 43,652 45,483
Distributions on preferred securities
of subsidiary 4,709 4,710 9,419 9,419
Allowance for borrowed funds used
during Construction (5,889) (5,926) (11,977) (10,405)
-----------------------------------------------------
TOTAL 140,651 155,890 273,215 287,192
-----------------------------------------------------
INCOME BEFORE INCOME TAXES 395,636 296,191 586,871 414,270
Income taxes 149,863 86,433 232,688 131,606
-----------------------------------------------------
CONSOLIDATED NET INCOME 245,773 209,758 354,183 282,664
Preferred dividend requirements and
other 8,581 9,981 18,131 20,706
-----------------------------------------------------
EARNINGS APPLICABLE TO
COMMON STOCK $237,192 $199,777 $336,052 $261,958
=====================================================
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Consolidated net income $354,183 $282,664
Noncash items included in net income:
Amortization of rate deferrals 15,279 97,180
Reserve for regulatory adjustments 37,113 13,344
Other regulatory credits - net (20,506) (18,970)
Depreciation, amortization, and
decommissioning 374,131 384,981
Deferred income taxes and investment tax
credits (25,070) (180,410)
Allowance for equity funds used during
construction (15,735) (12,759)
Gain on sale of assets - net (21,574) (61,301)
Changes in working capital:
Receivables (219,406) (427,677)
Fuel inventory (28,416) (36,600)
Accounts payable 185,462 353,302
Taxes accrued 131,612 262,406
Interest accrued 26,391 (35,306)
Deferred fuel (154,214) (18,029)
Other working capital accounts 59,295 (86,458)
Provision for estimated losses and reserves (28,396) (24,632)
Changes in other regulatory assets (32,028) (32,960)
Other 99,715 132,513
------------------------
Net cash flow provided by operating activities 737,836 591,288
------------------------
INVESTING ACTIVITIES
Construction/capital expenditures (822,584) (545,842)
Allowance for equity funds used during
construction 15,735 12,759
Nuclear fuel purchases (73,533) (92,196)
Proceeds from sale/leaseback of nuclear fuel 43,758 75,097
Proceeds from sale of businesses 61,519 351,082
Investment in other nonregulated/nonutility
properties (98,493) (14,406)
Proceeds from other temporary investments 298,251 -
Decommissioning trust contributions and
realized change in trust assets (26,732) (35,738)
Other 5,624 11,909
------------------------
Net cash flow used in investing activities (596,455) (237,335)
------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 925,889 617,220
Common stock 9,385 11,664
Retirement of long-term debt (103,970) (608,112)
Repurchase of common stock (392,591) (14,957)
Redemption of preferred and preference stock (152,493) (76,758)
Changes in short-term borrowings - net 315,000 (215,500)
Dividends paid:
Common stock (139,585) (144,059)
Preferred stock (16,715) (21,671)
-------------------------
Net cash flow provided by (used in)
financing activities 444,920 (452,173)
-------------------------
Effect of exchange rates on cash and cash
equivalents (2,946) (541)
-------------------------
Net increase (decrease) in cash and cash
equivalents 583,355 (98,761)
Cash and cash equivalents at beginning of
period 1,213,719 1,184,495
-------------------------
Cash and cash equivalents at end of period $1,797,074 $1,085,734
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $224,697 $319,456
Income taxes $94,478 $50,819
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $7,379 $24,544
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $156,068 $108,198
Temporary cash investments - at cost,
which approximates market 1,637,028 1,105,521
Special deposits 3,978 -
-------------------------
Total cash and cash equivalents 1,797,074 1,213,719
-------------------------
Other temporary investments - at cost,
which approximates market 23,100 321,351
Notes receivable 3,643 2,161
Accounts receivable:
Customer 299,948 290,331
Allowance for doubtful accounts (9,007) (9,507)
Other 354,719 207,898
Accrued unbilled revenues 375,983 298,616
-------------------------
Total receivables 1,021,643 787,338
-------------------------
Deferred fuel costs 394,875 240,661
Fuel inventory - at average cost 122,835 94,419
Materials and supplies - at average cost 358,217 392,403
Rate deferrals 24,265 30,394
Deferred nuclear refueling outage costs 33,708 58,119
Prepayments and other 101,796 78,567
-------------------------
TOTAL 3,881,156 3,219,132
-------------------------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 214 214
Decommissioning trust funds 1,284,301 1,246,023
Non-utility property - at cost (less accumulated
depreciation) 327,191 317,165
Non-regulated investments 264,442 198,003
Other - at cost (less accumulated depreciation)
22,145 16,714
-------------------------
TOTAL 1,898,293 1,778,119
-------------------------
UTILITY PLANT
Electric 23,421,808 23,163,161
Plant acquisition adjustment 398,797 406,929
Property under capital lease 771,466 768,500
Natural gas 190,000 186,041
Construction work in progress 1,960,517 1,500,617
Nuclear fuel under capital lease 262,996 286,476
Nuclear fuel 109,098 87,693
-------------------------
TOTAL UTILITY PLANT 27,114,682 26,399,417
Less - accumulated depreciation and amortization 11,248,370 10,898,661
-------------------------
UTILITY PLANT - NET 15,866,312 15,500,756
-------------------------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 7,430 16,581
SFAS 109 regulatory asset - net 1,031,503 1,068,006
Unamortized loss on reacquired debt 192,493 198,631
Other regulatory assets 706,401 637,870
Long-term receivables 30,970 32,260
Other 709,718 533,732
-------------------------
TOTAL 2,678,515 2,487,080
-------------------------
TOTAL ASSETS $24,324,276 $22,985,087
=========================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Currently maturing long-term debt $194,108 $194,555
Notes payable 435,716 120,715
Accounts payable 796,560 707,678
Customer deposits 164,986 161,909
Taxes accrued 580,593 445,677
Accumulated deferred income taxes 115,987 72,640
Nuclear refueling outage costs 2,329 11,216
Interest accrued 153,388 129,028
Co-owner advances 14,382 7,018
Obligations under capital leases 175,466 178,247
Other 173,865 125,749
-------------------------
TOTAL 2,807,380 2,154,432
-------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,224,430 3,310,340
Accumulated deferred investment tax credits 506,142 519,910
Obligations under capital leases 177,874 205,464
FERC settlement - refund obligation 34,143 37,337
Other regulatory liabilities 225,843 199,139
Decommissioning 725,858 703,453
Transition to competition 176,722 157,034
Regulatory reserves 415,420 378,307
Accumulated provisions 280,378 279,425
Other 818,711 535,156
-------------------------
TOTAL 6,585,521 6,325,565
-------------------------
Long-term debt 7,378,602 6,612,583
Preferred stock with sinking fund 69,650 69,650
Preference stock - 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holdingsolely junior subordinated deferrable
debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 335,961 338,455
Common stock, $.01 par value, authorized 500,000,000
shares; issued 247,172,239 shares in 2000 and
247,082,345 shares in 1999 2,472 2,471
Paid-in capital 4,636,407 4,636,163
Retained earnings 2,982,495 2,786,467
Accumulated other comprehensive income:
Cumulative foreign currency translation
adjustment (69,811) (68,782)
Net unrealized investment losses (6,275) (5,023)
Less - treasury stock, at cost (23,709,144
shares in 2000 and 8,045,434 shares in 1999) 613,126 231,894
-------------------------
TOTAL 7,268,123 7,457,857
-------------------------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,324,276 $22,985,087
=========================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended
2000 1999
(In Thousands)
<S> <C> <C> <C> <C>
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,814,499 $2,514,735
Add - Earnings applicable to common stock 237,192 $237,192 199,777 $199,777
Deduct:
Dividends declared on common stock 68,393 74,031
Capital stock and other expenses 803 108
---------- ----------
Total 69,196 74,139
---------- ----------
Retained Earnings - End of period $2,982,495 $2,640,373
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($79,447) ($46,360)
Foreign currency translation adjustments (322) (322) (1,337) (1,337)
Net unrealized investment gains 3,683 3,683 - -
---------- ---------
Balance at end of period ($76,086) ($47,697)
========== -------- ========= --------
Comprehensive Income $240,553 $198,440
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,636,474 $4,631,040
Other paid in capital (67) 1,486
---------- ----------
Paid-in Capital - End of period $4,636,407 $4,632,526
========== ==========
Six Months Ended
2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,786,467 $2,526,888
Add - Earnings applicable to common stock 336,052 $336,052 261,958 $261,958
Deduct:
Dividends declared on common stock 140,051 148,020
Capital stock and other expenses (27) 453
---------- ----------
Total 140,024 148,473
---------- ----------
Retained Earnings - End of period $2,982,495 $2,640,373
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($73,805) ($46,739)
Foreign currency translation adjustments (1,029) (1,029) (958) (958)
Net unrealized investment losses (1,252) (1,252) - -
---------- ----------
Balance at end of period ($76,086) ($47,697)
========== -------- ========== --------
Comprehensive Income $333,771 $261,000
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,636,163 $4,630,609
Other paid in capital 244 1,917
---------- ----------
Paid-in Capital - End of period $4,636,407 $4,632,526
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Domestic Electric Operating Revenues:
Residential $524.9 $497.8 $27.1 5
Commercial 387.7 358.8 28.9 8
Industrial 497.1 449.6 47.5 11
Governmental 41.3 38.4 2.9 8
-----------------------------------
Total retail 1,451.0 1,344.6 106.4 8
Sales for resale 92.9 86.8 6.1 7
Other 120.8 181.7 (60.9) (34)
-----------------------------------
Total $1,664.7 $1,613.1 $51.6 3
===================================
Billed Electric Energy
Sales (GWH):
Residential 6,857 6,850 7 -
Commercial 5,880 5,741 139 2
Industrial 11,021 10,827 194 2
Governmental 635 624 11 2
-----------------------------------
Total retail 24,393 24,042 351 1
Sales for resale 2,523 2,094 429 20
-----------------------------------
Total 26,916 26,136 780 3
===================================
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $993.1 $929.8 $63.3 7
Commercial 734.5 675.0 59.5 9
Industrial 950.5 856.2 94.3 11
Governmental 80.1 74.4 5.7 8
----------------------------------
Total retail 2,758.2 2,535.4 222.8 9
Sales for resale 176.2 163.9 12.3 8
Other 83.2 152.4 (69.2) (45)
-----------------------------------
Total $3,017.6 $2,851.7 $165.9 6
===================================
Billed Electric Energy
Sales (GWH):
Residential 13,369 13,267 102 1
Commercial 11,160 10,910 250 2
Industrial 21,638 21,043 595 3
Governmental 1,222 1,213 9 1
-----------------------------------
Total retail 47,389 46,433 956 2
Sales for resale 4,795 4,303 492 11
-----------------------------------
Total 52,184 50,736 1,448 3
===================================
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30,
2000 compared to the three and six months ended June 30, 1999
primarily due to increased electric operating revenues, partially
offset by an increase in other operation and maintenance expenses.
Revenues and Sales
The changes in electric operating revenues for the three months
and six months ended June 30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease Increase/(Decrease)
(In Millions)
Base revenues $1.7 $2.4
Rate riders (5.6) (12.0)
Fuel cost recovery 10.9 21.7
Sales volume/weather 1.7 3.0
Other revenue (including unbilled) 19.6 27.0
Sales for resale 32.3 53.4
----- -----
Total $60.6 $95.5
===== =====
Rate riders
Rate rider revenues do not affect net income because they are
offset by specific incurred expenses.
Rate rider revenues decreased for the three and six months ended
June 30, 2000 as a result of the decreased ANO Decommissioning and
Grand Gulf rate riders, both of which became effective in January
2000. The ANO Decommissioning rider allows Entergy Arkansas to
recover the decommissioning costs associated with ANO 1 and 2. The
Grand Gulf rate rider allows Entergy Arkansas to recover its share of
operating costs for Grand Gulf 1.
Fuel cost recovery
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that is offset by specific incurred
fuel costs.
Fuel cost recovery revenues increased for the three months ended
June 30, 2000 primarily due to an increase in the energy cost
recovery rider (ECR) in April 2000. The increase in the ECR allows
Entergy Arkansas to recover previously deferred fuel expenses.
Fuel cost recovery revenues increased for the six months ended
June 30, 2000 primarily due to the increase in the ECR in April 1999
affecting first quarter revenues and the increase in the ECR in April
2000 affecting second quarter revenues.
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other revenue (including unbilled)
Other revenue increased for the three and six months ended June
30, 2000 primarily due to increased unbilled revenue volume for
retail customers, the addition of unbilled revenue for wholesale
customers to the unbilled balance, and the effect of a change in
estimate on unbilled revenues in the second quarter of 1999. The
changed estimate more closely aligned the fuel component of unbilled
revenues with regulatory treatment.
Sales for resale
Sales for resale increased for the three and six months ended
June 30, 2000 primarily due to an increase in the market price of
electricity.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three and
six months ended June 30, 2000 primarily due to a shift to higher
priced gas generation from lower priced coal generation resulting
from planned maintenance outages at the White Bluff and Independence
coal plants as well as an increase in the market price of purchased
power and increased purchased power volume. Fuel and purchased power
expenses also increased for the six months ended June 30, 2000 due to
increased nuclear generation in 2000 due to a refueling outage at ANO
2 in the first quarter of 1999. The increased fuel and purchased
power expenses for the six months ended June 30, 2000 were partially
offset by an adjustment to the deferred fuel balance to reflect
deferred fuel costs that Entergy Arkansas expects to recover in the
future.
Other operation and maintenance
Other operation and maintenance expenses increased for the three
and six months ended June 30, 2000 primarily due to:
o capitalization of costs in June 1999 associated with return-to-
service projects for certain fossil plants;
o increased vegetation management costs; and
o increased expenses for outside services employed.
These increased expenses for the six months ended June 30, 2000 were
partially offset by a larger nuclear insurance refund in 2000
compared to 1999.
Decommissioning
Decommissioning expense decreased for the three and six months
ended June 30, 2000 primarily due to a true-up of the decommissioning
liability in June 2000 for previous over-accruals.
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory credits
Other regulatory credits increased for the three and six months
ended June 30, 2000 primarily due to an increased under-recovery of
Grand Gulf 1 costs as a result of the decreased rate rider that
became effective in January 2000 as ordered by the APSC. This
increase was partially offset by an adjustment to the transition cost
account as discussed in Note 2 to the financial statements.
Other
Income taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 38.5% and 32.4%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
39.6% and 29.3%, respectively. The increases in the effective tax
rates were due to increased pre-tax income for the three and six
months ended June 30, 2000 combined with decreased flow-through tax
benefits during those periods. These flow-through items include a
tax liability on nuclear fuel purchases for 2000 compared with a tax
credit on nuclear fuel purchases for 1999.
<PAGE>
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $447,823 $387,191 $794,700 $699,160
--------------------------------------------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 102,179 84,855 149,856 133,647
Purchased power 120,163 102,800 218,960 197,743
Nuclear refueling outage expenses 6,439 7,464 12,878 15,530
Other operation and maintenance 99,583 83,255 175,508 165,464
Decommissioning (2,741) 2,317 (713) 4,777
Taxes other than income taxes 8,979 9,259 17,695 18,516
Depreciation and amortization 41,695 40,929 82,996 82,598
Other regulatory credits - net (11,405) (3,900) (22,170) (11,487)
---------------------------------------------
TOTAL 364,892 326,979 635,010 606,788
---------------------------------------------
OPERATING INCOME 82,931 60,212 159,690 92,372
---------------------------------------------
OTHER INCOME
Allowance for equity funds used during
construction 3,842 3,434 7,420 5,845
Miscellaneous - net 695 (194) 2,239 742
--------------------------------------------
TOTAL 4,537 3,240 9,659 6,587
--------------------------------------------
INTEREST AND OTHER CHARGES
Interest on long-term debt 23,229 20,024 44,134 40,698
Other interest - net 2,111 1,565 4,408 3,090
Distributions on preferred securities
of subsidiary 1,275 1,275 2,550 2,550
Allowance for borrowed funds used
during construction (2,512) (2,221) (4,816) (3,878)
--------------------------------------------
TOTAL 24,103 20,643 46,276 42,460
--------------------------------------------
INCOME BEFORE INCOME TAXES 63,365 42,809 123,073 56,499
Income taxes 24,387 13,880 48,781 16,559
--------------------------------------------
NET INCOME 38,978 28,929 74,292 39,940
Preferred dividend requirements and other 1,944 2,403 3,888 4,824
--------------------------------------------
EARNINGS APPLICABLE TO
COMMON STOCK $37,034 $26,526 $70,404 $35,116
============================================
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $74,292 $39,940
Noncash items included in net income:
Other regulatory credits - net (22,170) (11,487)
Depreciation, amortization, and decommissioning 82,283 87,375
Deferred income taxes and investment tax
credits (7,228) (8,302)
Allowance for equity funds used during
construction (7,420) (5,845)
Loss on sale of assets - 2
Changes in working capital:
Receivables (54,442) (6,379)
Fuel inventory (4,858) (14,509)
Accounts payable (46,445) 3,009
Taxes accrued 47,006 12,283
Interest accrued 5,535 (927)
Deferred fuel costs 1,441 23,797
Other working capital accounts 28,184 8,018
Provision for estimated losses and reserves (2,577) (13,954)
Changes in other regulatory assets (17,793) (29,612)
Other 33,887 37,603
-----------------------
Net cash flow provided by operating activities 109,695 121,012
-----------------------
INVESTING ACTIVITIES
Construction expenditures (156,875) (122,428)
Allowance for equity funds used during
construction 7,420 5,845
Nuclear fuel purchases (148) (25,859)
Proceeds from sale/leaseback of nuclear fuel 148 25,859
Decommissioning trust contributions and realized
change in trust assets (5,670) (10,111)
-----------------------
Net cash flow used in investing activities (155,125) (126,694)
-----------------------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 99,487 -
Retirement of:
Long-term debt - (39,267)
Redemption of preferred stock - (2,027)
Dividends paid:
Common stock (5,600) (8,200)
Preferred stock (1,859) (4,873)
----------------------
Net cash flow provided by (used in) financing
activities 92,028 (54,367)
----------------------
Net increase (decrease) in cash and cash
equivalents 46,598 (60,049)
Cash and cash equivalents at beginning of period 6,862 93,105
----------------------
Cash and cash equivalents at end of period $53,460 $33,056
======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $43,037 $44,738
Income taxes ($883) $12,250
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $4,506 $13,289
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $6,233 $6,862
Temporary cash investments - at cost,
which approximates market 47,227 -
-----------------------
Total cash and cash equivalents 53,460 6,862
-----------------------
Accounts receivable:
Customer 70,257 73,357
Allowance for doubtful accounts (1,768) (1,768)
Associated companies 50,636 27,073
Other 18,770 5,583
Accrued unbilled revenues 74,392 53,600
-----------------------
Total receivables 212,287 157,845
-----------------------
Deferred fuel costs 40,179 41,620
Fuel inventory - at average cost 29,343 24,485
Materials and supplies - at average cost 79,144 85,612
Deferred nuclear refueling outage costs 15,408 28,119
Prepayments and other 8,426 6,480
-----------------------
TOTAL 438,247 351,023
-----------------------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 11,215 11,215
Decommissioning trust funds 354,187 344,011
Non-utility property - at cost (less accumulated depreciation) 1,461 1,463
Other - at cost (less accumulated depreciation) 3,034 3,033
-----------------------
TOTAL 369,897 359,722
-----------------------
UTILITY PLANT
Electric 4,912,483 4,854,433
Property under capital lease 43,480 44,471
Construction work in progress 363,311 267,091
Nuclear fuel under capital lease 79,405 85,725
Nuclear fuel 8,085 9,449
-----------------------
TOTAL UTILITY PLANT 5,406,764 5,261,169
Less - accumulated depreciation and amortization 2,480,896 2,401,021
-----------------------
UTILITY PLANT - NET 2,925,868 2,860,148
-----------------------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 185,987 192,344
Unamortized loss on reacquired debt 46,295 48,193
Other regulatory assets 131,109 106,959
Other 12,461 14,125
-----------------------
TOTAL 375,852 361,621
-----------------------
TOTAL ASSETS $4,109,864 $3,932,514
=======================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Currently maturing long-term debt $220 $220
Notes payable 667 667
Accounts payable
Associated companies 50,143 81,958
Other 88,330 102,959
Customer deposits 28,043 26,320
Taxes accrued 85,537 38,532
Accumulated deferred income taxes 42,138 38,649
Interest accrued 27,913 22,378
Co-owner advances 22,470 15,338
Obligations under capital leases 55,265 55,150
Other 15,724 11,598
-----------------------
TOTAL 416,450 393,769
-----------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 701,715 713,622
Accumulated deferred investment tax credits 90,822 94,852
Obligations under capital leases 67,620 75,045
Other regulatory liabilities 93,070 88,563
Transition to competition 116,982 109,933
Accumulated provisions 40,711 43,288
Other 51,099 51,080
-----------------------
TOTAL 1,162,019 1,176,383
-----------------------
Long-term debt 1,235,070 1,130,801
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 46,980,196 shares in 2000 and 1999 470 470
Paid-in capital 591,127 591,127
Retained earnings 528,378 463,614
-----------------------
TOTAL 1,236,325 1,171,561
-----------------------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,109,864 $3,932,514
=======================
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $112.4 $110.9 $1.5 1
Commercial 72.3 68.5 3.8 6
Industrial 83.9 80.6 3.3 4
Governmental 3.7 3.6 0.1 3
-----------------------------
Total retail 272.3 263.6 8.7 3
Sales for resale
Associated companies 93.4 60.9 32.5 53
Non-associated companies 49.1 49.3 (0.2) -
Other 33.0 13.4 19.6 146
-----------------------------
Total $447.8 $387.2 $60.6 16
=============================
Billed Electric Energy
Sales (GWH):
Residential 1,302 1,310 (8) (1)
Commercial 1,161 1,128 33 3
Industrial 1,714 1,694 20 1
Governmental 58 57 1 2
-----------------------------
Total retail 4,235 4,189 46 1
Sales for resale
Associated companies 2,584 2,734 (150) (5)
Non-associated companies 1,341 1,295 46 4
-----------------------------
Total 8,160 8,218 (58) (1)
=============================
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $230.1 $227.6 $2.5 1
Commercial 134.5 128.1 6.4 5
Industrial 157.5 151.4 6.1 4
Governmental 7.0 6.9 0.1 1
-----------------------------
Total retail 529.1 514.0 15.1 3
Sales for resale
Associated companies 138.1 90.3 47.8 53
Non-associated companies 91.4 85.8 5.6 7
Other 36.1 9.1 27.0 297
-----------------------------
Total $794.7 $699.2 $95.5 14
=============================
Billed Electric Energy
Sales (GWH):
Residential 2,852 2,865 (13) -
Commercial 2,237 2,187 50 2
Industrial 3,366 3,300 66 2
Governmental 112 112 - -
-----------------------------
Total retail 8,567 8,464 103 1
Sales for resale
Associated companies 4,265 4,270 (5) -
Non-associated companies 2,491 2,116 375 18
-----------------------------
Total 15,323 14,850 473 3
=============================
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30,
2000 compared to the three and six months ended June 30, 1999 due to
increased sales volume, decreased other operation and maintenance
expenses, decreased depreciation and amortization expenses, and
decreases in regulatory reserves.
The increase for the six months ended June 30, 2000 was
partially offset by an adjustment to the deferred fuel balance to
reflect regulatory actions in the first quarter of 2000.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and six
months ended June 30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($54.3) ($45.9)
Fuel cost recovery 65.5 116.6
Sales volume/weather 7.9 14.8
Other revenue (including unbilled) 6.8 5.0
Sales for resale 20.2 22.6
----- ------
Total $46.1 $113.1
===== ======
Base revenues
Base revenues decreased for the three and six months ended June
30, 2000 primarily due to the reversal of regulatory reserves
associated with the accelerated amortization of accounting order
deferrals in 1999 in conjunction with the Texas rate settlement, the
net income effect in 1999 of which was largely offset by the
amortization of rate deferrals discussed below.
These decreases were partially offset by reserves recorded in
1999 for actual and potential refunds to Louisiana and Texas retail
customers at Entergy Gulf States.
Fuel cost recovery
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that is offset by specific incurred
fuel costs.
Fuel cost recovery revenues increased for the three and six
months ended June 30, 2000 due to a higher fuel factor that became
effective in September 1999 and a fuel surcharge implemented in
January 2000 in the Texas jurisdiction. Fuel cost recovery revenues
also increased due to higher fuel and purchased power costs in the
Louisiana jurisdiction due to increased market prices.
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Sales volume increased for the three and six months ended June
30, 2000 due to more favorable weather as well as increased usage
primarily by industrial customers in both Louisiana and Texas.
Sales for resale
Sales for resale increased for the three and six months ended
June 30, 2000 primarily due to increased generation and subsequent
sales from River Bend in the second quarter of 2000 as a result of a
refueling outage in the second quarter of 1999.
Steam operating revenues
Steam operating revenues decreased for the three and six months
ended June 30, 2000 due to a new lease arrangement that began in June
1999 for the Louisiana Station generating facility. Under the terms
of this new lease, revenues and expenses are now classified as other
income rather than steam operating revenues and other operation and
maintenance expenses, respectively, which were the previous
classifications.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three and
six months ended June 30, 2000 due to:
o an adjustment of the Texas jurisdiction deferred fuel balance as
a result of the fuel reconciliation settlement with the PUCT;
o increased nuclear fuel expense in the second quarter of 2000 due
to a scheduled outage at River Bend in the second quarter of 1999;
and
o higher market prices for gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
and six months ended June 30, 2000 primarily due to:
o decreased maintenance of general plant in 2000;
o decreased requirements for environmental and injuries and
damages reserves in 2000; and
o lower salary expense.
Depreciation and amortization
Depreciation and amortization decreased for the three and six
months ended June 30, 2000 primarily due to reduced River Bend
depreciation expense as a result of the write-down of the River Bend
abeyed plant required by the Texas rate settlement in June 1999.
Amortization of rate deferrals
Amortization of rate deferrals decreased for the three and six
months ended June 30, 2000 primarily due to the large reduction in
the rate deferral balance upon the PUCT's approval in June 1999 of
the Texas rate settlement.
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income
Other income decreased for the three and six months ended June
30, 2000 due to the reversal of the provision for abeyed River Bend
plant costs in 1999, which exceeded the write-down of the plant as
the result of the June 1999 PUCT approval of the settlement
agreement.
Income taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 32.8% and 48.6%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
35.4% and 49.0%, respectively. The decreases in effective income tax
rates for the three and six months ended June 30, 2000 are primarily
due to tax adjustments in June 2000 for River Bend abeyed plant and
an increase in flow-through and permanent items.
<PAGE>
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $580,103 $534,022 $1,050,905 $937,828
Natural gas 6,283 5,267 18,697 16,984
Steam products - 7,254 - 15,550
---------------------------------------------
TOTAL 586,386 546,543 1,069,602 970,362
---------------------------------------------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 168,989 132,690 360,539 271,265
Purchased power 115,145 86,937 187,280 132,529
Nuclear refueling outage expenses 3,090 2,678 8,583 5,357
Other operation and maintenance 100,340 106,500 197,240 206,055
Decommissioning 1,568 1,510 3,136 4,790
Taxes other than income taxes 27,904 26,085 54,758 55,810
Depreciation and amortization 46,560 49,325 93,378 99,832
Other regulatory credits - net (3,645) (2,892) (11,790) (12,287)
Amortization of rate deferrals 1,402 82,124 2,804 84,393
---------------------------------------------
TOTAL 461,353 484,957 895,928 847,744
---------------------------------------------
OPERATING INCOME 125,033 61,586 173,674 122,618
---------------------------------------------
OTHER INCOME
Allowance for equity funds used during
construction 1,745 1,091 3,486 2,317
Gain on sale of assets 532 462 1,047 909
Miscellaneous - net (20) 5,957 3,410 6,554
--------------------------------------------
TOTAL 2,257 7,510 7,943 9,780
--------------------------------------------
INTEREST AND OTHER CHARGES
Interest on long-term debt 34,812 34,288 67,188 69,528
Other interest - net 1,705 888 3,110 1,572
Distributions on preferred securities of
subsidiary 1,859 1,859 3,719 3,719
Allowance for borrowed funds used during
construction (1,602) (1,026) (3,213) (2,135)
--------------------------------------------
TOTAL 36,774 36,009 70,804 72,684
--------------------------------------------
INCOME BEFORE INCOME TAXES 90,516 33,087 110,813 59,714
Income taxes 29,701 16,065 39,241 29,255
--------------------------------------------
NET INCOME 60,815 17,022 71,572 30,459
Preferred dividend requirements and other 3,175 4,115 7,319 8,666
--------------------------------------------
EARNINGS APPLICABLE TO
COMMON STOCK $57,640 $12,907 $64,253 $21,793
============================================
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $71,572 $30,459
Noncash items included in net income:
Amortization of rate deferrals 2,804 84,393
Reserve for regulatory adjustments (638) (53,479)
Other regulatory credits - net (11,790) (12,287)
Depreciation, amortization, and 96,514 104,622
decommissioning
Deferred income taxes and investment tax (12,174) 367
credits
Allowance for equity funds used during (3,486) (2,317)
construction
Gain on sale of assets (1,047) (909)
Changes in working capital:
Receivables (76,632) (32,098)
Fuel inventory (6,898) (13,939)
Accounts payable 25,972 (2,652)
Taxes accrued 19,347 26,997
Interest accrued 16,507 (754)
Deferred fuel costs (24,849) (10,501)
Other working capital accounts 5,945 (15,889)
Provision for estimated losses and reserves (3,075) 2,694
Changes in other regulatory assets (18,426) 13,228
Other 25,930 (26,190)
--------------------
Net cash flow provided by operating
activities 105,576 91,745
--------------------
INVESTING ACTIVITIES
Construction expenditures (138,464) (77,340)
Allowance for equity funds used during
construction 3,486 2,317
Nuclear fuel purchases (33,510) (37,930)
Proceeds from sale/leaseback of nuclear
fuel 13,797 37,930
Decommissioning trust contributions and
realized change in trust assets (5,489) (5,866)
--------------------
Net cash flow used in investing activities (160,180) (80,889)
--------------------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 299,086 21,775
Retirement of:
Long-term debt - (47,095)
Redemption of preferred and preference (152,493) (24,731)
stock
Dividends paid:
Common stock (14,200) -
Preferred stock (8,174) (8,758)
--------------------
Net cash flow provided by (used in) 124,219 (58,809)
financing activities --------------------
Net increase (decrease) in cash and cash
equivalents 69,615 (47,953)
Cash and cash equivalents at beginning of
period 32,312 115,736
--------------------
Cash and cash equivalents at end of period $101,927 $67,783
====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $54,877 $72,247
Income taxes $33,835 $10,934
Noncash investing and financing
activities:
Change in unrealized appreciation of
decommissioning trust assets $2,128 $9,658
See Notes to Financial Statements.
<PAGE>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $9,792 $8,607
Temporary cash investments - at cost,
which approximates market 92,135 23,705
-----------------------
Total cash and cash equivalents 101,927 32,312
-----------------------
Accounts receivable:
Customer 83,936 73,215
Allowance for doubtful accounts (1,828) (1,828)
Associated companies 13,352 1,706
Other 40,658 15,030
Accrued unbilled revenues 119,034 90,396
-----------------------
Total receivables 255,152 178,519
-----------------------
Deferred fuel costs 159,306 134,458
Fuel inventory - at average cost 45,170 38,271
Materials and supplies - at average cost 103,523 112,585
Rate deferrals 5,606 5,606
Prepayments and other 22,483 21,750
-----------------------
TOTAL 693,167 523,501
-----------------------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 242,294 234,677
Non-utility property - at cost (less
accumulated depreciation) 192,762 187,759
Other - at cost (less accumulated
depreciation) 14,672 13,681
-----------------------
TOTAL 449,728 436,117
-----------------------
UTILITY PLANT
Electric 7,444,157 7,365,407
Property under capital lease 42,847 46,210
Natural gas 54,163 52,473
Construction work in progress 190,003 145,492
Nuclear fuel under capital lease 53,416 70,801
Nuclear fuel 18,905 -
-----------------------
TOTAL UTILITY PLANT 7,803,491 7,680,383
Less - accumulated depreciation and
amortization 3,620,455 3,534,473
-----------------------
UTILITY PLANT - NET 4,183,036 4,145,910
-----------------------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 2,803 5,606
SFAS 109 regulatory asset - net 389,734 385,405
Unamortized loss on reacquired debt 39,694 40,576
Other regulatory assets 154,255 140,157
Long-term receivables 30,970 32,260
Other 16,181 23,490
-----------------------
TOTAL 633,637 627,494
-----------------------
TOTAL ASSETS $5,959,568 $5,733,022
=======================
See Notes to Financial Statements.
<PAGE>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies $53,446 $79,962
Other 166,932 114,444
Customer deposits 36,275 33,360
Taxes accrued 121,146 101,798
Accumulated deferred income taxes 41,455 27,960
Nuclear refueling outage costs 2,329 11,216
Interest accrued 45,077 28,570
Obligations under capital leases 50,611 51,973
Other 17,226 14,557
-----------------------
TOTAL 534,497 463,840
-----------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,082,644 1,098,882
Accumulated deferred investment tax credits 174,750 178,500
Obligations under capital leases 45,651 65,038
Other regulatory liabilities 19,185 20,089
Decommissioning 140,524 139,194
Transition to competition 59,741 47,101
Regulatory reserves 109,898 110,536
Accumulated provisions 66,320 69,395
Other 105,974 117,804
-----------------------
TOTAL 1,804,687 1,846,539
-----------------------
Long-term debt 1,931,698 1,631,581
Preferred stock with sinking fund 34,650 34,650
Preference stock - 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely junior subordinated deferrable
debentures 85,000 85,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 48,951 51,444
Common stock, no par value, authorized
200,000,000 shares; issued and outstanding
100 shares in 2000 and 1999 114,055 114,055
Paid-in capital 1,153,195 1,153,131
Retained earnings 252,835 202,782
-----------------------
TOTAL 1,569,036 1,521,412
-----------------------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,959,568 $5,733,022
=======================
See Notes to Financial Statements.
<PAGE>
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $159.1 $137.2 $21.9 16
Commercial 120.8 103.0 17.8 17
Industrial 208.2 170.4 37.8 22
Governmental 8.0 6.8 1.2 18
----------------------------
Total retail 496.1 417.4 78.7 19
Sales for resale
Associated companies 11.6 0.9 10.7 256
Non-associated companies 24.8 15.3 9.5 62
Other 47.6 100.4 (52.8) (53)
---------------------------
Total $580.1 $534.0 $46.1 9
===========================
Billed Electric Energy
Sales (GWH):
Residential 2,100 2,039 61 3
Commercial 1,864 1,784 80 4
Industrial 4,545 4,442 103 2
Governmental 109 102 7 7
---------------------------
Total retail 8,618 8,367 251 3
Sales for resale
Associated companies 44 17 27 159
Non-associated companies 974 428 546 128
---------------------------
Total 9,636 8,812 824 9
===========================
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $296.9 $253.4 $43.5 17
Commercial 229.1 194.5 34.6 18
Industrial 392.6 326.6 66.0 20
Governmental 15.8 13.3 2.5 19
-----------------------------
Total retail 934.4 787.8 146.6 19
Sales for resale
Associated companies 18.0 4.7 13.3 104
Non-associated companies 45.3 36.0 9.3 26
Other 53.2 109.3 (56.1) (51)
-----------------------------
Total $1,050.9 $937.8 $113.1 12
=============================
Billed Electric Energy
Sales (GWH):
Residential 3,934 3,842 92 2
Commercial 3,506 3,384 122 4
Industrial 8,915 8,556 359 4
Governmental 214 202 12 6
-----------------------------
Total retail 16,569 15,984 585 4
Sales for resale
Associated companies 231 170 61 36
Non-associated companies 1,773 1,413 360 25
-----------------------------
Total 18,573 17,567 1,006 6
=============================
<PAGE>
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
2000 compared to the three and six months ended June 30, 1999
primarily due to a decrease in unbilled revenues and an increase in
other operation and maintenance expenses. Net income also decreased
for the six months ended June 30, 2000 due to an increase in
provisions for potential rate refunds.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues $0.6 ($28.9)
Fuel cost recovery 4.9 26.3
Sales volume/weather (1.8) 6.8
Other revenue (including unbilled) (52.8) (57.0)
Sales for resale (8.4) (10.0)
------ ------
Total ($57.5) ($62.8)
====== ======
Base revenues
Base revenues decreased for the six months ended June 30, 2000
primarily due to accruals for potential rate refunds.
Fuel cost recovery
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that is offset by specific incurred
fuel costs.
Fuel cost recovery revenues increased for the three and six
months ended June 30, 2000 as a result of higher fuel and purchased
power expenses primarily due to the increased market price of natural
gas.
Sales volume/weather
Sales volume increased for the six months ended June 30, 2000
primarily due to increased usage by industrial customers, as well as
more favorable weather in the residential and commercial sectors.
Other revenue (including unbilled)
Other revenue decreased for the three and six months ended June
30, 2000 primarily due to the effect of a change in estimate on
unbilled revenues in the second quarter of 1999. The changed
estimate more closely aligned the fuel component of unbilled revenues
with regulatory treatment. The decrease was partially offset by more
favorable weather in the second quarter of 2000.
<PAGE>
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for resale
Sales for resale decreased for the three and six months ended
June 30, 2000 primarily due to a decrease in gas generation coupled
with increased sales to retail customers resulting in less
electricity available for resale.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses decreased for the three
months ended June 30, 2000 primarily due to an increased under-
recovery of fuel costs compared to 1999 due to higher fuel prices in
May and June 2000. These under-recoveries will be recovered in
future months at which time the effect of the increased prices will
be reflected in fuel expense.
Fuel and purchased power expenses increased for the six months
ended June 30, 2000 primarily due to a shift to higher priced
purchased power due to reduced gas and nuclear generation and higher
market prices for gas. The decrease in nuclear generation was due
to a planned maintenance outage at Waterford 3 in June 2000.
Other operation and maintenance
Other operation and maintenance expenses increased for the
three and six months ended June 30, 2000 primarily due to:
o capitalization of costs in 1999 associated with return-to-
service projects;
o maintenance and planned maintenance outages at Waterford 3 and
certain fossil plants;
o insurance settlement proceeds received in 1999;
o increased vegetation management costs; and
o increased environmental reserves.
Other
Interest charges
Interest on long-term debt decreased for the three and six
months ended June 30, 2000 primarily due to the refinancing and net
redemption of $77 million of long-term debt in 1999, partially offset
by the issuance of $150 million of long-term debt in May 2000.
Income taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 40.1% and 39.4%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
41.2% and 40.0%, respectively.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $448,067 $505,601 $794,888 $857,736
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 48,748 104,399 131,940 162,623
Purchased power 145,243 92,119 234,119 184,582
Nuclear refueling outage expenses 3,410 3,487 6,820 8,923
Other operation and maintenance 85,098 65,511 148,173 133,315
Decommissioning 2,606 2,197 5,211 4,393
Taxes other than income taxes 17,953 18,426 34,715 36,670
Depreciation and amortization 42,182 40,184 84,329 81,963
Other regulatory charges - net 240 - 480 -
-------- -------- -------- --------
TOTAL 345,480 326,323 645,787 612,469
-------- -------- -------- --------
OPERATING INCOME 102,587 179,278 149,101 245,267
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,196 1,732 1,879 2,493
Miscellaneous - net 435 621 543 579
-------- -------- -------- --------
TOTAL 1,631 2,353 2,422 3,072
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 23,779 26,691 47,942 53,744
Other interest - net 1,896 1,041 3,946 2,212
Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150
Allowance for borrowed funds used during construction (911) (1,716) (1,868) (2,367)
-------- -------- -------- --------
TOTAL 26,339 27,591 53,170 56,739
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 77,879 154,040 98,353 191,600
Income taxes 31,192 60,669 40,474 76,742
-------- -------- -------- --------
NET INCOME 46,687 93,371 57,879 114,858
Preferred dividend requirements and other 2,378 2,378 4,757 5,048
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $44,309 $90,993 $53,122 $109,810
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $57,879 $114,858
Noncash items included in net income:
Other regulatory charges - net 480 -
Depreciation, amortization, and decommissioning 89,540 86,356
Deferred income taxes and investment tax credits 15,191 8,042
Allowance for equity funds used during construction (1,879) (2,493)
Changes in working capital:
Receivables (12,108) (60,053)
Fuel inventory - (489)
Accounts payable (57,456) (16,718)
Taxes accrued 25,659 79,628
Interest accrued 10,250 (23,195)
Deferred fuel costs (80,801) (17,934)
Other working capital accounts 29,378 (11,062)
Provision for estimated losses and reserves 3,375 112
Changes in other regulatory assets 6,663 13,901
Other (8,977) (16,283)
-------- --------
Net cash flow provided by operating activities 77,194 154,670
-------- --------
INVESTING ACTIVITIES
Construction expenditures (90,488) (55,932)
Allowance for equity funds used during construction 1,879 2,493
Nuclear fuel purchases (29,806) (11,308)
Proceeds from sale/leaseback of nuclear fuel 29,806 11,308
Decommissioning trust contributions and realized
change in trust assets (4,030) (8,497)
-------- --------
Net cash flow used in investing activities (92,639) (61,936)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 149,003 188,226
Retirement of:
Long-term debt (100,000) (129,147)
Redemption of preferred stock - (50,000)
Dividends paid:
Common stock (6,200) (31,900)
Preferred stock (4,757) (5,632)
-------- --------
Net cash flow provided by (used in) financing activities 38,046 (28,453)
-------- --------
Net increase in cash and cash equivalents 22,601 64,281
Cash and cash equivalents at beginning of period 7,734 83,030
-------- --------
Cash and cash equivalents at end of period $30,335 $147,311
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $40,981 $79,593
Income taxes $17,572 $12,270
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $545 $2,389
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $8,940 $7,734
Temporary cash investments - at cost,
which approximates market 21,395 -
---------- ----------
Total cash and cash equivalents 30,335 7,734
---------- ----------
Notes receivable 1,503 3
Accounts receivable:
Customer 86,169 79,335
Allowance for doubtful accounts (1,615) (1,615)
Associated companies 8,775 14,601
Other 10,762 10,762
Accrued unbilled revenues 117,300 106,200
---------- ----------
Total receivables 221,391 209,283
---------- ----------
Deferred fuel costs 82,963 2,161
Accumulated deferred income taxes - 12,520
Materials and supplies - at average cost 77,595 84,027
Deferred nuclear refueling outage costs 4,139 11,336
Prepayments and other 11,953 6,011
---------- ----------
TOTAL 429,879 333,075
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 14,230 14,230
Decommissioning trust funds 105,518 100,943
Non-utility property - at cost (less accumulated depreciation) 21,800 21,433
---------- ----------
TOTAL 141,548 136,606
---------- ----------
UTILITY PLANT
Electric 5,226,394 5,178,808
Property under capital lease 236,272 236,271
Construction work in progress 146,868 108,106
Nuclear fuel under capital lease 66,945 51,930
---------- ----------
TOTAL UTILITY PLANT 5,676,479 5,575,115
Less - accumulated depreciation and amortization 2,377,723 2,294,394
---------- ----------
UTILITY PLANT - NET 3,298,756 3,280,721
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 219,846 230,899
Unamortized loss on reacquired debt 35,719 35,856
Other regulatory assets 54,582 50,191
Other 13,996 17,302
---------- ----------
TOTAL 324,143 334,248
---------- ----------
TOTAL ASSETS $4,194,326 $4,084,650
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Currently maturing long-term debt $35,088 $116,388
Accounts payable
Associated companies 55,786 137,869
Other 115,395 90,768
Customer deposits 57,539 61,096
Taxes accrued 51,522 25,863
Accumulated deferred income taxes 15,763 -
Interest accrued 30,486 20,236
Obligations under capital leases 28,387 28,387
Other 86,487 59,737
---------- ----------
TOTAL 476,453 540,344
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 772,345 792,290
Accumulated deferred investment tax credits 120,154 123,155
Obligations under capital leases 38,558 23,543
Other regulatory liabilities 15,966 15,421
Accumulated provisions 61,462 58,087
Other 34,116 34,564
---------- ----------
TOTAL 1,042,601 1,047,060
---------- ----------
Long-term debt 1,276,567 1,145,463
Preferred stock with sinking fund 35,000 35,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized 250,000,000
shares; issued and outstanding 165,173,180 shares in 2000
and 1999 1,088,900 1,088,900
Capital stock expense and other (2,171) (2,171)
Retained earnings 106,476 59,554
---------- ----------
TOTAL 1,293,705 1,246,783
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,194,326 $4,084,650
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $143.3 $145.2 ($1.9) (1)
Commercial 94.9 94.0 0.9 1
Industrial 160.8 156.3 4.5 3
Governmental 8.4 8.2 0.2 2
------ ------ ------
Total retail 407.4 403.7 3.7 1
Sales for resale
Associated companies 0.2 5.4 (5.2) (96)
Non-associated companies 10.0 13.2 (3.2) (24)
Other 30.5 83.3 (52.8) (63)
------ ------ ------
Total $448.1 $505.6 ($57.5) (11)
====== ====== ======
Billed Electric Energy
Sales (GWH):
Residential 1,939 1,971 (32) (2)
Commercial 1,296 1,287 9 1
Industrial 3,881 3,777 104 3
Governmental 117 115 2 2
------ ------ ------
Total retail 7,233 7,150 83 1
Sales for resale
Associated companies 3 142 (139) (98)
Non-associated companies 110 233 (123) (53)
------ ------ ------
Total 7,346 7,525 (179) (2)
====== ====== ======
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $262.3 $257.4 $4.9 2
Commercial 178.2 173.2 5.0 3
Industrial 313.5 294.6 18.9 6
Governmental 16.4 15.9 0.5 3
------ ------ ------
Total retail 770.4 741.1 29.3 4
Sales for resale
Associated companies 0.7 7.9 (7.2) (91)
Non-associated companies 21.5 24.3 (2.8) (12)
Other 2.3 84.4 (82.1) (97)
------ ------ ------
Total $794.9 $857.7 ($62.8) (7)
====== ====== ======
Billed Electric Energy
Sales (GWH):
Residential 3,672 3,661 11 -
Commercial 2,444 2,418 26 1
Industrial 7,642 7,403 239 3
Governmental 231 230 1 -
------ ------ ------
Total retail 13,989 13,712 277 2
Sales for resale
Associated companies 17 240 (223) (93)
Non-associated companies 313 477 (164) (34)
------ ------ ------
Total 14,319 14,429 (110) (1)
====== ====== ======
<PAGE>
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30,
2000 compared to the three and six months ended June 30, 1999
primarily due to an increase in unbilled revenues and other income,
partially offset by increased rate reductions and increased other
operation and maintenance expenses.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($0.6) ($3.9)
Grand Gulf rate rider 0.8 1.4
Fuel cost recovery 11.2 22.3
Sales volume/weather 0.1 1.2
Other revenue (including unbilled) 10.6 17.3
Sales for resale (1.1) (17.0)
----- -----
Total $21.0 $21.3
===== =====
Base revenues
Base revenues decreased for the six months ended June 30, 2000
primarily due to base rate reductions that became effective in May
1999 and May 2000.
Fuel cost recovery
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that is offset by specific incurred
fuel costs.
Fuel cost recovery revenues increased for the three and six
months ended June 30, 2000 primarily due to an increase in the energy
cost recovery rider effective January 2000.
Other revenue (including unbilled)
Other revenue increased for the three and six months ended June
30, 2000 primarily due to the effect of favorable weather in the
second quarter of 2000 and the effect of a change in estimate on
unbilled revenues in the second quarter of 1999. The changed
estimate more closely aligned the fuel component of unbilled revenues
with regulatory treatment.
Sales for resale
Sales for resale decreased for the six months ended June 30,
2000 primarily due to a decrease in sales to associated companies as
a result of decreased oil generation due to plant outages at Entergy
Mississippi in early 2000.
<PAGE>
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three months
ended June 30, 2000 primarily due to:
o a shift to higher priced gas generation and purchased power from
lower priced coal generation due to a planned outage at Independence
in May 2000;
o increased purchased power prices; and
o increased oil prices.
Other operation and maintenance
Other operation and maintenance expenses increased for the six
months ended June 30, 2000 primarily due to increased plant
maintenance and an increase in property insurance expense.
Other regulatory credits - net
Other regulatory credits decreased for the three and six months
ended June 30, 2000 primarily due to a decrease in the deferral of
Grand Gulf expenses.
Other
Other Income
The increase in other income for the six months ended June 30,
2000 is primarily due to an increase in AFUDC as a result of higher
construction expenditures and an increase in the interest income from
the deferral of Grand Gulf 1 expenses.
Income taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 35.8% and 35.1%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
33.9% and 33.7%, respectively.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $215,606 $194,637 $398,381 $377,080
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 31,043 37,341 75,330 96,775
Purchased power 95,038 79,804 171,866 148,269
Other operation and maintenance 43,082 41,795 78,705 72,913
Taxes other than income taxes 11,091 11,042 21,267 21,744
Depreciation and amortization 11,977 10,984 23,702 22,500
Other regulatory credits - net (5,409) (6,958) (14,487) (17,971)
-------- -------- -------- --------
TOTAL 186,822 174,008 356,383 344,230
-------- -------- -------- --------
OPERATING INCOME 28,784 20,629 41,998 32,850
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 613 225 1,250 368
Miscellaneous - net 2,380 1,872 4,411 3,490
-------- -------- -------- --------
TOTAL 2,993 2,097 5,661 3,858
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 10,561 9,800 20,014 19,022
Other interest - net 676 601 1,696 1,444
Allowance for borrowed funds used during construction (479) (341) (983) (696)
-------- -------- -------- --------
TOTAL 10,758 10,060 20,727 19,770
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 21,019 12,666 26,932 16,938
Income taxes 7,516 4,444 9,132 5,701
-------- -------- -------- --------
NET INCOME 13,503 8,222 17,800 11,237
Preferred dividend requirements and other 842 842 1,685 1,685
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $12,661 $7,380 $16,115 $9,552
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $17,800 $11,237
Noncash items included in net income:
Other regulatory credits - net (14,487) (17,971)
Depreciation and amortization 23,702 22,500
Deferred income taxes and investment tax credits 2,554 16,220
Allowance for equity funds used during construction (1,250) (368)
Changes in working capital:
Receivables (14,566) 20,306
Fuel inventory (885) (2,837)
Accounts payable (32,666) 21,636
Taxes accrued 8,947 149
Interest accrued 1,908 (3,108)
Deferred fuel costs (33,512) (1,341)
Other working capital accounts 2,557 5,988
Provision for estimated losses and reserves (591) 848
Changes in other regulatory assets (18,550) (34,867)
Other 23,127 17,079
-------- --------
Net cash flow provided by (used in) operating activities (35,912) 55,471
-------- --------
INVESTING ACTIVITIES
Construction expenditures (63,770) (34,622)
Allowance for equity funds used during construction 1,250 368
-------- --------
Net cash flow used in investing activities (62,520) (34,254)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 119,175 153,762
Retirement of:
Long-term debt - (133,277)
Dividends paid:
Common stock (5,800) (9,100)
Preferred stock (1,685) (1,685)
-------- --------
Net cash flow provided by financing activities 111,690 9,700
-------- --------
Net increase in cash and cash equivalents 13,258 30,917
Cash and cash equivalents at beginning of period 4,787 2,640
-------- --------
Cash and cash equivalents at end of period $18,045 $33,557
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $18,600 $22,648
Income taxes ($5,830) $23,711
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $5,112 $4,787
Temporary cash investments - at cost,
which approximates market 12,933 -
---------- ----------
Total cash and cash equivalents 18,045 4,787
---------- ----------
Accounts receivable:
Customer 35,241 35,675
Allowance for doubtful accounts (886) (886)
Associated companies 4,219 1,370
Other 3,942 2,391
Accrued unbilled revenues 39,200 28,600
---------- ----------
Total receivables 81,716 67,150
---------- ----------
Deferred fuel costs 81,451 47,939
Accumulated deferred income taxes 3,797 -
Fuel inventory - at average cost 4,659 3,774
Materials and supplies - at average cost 16,323 17,068
Prepayments and other 7,592 7,114
---------- ----------
TOTAL 213,583 147,832
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,915 6,965
---------- ----------
TOTAL 12,446 12,496
---------- ----------
UTILITY PLANT
Electric 1,818,497 1,763,636
Property under capital lease 338 384
Construction work in progress 73,524 66,789
---------- ----------
TOTAL UTILITY PLANT 1,892,359 1,830,809
Less - accumulated depreciation and amortization 729,340 709,543
---------- ----------
UTILITY PLANT - NET 1,163,019 1,121,266
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 24,408 24,051
Unamortized loss on reacquired debt 15,725 16,345
Other regulatory assets 150,436 132,243
Other 6,549 5,784
---------- ----------
TOTAL 197,118 178,423
---------- ----------
TOTAL ASSETS $1,586,166 $1,460,017
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable
Associated companies $41,431 $84,382
Other 42,755 32,470
Customer deposits 25,128 23,303
Taxes accrued 44,914 35,968
Accumulated deferred income taxes - 526
Interest accrued 11,946 10,038
Obligations under capital leases 98 95
Other 2,603 2,137
---------- ----------
TOTAL 168,875 188,919
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 307,007 298,477
Accumulated deferred investment tax credits 20,158 20,908
Obligations under capital leases 240 290
Accumulated provisions 6,783 7,374
Other 12,268 3,368
---------- ----------
TOTAL 346,456 330,417
---------- ----------
Long-term debt 584,305 464,466
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 50,381 50,381
Common stock, no par value, authorized 15,000,000
shares; issued and outstanding 8,666,357 shares in
2000 and 1999 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 236,882 226,567
---------- ----------
TOTAL 486,530 476,215
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,586,166 $1,460,017
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $73.4 $70.1 $3.3 5
Commercial 65.3 60.1 5.2 9
Industrial 39.3 36.7 2.6 7
Governmental 6.3 5.9 0.4 7
------ ------ -----
Total retail 184.3 172.8 11.5 7
Sales for resale
Associated companies 7.0 8.4 (1.4) (17)
Non-associated companies 6.9 6.6 0.3 5
Other 17.4 6.8 10.6 156
------ ------ -----
Total $215.6 $194.6 $21.0 11
====== ====== =====
Billed Electric Energy
Sales (GWH):
Residential 1,013 1,028 (15) (1)
Commercial 1,008 986 22 2
Industrial 786 787 (1) -
Governmental 89 88 1 1
------ ------ -----
Total retail 2,896 2,889 7 -
Sales for resale
Associated companies 82 188 (106) (56)
Non-associated companies 62 89 (27) (30)
------ ------ -----
Total 3,040 3,166 (126) (4)
====== ====== =====
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $139.5 $132.4 $7.1 5
Commercial 124.7 115.2 9.5 8
Industrial 76.7 72.8 3.9 5
Governmental 12.1 11.6 0.5 4
------ ------ -----
Total retail 353.0 332.0 21.0 6
Sales for resale
Associated companies 13.0 30.3 (17.3) (57)
Non-associated companies 13.7 13.4 0.3 2
Other 18.7 1.4 17.3 1,236
------ ------ -----
Total $398.4 $377.1 $21.3 6
====== ====== =====
Billed Electric Energy
Sales (GWH):
Residential 2,036 2,032 4 -
Commercial 1,926 1,875 51 3
Industrial 1,529 1,542 (13) (1)
Governmental 169 170 (1) (1)
------ ------ -----
Total retail 5,660 5,619 41 1
Sales for resale
Associated companies 207 1,165 (958) (82)
Non-associated companies 139 201 (62) (31)
------ ------ -----
Total 6,006 6,985 (979) (14)
====== ====== =====
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2000
compared to the three months ended June 30, 1999 primarily due to an
increase in other operation and maintenance expenses.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and six
months ended June 30, 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues $0.1 $-
Fuel cost recovery 4.9 11.8
Sales volume/weather (1.0) (0.9)
Other revenue (including unbilled) (2.9) (1.3)
Sales for resale 9.0 6.8
----- -----
Total $10.1 $16.4
===== =====
Fuel cost recovery revenues
Fuel cost recovery revenues do not affect net income because
they are an increase to revenues that are offset by specific incurred
fuel costs.
Fuel cost recovery revenues increased for the three and six
months ended June 30, 2000 due to the increased market price of
natural gas.
Sales for resale
Sales for resale increased for the three and six months ended
June 30, 2000 primarily due to reduced generation at affiliate plants
combined with an increase in the average price of electricity
supplied for resale.
Gas operating revenues
Gas operating revenues increased for the three and six months
ended June 30, 2000 primarily due to the increased market price of
natural gas.
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power
Fuel expenses increased for the three and six months ended June
30, 2000 primarily due to increased market prices for gas, along with
increased generation in the second quarter due to an outage at
Michoud Unit 3 in May 1999.
The increase in fuel expenses for the three months ended June
30, 2000 was partially offset by decreased deferred fuel expenses.
The increase in fuel expenses for the six months ended June 30,
2000 was partially offset by decreased purchased power volume due to
displacement by increased gas generation in 2000.
Other operation and maintenance
Other operation and maintenance expenses increased for the
three months ended June 30, 2000 primarily due to the capitalization
of costs in 1999 associated with return-to-service projects.
Other regulatory credits
Other regulatory credits decreased for the six months ended June
30, 2000 primarily due to an over-recovery of Grand Gulf 1 related
costs in 2000 compared to an under-recovery in 1999 and the
amortization of Y2K cost deferrals in 2000.
Other
Income taxes
For the three months ended June 30, 2000 and 1999, the effective
income tax rates were 43.0% and 39.6%, respectively. For the six
months ended June 30, 2000 and 1999, the effective income tax rates
were 45.0% and 41.1%, respectively.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $114,539 $104,404 $200,797 $184,446
Natural gas 22,112 16,882 55,595 42,897
-------- -------- -------- --------
TOTAL 136,651 121,286 256,392 227,343
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 40,231 20,140 82,032 51,076
Purchased power 38,784 41,464 73,895 77,916
Other operation and maintenance 22,806 17,293 39,657 40,272
Taxes other than income taxes 9,184 10,519 18,696 18,137
Depreciation and amortization 5,809 5,300 11,510 10,928
Other regulatory credits - net (1,732) (2,162) (3,333) (6,610)
Amortization of rate deferrals 6,482 6,643 12,476 12,786
-------- -------- -------- --------
TOTAL 121,564 99,197 234,933 204,505
-------- -------- -------- --------
OPERATING INCOME 15,087 22,089 21,459 22,838
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 270 217 595 423
Miscellaneous - net 819 559 1,417 972
-------- -------- -------- --------
TOTAL 1,089 776 2,012 1,395
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 3,319 3,319 6,638 6,638
Other interest - net 410 333 826 654
Allowance for borrowed funds used during construction (207) (156) (445) (311)
-------- -------- -------- --------
TOTAL 3,522 3,496 7,019 6,981
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 12,654 19,369 16,452 17,252
Income taxes 5,437 7,675 7,418 7,092
-------- -------- -------- --------
NET INCOME 7,217 11,694 9,034 10,160
Preferred dividend requirements and other 241 241 482 482
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $6,976 $11,453 $8,552 $9,678
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $9,034 $10,160
Noncash items included in net income:
Amortization of rate deferrals 12,476 12,786
Other regulatory credits - net (3,333) (6,610)
Depreciation and amortization 11,510 10,928
Deferred income taxes and investment tax credits 2,405 1,819
Allowance for equity funds used during (595) (423)
construction
Changes in working capital:
Receivables (2,623) (6,041)
Fuel inventory 1,920 1,229
Accounts payable 6,956 5,798
Taxes accrued 2,348 6,587
Interest accrued (417) (412)
Deferred fuel costs (16,493) (12,050)
Other working capital accounts (4,787) (718)
Provision for estimated losses and reserves (509) (1,568)
Changes in other regulatory assets (4,977) (7,499)
Other 3,983 5,956
-------- --------
Net cash flow provided by operating activities 16,898 19,942
-------- --------
INVESTING ACTIVITIES
Construction expenditures (17,463) (25,718)
Allowance for equity funds used during construction 595 423
-------- --------
Net cash flow used in investing activities (16,868) (25,295)
-------- --------
FINANCING ACTIVITIES
Dividends paid:
Preferred stock (241) (723)
-------- --------
Net cash flow used in financing activities (241) (723)
-------- --------
Net decrease in cash and cash equivalents (211) (6,076)
Cash and cash equivalents at beginning of period 4,454 17,153
-------- --------
Cash and cash equivalents at end of period $4,243 $11,077
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $7,702 $7,524
Income taxes ($2,386) ($4,644)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $4,243 $4,454
Accounts receivable:
Customer 24,254 28,658
Allowance for doubtful accounts (846) (846)
Associated companies 724 404
Other 6,694 6,225
Accrued unbilled revenues 26,057 19,820
-------- --------
Total receivables 56,883 54,261
-------- --------
Deferred fuel costs 30,976 14,483
Fuel inventory - at average cost 1,373 3,293
Materials and supplies - at average cost 9,613 10,127
Rate deferrals 18,659 24,788
Prepayments and other 8,634 2,528
-------- --------
TOTAL 130,381 113,934
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 551,596 541,525
Natural gas 135,838 133,568
Construction work in progress 33,741 29,780
-------- --------
TOTAL UTILITY PLANT 721,175 704,873
Less - accumulated depreciation and amortization 392,316 382,797
-------- --------
UTILITY PLANT - NET 328,859 322,076
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 4,627 10,974
Unamortized loss on reacquired debt 1,080 1,187
Other regulatory assets 38,016 33,039
Other 822 1,277
-------- --------
TOTAL 44,545 46,477
-------- --------
TOTAL ASSETS $507,044 $485,746
======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable
Associated companies $18,046 $24,350
Other 41,521 28,261
Customer deposits 18,001 17,830
Taxes accrued 2,777 429
Accumulated deferred income taxes 15,030 10,863
Interest accrued 4,538 4,956
Other 6,399 5,524
-------- --------
TOTAL 106,312 92,213
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 40,156 43,878
Accumulated deferred investment tax credits 6,122 6,378
SFAS 109 regulatory liability - net 10,140 7,528
Other regulatory liabilities 1,141 1,753
Accumulated provisions 8,328 8,836
Other 8,833 7,733
-------- --------
TOTAL 74,720 76,106
-------- --------
Long-term debt 169,116 169,083
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 19,780 19,780
Common stock, $4 par value, authorized 10,000,000
shares; issued 8,435,900 shares in 2000 and 1999 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings 67,078 58,526
-------- --------
TOTAL 156,896 148,344
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $507,044 $485,746
======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $36.7 $34.4 $2.3 7
Commercial 34.4 33.3 1.1 3
Industrial 5.1 5.5 (0.4) (7)
Governmental 14.8 13.8 1.0 7
------ ------ -----
Total retail 91.0 87.0 4.0 5
Sales for resale
Associated companies 10.9 1.6 9.3 581
Non-associated companies 2.2 2.5 (0.3) (12)
Other 10.4 13.3 (2.9) (22)
------ ------ -----
Total $114.5 $104.4 $10.1 10
====== ====== =====
Billed Electric Energy
Sales (GWH):
Residential 503 502 1 -
Commercial 550 556 (6) (1)
Industrial 95 127 (32) (25)
Governmental 264 263 1 -
------ ------ -----
Total retail 1,412 1,448 (36) (2)
Sales for resale
Associated companies 218 56 162 289
Non-associated companies 35 49 (14) (29)
------ ------ -----
Total 1,665 1,553 112 7
====== ====== =====
Six Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $64.2 $59.0 $5.2 9
Commercial 68.1 64.1 4.0 6
Industrial 10.1 10.7 (0.6) (6)
Governmental 28.9 26.6 2.3 9
------ ------ -----
Total retail 171.3 160.4 10.9 7
Sales for resale
Associated companies 13.6 6.7 6.9 103
Non-associated companies 4.4 4.5 (0.1) (2)
Other 11.5 12.8 (1.3) (10)
------ ------ -----
Total $200.8 $184.4 $16.4 9
====== ====== =====
Billed Electric Energy
Sales (GWH):
Residential 876 866 10 1
Commercial 1,047 1,046 1 -
Industrial 186 242 (56) (23)
Governmental 497 498 (1) -
------ ------ -----
Total retail 2,606 2,652 (46) (2)
Sales for resale
Associated companies 301 288 13 5
Non-associated companies 79 96 (17) (18)
------ ------ -----
Total 2,986 3,036 (50) (2)
====== ====== =====
<PAGE>
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2000
compared to the three months ended June 30, 1999 primarily due to an
increase in the effective tax rate.
Net income increased for the six months ended June 30, 2000
compared to the six months ended June 30, 1999 primarily due to
increased operating revenues and decreased interest charges,
partially offset by an increase in the effective tax rate.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt.
Operating revenues increased for the six months ended June 30, 2000
as compared to the same period in 1999 due to additional reserves
recorded in the first quarter of 1999 for the potential refund of
tariffs collected in System Energy's pending rate case before FERC.
System Energy's proposed rate increase, which is subject to refund,
and FERC's recent decision in the proceeding, is discussed in Note 2
to the financial statements.
Other
Interest charges
Interest on long-term debt decreased for the three and six
months ended June 30, 2000 as a result of the refinancing and
redemption of pollution control revenue bonds and the redemption of
first mortgage bonds in 1999.
Other interest decreased for the six months ended June 30, 2000
due to an adjustment in the first quarter of 1999 to record interest
on the potential refund of System Energy's proposed rate increase.
Income taxes
The effective income tax rates for the three months ended June
30, 2000 and 1999 were 48.9% and 31.1%, respectively. The effective
income tax rates for the six months ended June 30, 2000 and 1999 were
47.9% and 38.8%, respectively. The increase was primarily due to the
amortization of investment tax credits related to Grand Gulf Unit 2
affecting the 1999 tax rates.
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Ended Six Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Domestic electric $159,389 $159,505 $316,479 $300,122
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 10,858 12,157 21,540 20,793
Nuclear refueling outage expenses 3,690 3,505 6,904 7,011
Other operation and maintenance 23,059 22,547 38,332 40,992
Decommissioning 4,736 4,736 9,472 9,472
Taxes other than income taxes 6,225 6,767 12,168 13,518
Depreciation and amortization 27,875 27,559 55,931 56,419
Other regulatory charges - net 16,051 13,540 30,796 29,385
-------- -------- -------- --------
TOTAL 92,494 90,811 175,143 177,590
-------- -------- -------- --------
OPERATING INCOME 66,895 68,694 141,336 122,532
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 374 648 1,106 1,313
Miscellaneous - net 5,096 4,145 9,192 8,204
-------- -------- -------- --------
TOTAL 5,470 4,793 10,298 9,517
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 22,636 25,270 46,762 51,099
Other interest - net 7,298 5,891 14,141 32,642
Allowance for borrowed funds used
during construction (177) (466) (653) (1,017)
-------- -------- -------- --------
TOTAL 29,757 30,695 60,250 82,724
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 42,608 42,792 91,384 49,325
Income taxes 20,822 13,309 43,811 19,142
-------- -------- -------- --------
NET INCOME $21,786 $29,483 $47,573 $30,183
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $47,573 $30,183
Noncash items included in net income:
Reserve for regulatory adjustments 37,751 82,492
Other regulatory charges - net 30,796 29,385
Depreciation, amortization, and decommissioning 65,403 65,891
Deferred income taxes and investment tax credits (39,621) (62,462)
Allowance for equity funds used during construction (1,106) (1,313)
Changes in working capital:
Receivables 186,754 (59,956)
Accounts payable (14,193) 25,103
Taxes accrued 2,751 45,944
Interest accrued (9,375) (7,686)
Other working capital accounts 12,218 3,149
Provision for estimated losses and reserves (106) (228)
Changes in other regulatory assets 19,298 11,889
Other (13,084) 12,630
-------- --------
Net cash flow provided by operating activities 325,059 175,021
-------- --------
INVESTING ACTIVITIES
Construction expenditures (24,557) (11,200)
Allowance for equity funds used during construction 1,106 1,313
Decommissioning trust contributions and realized
change in trust assets (11,544) (11,264)
-------- --------
Net cash flow used in investing activities (34,995) (21,151)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt - 101,862
Retirement of:
Long-term debt (2,947) (182,884)
Dividends paid:
Common stock (47,000) (32,500)
-------- --------
Net cash flow used in financing activities (49,947) (113,522)
-------- --------
Net increase in cash and cash equivalents 240,117 40,348
Cash and cash equivalents at beginning of period 35,152 236,841
-------- --------
Cash and cash equivalents at end of period $275,269 $277,189
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $54,870 $70,231
Income taxes $37,045 $19,744
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets $199 ($792)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents:
Cash $39 $136
Temporary cash investments - at cost,
which approximates market 275,230 35,016
---------- ----------
Total cash and cash equivalents 275,269 35,152
---------- ----------
Accounts receivable:
Associated companies 113,845 301,287
Other 1,358 670
---------- ----------
Total receivables 115,203 301,957
---------- ----------
Materials and supplies - at average cost 50,541 61,264
Deferred nuclear refueling outage costs 14,161 18,665
Prepayments and other 5,114 2,251
---------- ----------
TOTAL 460,288 419,289
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 147,127 135,384
---------- ----------
UTILITY PLANT
Electric 3,062,317 3,060,324
Property under capital lease 444,850 434,993
Construction work in progress 71,196 58,510
Nuclear fuel under capital lease 63,231 78,020
---------- ----------
TOTAL UTILITY PLANT 3,641,594 3,631,847
Less - accumulated depreciation and amortization 1,371,577 1,312,559
---------- ----------
UTILITY PLANT - NET 2,270,017 2,319,288
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 221,668 242,834
Unamortized loss on reacquired debt 53,980 56,474
Other regulatory assets 187,779 185,910
Other 9,351 9,869
---------- ----------
TOTAL 472,778 495,087
---------- ----------
TOTAL ASSETS $3,350,210 $3,369,048
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Currently maturing long-term debt $91,800 $77,947
Accounts payable
Associated companies 1,372 15,237
Other 18,142 18,470
Taxes accrued 58,134 55,383
Accumulated deferred income taxes 5,378 7,162
Interest accrued 30,624 40,000
Obligations under capital leases 38,421 38,421
Other 1,505 1,651
---------- ----------
TOTAL 245,376 254,271
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 435,323 481,945
Accumulated deferred investment tax credits 91,254 93,219
Obligations under capital leases 24,809 39,599
FERC settlement - refund obligation 34,143 37,337
Other regulatory liabilities 96,481 73,313
Decommissioning 141,048 129,503
Regulatory reserves 305,521 267,771
Accumulated provisions 1,910 2,016
Other 16,475 16,014
---------- ----------
TOTAL 1,146,964 1,140,717
---------- ----------
Long-term debt 1,065,817 1,082,579
SHAREHOLDERS' EQUITY
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 789,350 shares in 2000
and 1999 789,350 789,350
Retained earnings 102,703 102,131
---------- ----------
TOTAL 892,053 891,481
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,350,210 $3,369,048
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures
(excluding nuclear fuel), long-term debt and preferred stock
maturities, and cash sinking fund requirements.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries
in the Entergy London and CitiPower sales transactions.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear
fuel, other high-level radioactive waste, and decommissioning costs
associated with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1,
and Pilgrim.
ANO Matters (Entergy Corporation and Entergy Arkansas)
See Note 9 to the financial statements in the Form 10-K for
information on cracks in a number of steam generator tubes at ANO 2
that were discovered and repaired during an outage in March 1992, and
the replacement of the steam generators scheduled for September 2000.
On July 21, 2000, ANO 2 went offline to conduct additional
inspections on the steam generator tubes as requested by the NRC.
Management expects that ANO 2 will go back online in mid-August 2000.
Environmental Issues
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially
responsible party (PRP) for the cleanup of certain hazardous waste
disposal sites. Entergy Gulf States is in periodic negotiations with
the U.S. Environmental Protection Agency and state authorities
regarding the cleanup of certain of these sites. As of June 30,
2000, a remaining recorded liability of approximately $17.7 million
existed related to the cleanup of the remaining sites at which
Entergy Gulf States has been designated a PRP. See "Environmental
Regulation" in Item 1 of Part I of the Form 10-K for additional
discussion of Entergy Gulf States' environmental clean-up activity
and related litigation.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the Louisiana Department of Environmental Quality
(LDEQ) issued new rules for solid waste regulation, including
regulation of wastewater impoundments. Entergy Louisiana and Entergy
New Orleans have determined that certain of their power plant
wastewater impoundments were affected by these regulations and chose
to upgrade or close them. Completion of this work is awaiting LDEQ
approval. LDEQ has issued notices of deficiencies for certain of
these sites. Additional notices of deficiencies are expected in the
third quarter of 2000. Recorded liabilities in the amounts of
$5.8 million and $0.5 million existed at June 30, 2000 for wastewater
upgrades and closures for Entergy Louisiana and Entergy New Orleans,
respectively. Management of Entergy Louisiana and Entergy New
Orleans believe these reserves are adequate based on current
estimates.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the
City of New Orleans pursuant to franchise ordinances. These
ordinances contain a continuing option for the City to purchase
Entergy New Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
separate but substantially identical transactions for the sale and
leaseback of undivided interests (aggregating approximately 9.3%) in
Waterford 3, which were refinanced in 1997. Entergy Louisiana is
obligated under certain circumstances to pay amounts sufficient to
permit the Owner Participants to withdraw from these lease
transactions. Additionally, Entergy Louisiana may be required to
assume the outstanding bonds issued by the Owner Trustee under these
leases to finance, in part, its acquisition of the undivided
interests in Waterford 3. See Note 10 to the financial statements in
the Form 10-K for further information.
Employment Litigation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans are defendants in numerous
lawsuits filed by former employees asserting that they were
wrongfully terminated and/or discriminated against on the basis of
age, race, and/or sex. The defendant companies are vigorously
defending these suits and deny any liability to the plaintiffs.
However, no assurance can be given as to the outcome of these cases.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement,
System Energy has agreed to a number of covenants relating to the
maintenance of certain capitalization and fixed charge coverage
ratios. System Energy agreed, during the term of the agreement, to
maintain its equity at not less than 33% of its adjusted
capitalization (defined in the agreement to include certain amounts
not included in capitalization for financial statement purposes). In
addition, System Energy must maintain, with respect to each fiscal
quarter during the term of the agreement, a ratio of adjusted net
income to interest expense (calculated, in each case, as specified in
the agreement) of at least 1.60 times earnings. System Energy was in
compliance with the above covenants at June 30, 2000. See Note 9 to
the financial statements in the Form 10-K for further information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In addition to those proceedings discussed elsewhere herein and
in the Form 10-K, Entergy and the domestic utility companies are
involved in a number of other legal proceedings and claims in the
ordinary course of their businesses. While management is unable to
predict the outcome of these other legal proceedings and claims, it
is not expected that their ultimate resolution individually or
collectively will have a material adverse effect on the results of
operations, cash flows, or financial condition of these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring
Previous developments and information related to electric
industry restructuring are presented in Note 2 to the financial
statements in the Form 10-K.
Arkansas
(Entergy Corporation and Entergy Arkansas)
As discussed in Note 2 to the financial statements in the Form
10-K, in April 1999 the Arkansas legislature enacted a law providing
for competition in the electric utility industry through retail open
access on January 1, 2002. When retail open access is achieved, the
generation operations will become a competitive business, but
transmission and distribution operations will continue to be
regulated. The APSC may delay implementation of retail open access,
but not beyond June 30, 2003.
The implementation of the Arkansas retail open access law
through rulemakings and company filings is ongoing. Rulemakings
associated with energy service provider licensing rules and affiliate
rules have been completed. In June 2000, the APSC declared that
billing would become a competitive service at the beginning of retail
open access. Entergy Arkansas filed a functional, but not corporate,
unbundling plan with the APSC on August 8, 2000. The plan initially
establishes separate business units for distribution, generation, and
a new retail energy service provider. The plan contemplates the
transfer of transmission assets to the Transco discussed in the Form
10-K in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS." The functional unbundling plan is
tentative because the regulatory requirements to implement the retail
open access law have not been finalized, and changes to the details
of the plan are likely.
In June 2000, Entergy Arkansas filed an application to continue
the stranded cost mitigation efforts agreed upon in the 1997
settlement agreement approved by the APSC. These mitigation efforts
include the funding of a transition cost account with excess earnings
to offset future stranded costs and the accelerated amortization of
Entergy Arkansas' share of the Grand Gulf purchased power obligation
under the Unit Power Sales Agreement. The filing included an updated
stranded cost estimate intended to support Entergy Arkansas'
recommendation that the mitigation efforts continue. The filing
presents an estimated range of stranded costs based upon the
comparison of possible generation asset market values to the
generation assets' book values and contractual obligations. The
range of possible generation asset market values used in the estimate
was determined using generation asset sales in other jurisdictions.
The estimated range of stranded costs in Arkansas set forth in the
filing is $254 million to $1.64 billion.
Texas
(Entergy Corporation and Entergy Gulf States)
As discussed in Note 2 to the financial statements in the Form
10-K, in June 1999 the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open
access. The law provides for retail open access by most electric
utilities, including Entergy Gulf States, on January 1, 2002. When
retail open access is achieved, the generation business and a new
retail electricity provider function will become competitive
businesses, but transmission and distribution operations will
continue to be regulated. The new retail provider function will be
the primary point of contact with the customers for most services
beyond initiation of electric service and restoration of service
following outages.
In January 2000, as required by the Texas restructuring
legislation, Entergy Gulf States filed a business separation plan
with the PUCT, which was amended in June 2000. The plan provided
that, by January 2002, Entergy Gulf States would ultimately be
divided into a Texas distribution company, a Texas transmission
company, a Texas generation company, a Texas retail electricity
provider, and a Louisiana company that will encompass distribution,
generation, and transmission operations. In July 2000, the PUCT
issued an interim order to approve the amended business separation
plan. The plan provides that the Louisiana company would retain the
liability for all debt obligations of Entergy Gulf States and that
the property of the Texas companies would be released from the lien
of Entergy Gulf States' mortgage. Each of the Texas companies would
assume a portion of Entergy Gulf States' debt obligations, which
assumptions would not act to release the Louisiana company's
obligations. Each of the Texas companies would also grant a lien on
properties in favor of the Louisiana company to secure its
obligations to the Louisiana company in respect of the assumed
obligations. In addition, under the plan Entergy Gulf States will
refinance or retire existing debt through 2004. Regulatory approvals
from FERC, the SEC, and the LPSC will be required before the business
separation plan can be implemented. Remaining business separation
issues in Texas will be addressed in the unbundled costs proceeding
before the PUCT. The LPSC has opened a docket to identify the
changes in corporate structure of Entergy Gulf States, and their
potential impact on Louisiana retail ratepayers, resulting from
restructuring in Texas and Arkansas. Entergy Gulf States filed
testimony in that proceeding in August 2000 and hearings are
scheduled in February 2001.
On March 31, 2000, pursuant to the Texas restructuring
legislation, Entergy Gulf States filed cost data with the PUCT for
its unbundled business functions and proposed tariffs for its
unbundled distribution utility. In the filing, Entergy Gulf States
is seeking approval for recovery of the following, among other
things:
o the unbundled distribution utility's cost of service;
o a 12% return on equity for the unbundled distribution utility;
and
o a ten-year non-bypassable charge to recover estimated stranded
costs and a non-bypassable charge to recover nuclear decommissioning
costs.
At a prehearing conference held in April 2000, a procedural
schedule for the case was established, calling for a hearing in
January 2001. Management cannot predict the outcome of this
proceeding. In connection with unbundled cost filings made by all
Texas investor-owned utilities, the PUCT has opened a "generic
docket" to determine issues that may be resolved on an industry-wide
basis before the individual utility hearings begin. These issues
include updating gas prices to be used in the model established by
the PUCT for estimating stranded costs and incentive mechanisms to
enhance the authorized rate of return.
Federal Regulatory Activity (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, and System Energy)
In April 2000, the LPSC and the Council filed a complaint with
FERC seeking revisions to the System Agreement that they allege are
necessary to accommodate the introduction of retail competition in
Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas
provide utility service, and to protect Entergy's Louisiana customers
from any adverse impact that may occur due to the introduction of
such retail competition in some jurisdictions but not others. The
LPSC and the Council request that FERC immediately institute a
proceeding to permit changes to be adopted prior to January 1, 2002,
and request, among other things, that FERC cap certain of the System
Agreement obligations of Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans and fix these companies' access to pool energy at
the average level existing for the three years prior to the date that
retail access is initiated in Texas and Arkansas. Alternatively, the
LPSC and the Council request that FERC require Entergy to provide
wholesale power contracts to these companies to satisfy their energy
requirements at costs no higher than would have been incurred if
retail competition were not implemented. The LPSC and the Council
request that the relief be made available for at least eight years
after implementation of retail competition or the withdrawal of
Entergy Arkansas and Entergy Gulf States from the System Agreement,
or until retail access is implemented in Louisiana and New Orleans.
In addition, among other things, the LPSC and the Council assert in
their complaint that:
o unless the requested relief is granted, the restructuring
legislation adopted in Texas and Arkansas, to the extent such
legislation requires, or has the effect of, altering the rights of
parties under the System Agreement, will result in violations of the
interstate commerce clause, the due process clause, and the
impairment of contracts clause in the U.S. Constitution; and
o the failure of the domestic utility companies to honor a right
of first refusal with respect to any sale of generating capacity and
associated energy under the System Agreement, and any attempt to
eliminate such right of first refusal from the System Agreement,
would violate the Federal Power Act and constitute a breach of the
System Agreement.
In June 2000, Entergy's domestic utility companies filed
proposed amendments to the System Agreement with FERC to facilitate
the implementation of retail competition in Arkansas and Texas and to
provide for continued equalization of costs among the domestic
utilities in Louisiana and Mississippi. The amendments provide the
following:
o cessation of participation in all aspects of the System
Agreement, other than those related to transmission equalization,
for any jurisdictional division of a domestic utility operating
in a jurisdiction that initiates retail access;
o certain sections of the System Agreement will no longer apply to
the sales of generating capacity, whether through the sale of
the asset or the output thereof, by a domestic utility operating
in a jurisdiction that has established a date by which it will
implement retail access; and
o modification of the service schedule developed to track changes
in energy costs resulting from the Entergy-Gulf States Utilities
merger to include one final true-up of fuel costs upon cessation
of one company's participation in the System Agreement, which
thereafter will no longer be applicable for any purpose.
Entergy believes that the proceedings relating to the proposed
amendments serve as a response to the complaint by the LPSC and the
Council and anticipates that the proceedings would be consolidated.
In response to Entergy's proposal, the LPSC and the Council have
requested that FERC dismiss the proposed amendments and proceed with
the complaint proceedings. Several other parties have also
intervened in the proceeding. In the event that the proceedings
relating to the proposed amendments proceed, the LPSC and the Council
have asserted that the charges to the domestic utility companies
under the Unit Power Sales Agreement need to be reconsidered.
Entergy has requested an expedited hearing on the proposed amendments
and that FERC issue a final decision by October 1, 2001. A
procedural schedule has not been established. Neither the timing,
nor the ultimate outcome of these proceedings at FERC can be
predicted at this time.
Retail Rate Proceedings
Previous developments and information related to retail rate
proceedings are presented in Note 2 to the financial statements in
the Form 10-K.
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In March 2000, Entergy Arkansas filed its annually redetermined
energy cost recovery (ECR) rate with the APSC in accordance with the
energy cost recovery rider formula. The filing reflected that an
increase was warranted to collect an under-recovery of energy costs
for 1999. The increased ECR rate is effective April 2000 through
March 2001.
As discussed in Note 2 to the financial statements in the Form
10-K, Entergy Arkansas is operating under the terms of a settlement
agreement approved by the APSC in December 1997 that allows the
collection of excess earnings in a transition cost account. An
adjustment was made to the transition cost account in May 2000
resulting in a negative net income impact of $4.4 million ($2.7
million after tax). Interest of $2.6 million ($1.6 million net of
tax) was also recorded in the transition cost account for the first
six months of 2000. The results of operations reflect these charges
in operating expenses.
Filings with the PUCT and Texas Cities
PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States)
As determined in the settlement agreement discussed in Note 2 to
the financial statements in the Form 10-K, Entergy Gulf States
adopted a methodology for calculating its fixed fuel factor based on
the market price of natural gas. This calculation and any necessary
adjustments occur semi-annually and will continue until December
2001.
The amounts collected under Entergy Gulf States' fixed fuel
factor through December 2001 are subject to fuel reconciliation
proceedings before the PUCT, including a fuel reconciliation case
filed by Entergy Gulf States in July 1999. In February 2000, Entergy
Gulf States reached a settlement with all but one of the parties to
that proceeding. Entergy Gulf States reconciled approximately $731
million (after excluding approximately $14 million related to Cajun
issues to be handled in a subsequent proceeding) of fuel and
purchased power costs. The settlement reduces Entergy Gulf States'
requested surcharge in the reconciliation filing from $14.7 million
to $2.2 million. This settlement was approved by the PUCT in
April 2000, confirming an interim order that allowed Entergy Gulf
States to begin the recovery of the $2.2 million surcharge between
April 2000 and January 2001. In addition, Entergy Gulf States agreed
to file a fuel reconciliation case by January 12, 2001 covering the
period from March 1, 1999 through August 31, 2000. The decrease in
the requested surcharge was recorded in March 2000 and is reflected
in Entergy Gulf States' operating income.
In September 1999, the PUCT approved the final adjustment of the
rate refunds ordered as a result of Entergy Gulf States' November
1996 rate case. These refunds were completed in the October 1999
billing month. Pursuant to the September 1999 order, a true-up
proceeding was initiated, which required Entergy Gulf States to
refund an additional $25 million. This refund was concluded in
December 1999. The PUCT approved the final refund and concluded the
proceeding in June 2000.
In September 1999, Entergy Gulf States filed an application with
the PUCT requesting an interim fuel surcharge to collect under-
recovered fuel and purchased power expenses incurred from March 1999
through July 1999. In December 1999, the PUCT approved the
collection of $33.9 million over a five-month period beginning
January 2000. An administrative appeal of the interim fuel surcharge
was filed by certain cities in Travis County District Court. The
fuel and purchased power expenses contained in this surcharge will be
subject to future fuel reconciliation proceedings.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf
States)
In June 2000, the LPSC approved a settlement between Entergy
Gulf States and the LPSC staff to refund $83 million, including
interest, resolving refund issues in Entergy Gulf States' second,
third, fourth, and fifth post-Merger earnings reviews by the LPSC.
The refund, for which adequate reserves have been made, will occur
over a three-month period beginning July 2000.
In May 2000, Entergy Gulf States filed its seventh required post-
Merger earnings analysis with the LPSC. This filing will be subject
to review by the LPSC, which may result in a change in rates.
Entergy Gulf States also is proposing that the allowed return on
common equity be increased to 11.60%. A procedural schedule has not
yet been established by the LPSC.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In April 1999, Entergy Louisiana submitted its fourth annual
performance-based rate plan filing for the 1998 test year. A rate
reduction of $15 million was implemented effective August 1, 1999.
In May 2000, the LPSC ordered an additional $6.4 million refund
effective April 2000. Entergy Louisiana has provided reserves for
these refunds. In addition, the LPSC extended Entergy Louisiana's
formula rate plan for an additional year with the last filing to be
made on April 15, 2001.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based rate plan filing for the 1999 test year. The
filing indicated that a $24.8 million base rate reduction might be
appropriate for implementation effective August 2000. Entergy
Louisiana is proposing to increase prospectively the allowed return
on common equity from 10.5% to 11.6%, which would reduce the amount
of any rate reduction implemented. This filing will be subject to
review by the LPSC. A procedural schedule has not yet been
established by the LPSC.
Fuel Adjustment Clause Litigation
(Entergy Corporation and Entergy Louisiana)
In May 1998, a group of ratepayers filed a complaint against
Entergy Corporation, Entergy Power, and Entergy Louisiana in state
court in Orleans Parish purportedly on behalf of all Entergy
Louisiana ratepayers. The plaintiffs seek treble damages for alleged
injuries arising from alleged violations by the defendants of
Louisiana's antitrust laws in connection with the costs included in
fuel filings with the LPSC and passed through to ratepayers. Among
other things, the plaintiffs allege that Entergy Louisiana improperly
introduced certain costs into the calculation of the fuel charges,
including high-cost electricity imprudently purchased from its
affiliates and high-cost gas imprudently purchased from independent
third party suppliers. In addition, plaintiffs seek to recover
interest and attorney's fees. Exceptions were filed by Entergy,
asserting that this dispute should be litigated before the LPSC and
FERC. At the appropriate time, if necessary, Entergy will raise its
defenses to the antitrust claims. At present, the suit in state
court is stayed by stipulation of the parties.
Plaintiffs also requested that the LPSC initiate a review of
Entergy Louisiana's monthly fuel adjustment charge filings and force
restitution to ratepayers of all costs that the plaintiffs allege
were improperly included in those fuel adjustment filings. Marathon
Oil Company and Louisiana Energy Users Group have also intervened in
the LPSC proceeding. Discovery at the LPSC has been conducted and is
expected to continue. Direct testimony was filed with the LPSC by
plaintiffs and the intervenors in July 1999. In their testimony for
the period 1989 through 1998, plaintiffs purport to quantify many of
their claims in an amount totaling $544 million, plus interest. The
plaintiffs will likely assert additional damages for the period 1974
through 1988. The Entergy companies filed responsive and rebuttal
testimony in September 1999. Rebuttal testimony by the plaintiffs
and intervenors was filed in November 1999.
Entergy Louisiana and the staff of the LPSC have reached an
agreement in principle for the settlement of the matter before the
LPSC. The terms of the proposed settlement have not as yet been
agreed to by other parties to the LPSC proceeding, and must be
approved by the LPSC after any parties contesting the settlement are
afforded the opportunity for a hearing. Entergy Louisiana would
agree under the proposed settlement terms to refund to customers
approximately $72 million to resolve all claims arising out of or
relating to Entergy Louisiana's fuel adjustment clause filings from
January 1, 1975 through December 31, 1999, except with respect to
purchased power and associated costs included in the fuel adjustment
clause filings for the period May 1 through September 30, 1999.
Reserves were previously provided by Entergy Louisiana for the
refund. If the proposed settlement is approved, Entergy Louisiana
would also consent to future fuel cost recovery under a long-term gas
contract based on a formula that would likely result in an under-
recovery of actual costs under that contract for the remainder of its
term, which runs through 2013. The future under-recovery cannot be
precisely estimated at this time because it will depend upon factors
that are not certain, such as the price of gas and the amount of gas
purchased under the long-term contract. In recent years, Entergy
Louisiana has made purchases under that contract totaling from $91
million to $121 million annually. Had the proposed settlement terms
been applicable to such purchases, the under-recoveries would have
ranged from $4 million to $9 million per year. Hearings in this
proceeding are scheduled for September 2000, which will include
consideration of the proposed settlement.
In its intervention, Marathon Oil Company and Louisiana Energy
Users Group requested that the LPSC review the prudence of a contract
entered into by Entergy Louisiana to purchase energy generated by a
hydroelectric facility known as the Vidalia project through the year
2031. Note 9 to the financial statements in the Form 10-K contains
further discussions of the obligations related to the Vidalia
project. By orders entered by the LPSC in 1985 and 1990, the LPSC
approved Entergy Louisiana's entry into the Vidalia contract and
Entergy Louisiana's right to recover, through the fuel adjustment
clause, the costs of power purchased thereunder. Additionally, the
wholesale electric rates under the Vidalia power purchase contract
were filed at FERC. In December 1999, the LPSC instituted a review
of the following issues relating to the Vidalia project: (i) the
LPSC's jurisdiction over the Vidalia project; (ii) Entergy
Louisiana's management of the Vidalia contract, including
opportunities to restructure or otherwise reform the contract; (iii)
the appropriateness of Entergy Louisiana's recovery of 100% of the
Vidalia contract costs from ratepayers; (iv) the appropriateness of
the fuel adjustment clause as the method for recovering all or part
of the Vidalia contract costs; (v) the appropriate regulatory
treatment of the Vidalia contract in the event the LPSC approves
implementation of retail competition; and (vi) Entergy Louisiana's
communication of pertinent information to the LPSC regarding the
Vidalia project and contract. Based on its review, the LPSC will
determine whether it should disallow any of the costs of the Vidalia
project included in the fuel adjustment clause.
In March 2000, Entergy Louisiana filed testimony in this sub-
docket asserting that the prudence of the Vidalia contract already
has been approved by final orders of the LPSC and that recovery of
all amounts paid by Entergy Louisiana related to the Vidalia project
pursuant to the FERC-filed rate is appropriate. Direct testimony was
filed by intervenor Marathon Oil Company in May 2000 and by the LPSC
staff and intervenor Louisiana Energy Users Group in July 2000. In
its testimony the LPSC staff alleges that Entergy Louisiana was
imprudent for not declaring to the LPSC that the Vidalia project had
become uneconomic and not threatening to block the Vidalia project's
owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985
order (approving the Entergy Louisiana/Vidalia project power purchase
agreement), unless the Vidalia project's owners' shared with Entergy
Louisiana's ratepayers some portion of what the LPSC staff quantifies
as approximately $90 million of tax consequences available to the
project. The LPSC staff's testimony does not quantify how much of
the potential tax savings Entergy Louisiana should have demanded in
exchange for not attempting to block the Vidalia project's owners'
request for clarification; however, that testimony does suggest
various alternatives by which some portion of the $90 million,
perhaps $45 million plus interest since 1990, could be returned to
the ratepayers. The direct testimony of the intervenor Louisiana
Energy Users Group alleges that Entergy Louisiana was imprudent for
not attempting to block the Vidalia project's owners' July 30, 1990
request that the LPSC clarify the LPSC's 1985 order approving the
Entergy Louisiana/Vidalia project power purchase agreement; however,
that intervenor does not quantify the amount of damage alleged to
have been caused by this alleged imprudence. The direct testimony of
the intervenor Marathon Oil Company alleges with respect to Entergy
Louisiana that imprudent Vidalia project costs should be disallowed
and that Entergy Louisiana's customers should not be charged 100% of
the Vidalia costs. It is anticipated that hearings in this sub-
docket concerning the Vidalia contract will be completed by the end
of 2000.
(Entergy Corporation and Entergy New Orleans)
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state court in Orleans Parish purportedly on behalf
of all Entergy New Orleans ratepayers. The plaintiffs seek treble
damages for alleged injuries arising from the defendants' alleged
violations of Louisiana's antitrust laws in connection with certain
costs passed on to ratepayers in Entergy New Orleans' fuel adjustment
filings with the Council. In particular, plaintiffs allege that
Entergy New Orleans improperly included certain costs in the
calculation of fuel charges and that Entergy New Orleans imprudently
purchased high-cost fuel from other Entergy affiliates. Plaintiffs
allege that Entergy New Orleans and the other defendant Entergy
companies conspired to make these purchases to the detriment of
Entergy New Orleans' ratepayers and to the benefit of Entergy's
shareholders, in violation of Louisiana's antitrust laws. Plaintiffs
also seek to recover interest and attorney's fees. Exceptions to the
plaintiffs' allegations were filed by Entergy, asserting, among other
things, that jurisdiction over these issues rests with the Council
and FERC. If necessary, at the appropriate time, Entergy will also
raise its defenses to the antitrust claims. At present, the suit in
state court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the Council in order
to initiate a review by the Council of their allegations and to force
restitution to ratepayers of all costs they allege were improperly
and imprudently included in the fuel adjustment filings. Discovery
has begun in the proceedings before the Council. In April 2000,
testimony was filed on behalf of the plaintiffs in this proceeding.
The testimony asserts, among other things, that Entergy New Orleans
and other defendants have engaged in fuel procurement and power
purchasing practices that could have resulted in New Orleans
customers being overcharged by more than $45 million over a period of
years. However, it is not clear precisely what periods and damages
are being alleged. Entergy intends to defend this matter vigorously,
both in court and before the Council. The ultimate outcome of the
lawsuit and the Council proceeding cannot be predicted at this time.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
In March 2000, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 1999 test year.
The filing indicated that no change in rate levels was warranted and
the current rate levels remain in effect.
Purchased Power for Summer 2000 (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies filed applications with the APSC,
the LPSC, the MPSC, and the Council to approve the sale of power by
Entergy Gulf States from its unregulated, undivided 30% interest in
River Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. In addition, Entergy Gulf
States and Entergy Louisiana filed an application with the LPSC for
authorization to purchase capacity and electric power from third
parties for the summer of 2000. The commissions and Council have
approved the applications, with a reservation of their right to
review the prudence of the purchases and the appropriate
catagorization of the costs as either capacity or energy charges for
purposes of recovery.
Proposed Rate Increase (Entergy Corporation, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
As discussed in Note 2 to the financial statements in the Form
10-K, System Energy applied to FERC in May 1995 for a $65.5 million
rate increase. The request sought changes to System Energy's rate
schedule, including increases in the revenue requirement associated
with decommissioning costs, the depreciation rate, and the rate of
return on common equity. In December 1995, System Energy implemented
the $65.5 million rate increase, subject to refund, for which a
portion has been reserved.
After a hearing, FERC issued an order in August 2000 in the
proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on
equity, but modified the return to reflect changes in capital market
conditions since the ALJ's decision. FERC adjusted the rate of
return to 10.58% for the period December 1995 to the date of FERC's
decision, and prospectively adjusted the rate of return to 10.94%
from the date of FERC's decision. FERC's decision also changed other
aspects of System Energy's proposed rate schedule, including the
depreciation rate and decommissioning costs and their methodology.
System Energy has provided reserves for a potential refund to
the rate level of the initial ALJ decision, including interest.
Management is analyzing the effect of FERC's decision, but a refund
to the FERC decision rate level is not expected to have a material
adverse effect on Entergy's, System Energy's, or the domestic utility
companies results of operations. Management's analysis may result in
a request for rehearing or an appeal of FERC's order.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 2000, Entergy Corporation
repurchased 16,126,000 shares of common stock in the open market for
an aggregate purchase price of approximately $389 million. These
shares were purchased pursuant to Entergy's stock repurchase plan and
also to fulfill the requirements of various stock-based compensation
and benefit plans. Under the terms of the Merger Agreement, Entergy
will use its commercially reasonable efforts to purchase in open
market transactions an additional $430 million of shares of its
common stock.
During the six months ended June 30, 2000, Entergy Corporation
issued 462,290 shares of its previously repurchased common stock to
satisfy stock options exercised and employee stock purchases. In
addition, Entergy Corporation received proceeds of approximately $2.0
million from the issuance of 89,894 shares of common stock under its
dividend reinvestment and stock purchase plan.
NOTE 4. LONG-TERM DEBT
(Entergy Mississippi)
On February 15, 2000, Entergy Mississippi issued $120 million of
7.75% Series First Mortgage Bonds due February 15, 2003. The
proceeds are being used for general corporate purposes, including the
retirement of short-term indebtedness that was incurred for working
capital needs and capital expenditures.
(Entergy Arkansas)
On March 9, 2000, Entergy Arkansas issued $100 million of 7.72%
Series First Mortgage Bonds due March 1, 2003. The proceeds are
being used for general corporate purposes, including the retirement
of short-term indebtedness that was incurred for working capital
needs and capital expenditures.
(Entergy Louisiana)
On March 1, 2000, Entergy Louisiana redeemed, at maturity, $100
million of 6.00% Series First Mortgage Bonds using funds received
from an open-account advance from Entergy Corporation.
On May 23, 2000, Entergy Louisiana issued $150 million of 8.50%
Series First Mortgage Bonds due June 1, 2003. The proceeds are being
used for general corporate purposes, including the repayment of the
open account advance from Entergy Corporation and of short-term
indebtedness that was incurred for capital needs and capital
expenditures.
(Entergy Gulf States)
On June 1, 2000, Entergy Gulf States issued $300 million of
First Mortgage Bonds due June 2, 2003 bearing interest at an initial
rate of 8.04%. The proceeds are being used for general corporate
purposes, including the retirement of short-term indebtedness that
was incurred for capital needs and capital expenditures, and the
mandatory redemption of $150 million of preference stock.
(Entergy New Orleans)
On July 25, 2000, Entergy New Orleans issued $30 million of
8.125% Series First Mortgage Bonds due July 15, 2005. The proceeds
are being used for general corporate purposes, including the
retirement of short-term indebtedness that was incurred for capital
needs and capital expenditures.
(Entergy Corporation)
In May 2000, Entergy's global power development business entered
into 10-year interest rate swap agreements with an average fixed rate
of 6.568% for approximately 75% of the debt outstanding under the
Damhead Creek bridge and term loan portion of the Senior Credit
Facility. The global power development business is exposed to market
risks from movements in interest rates for the hedged portion of the
debt only in the unlikely event that the counterparties to the
interest rate swap agreements were to default on contractual
payments. At June 30, 2000, Entergy's global power development
business had outstanding interest rate swap agreements totalling a
notional amount of $362.8 million. Under the Senior Credit Facility
and the Subordinated Credit Facility, the ability of the global power
development business to make distributions of dividends, loans, or
advances to Entergy Corporation is restricted by, among other things,
the requirement to pay permitted project costs, make debt repayments,
and maintain cash reserves. See Note 7 to the financial statements
in the Form 10-K for further discussion on the financing of the
Damhead Creek project.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 28, 2000, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.30 per share, payable on
September 1, 2000, to holders of record on August 14, 2000.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
See Note 14 to the financial statements in the Form 10-K for
information regarding Entergy's adoption of SFAS 131 and its
operating segments. Entergy's segment financial information for the
three months ended June 30, 2000 and 1999 is as follows (in
thousands):
<TABLE>
<CAPTION>
Domestic Power
Utility and Marketing
System and All
Energy Trading* Other* Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
2000
Operating Revenues $1,697,577 $372,803 $ 79,988 $ (12,580) $2,137,788
Income Taxes 120,306 2,061 27,496 - 149,863
Net Income 186,946 3,823 55,004 - 245,773
1999
Operating Revenues $1,646,027 $ 668,797 $ 9,868 $ (8,288) $ 2,316,404
Income Taxes 107,903 1,187 (22,657) - 86,433
Net Income 174,868 (142) 35,032 - 209,758
</TABLE>
Entergy's segment financial information for the six months ended
June 30, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Domestic Power
Utility and Marketing
System and
Energy Trading* All Other* Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
2000
Operating Revenues $3,098,921 $718,960 $ 155,839 $ (24,440) $ 3,949,280
Income Taxes 191,497 7,797 33,394 - 232,688
Net Income 274,284 15,120 64,779 - 354,183
Total Assets 20,228,032 849,718 3,780,569 (534,043) 24,324,276
1999
Operating Revenues $2,932,729 $1,013,595 $ 21,731 $ (11,729) $ 3,956,326
Income Taxes 167,497 (7,036) (28,855) - 131,606
Net Income 257,444 (14,155) 39,375 - 282,664
Total Assets 19,515,460 952,960 2,838,509 (223,197) 23,083,732
</TABLE>
Businesses marked with * are referred to as the "competitive
businesses," with the exception of the parent company, Entergy
Corporation, which is also included in the "All Other" column. The
"All Other" category includes the parent, Entergy Corporation,
segments below the quantitative threshold for separate disclosure,
and other business activities. Other segments principally include
global power development and non-utility nuclear power operations and
management. Other business activities principally include the gains
on the sales of businesses. The elimination of power marketing and
trading mark-to-market profits on intercompany power transactions is
also included in "All Other." Eliminations are primarily
intersegment activity.
NOTE 7. SUBSEQUENT EVENT (Entergy Corporation)
On July 30, 2000, Entergy Corporation and FPL Group entered into
a Merger Agreement, providing for a business combination that results
in the creation of a new company. The Merger will be accounted for
under the purchase method of accounting as an acquisition of Entergy
by FPL Group. Each outstanding share of FPL Group common stock will
be converted into the right to receive one share of the new company's
common stock, and each outstanding share of Entergy Corporation
common stock will be converted into the right to receive 0.585 of a
share of the new company's common stock. It is expected that FPL
Group's shareholders will own approximately 57% of the common equity
of the new company and Entergy's shareholders will own approximately
43%. The new company will be given a new name that will be agreed
upon between the Boards of Directors of FPL and Entergy prior to the
consummation of the Merger. The new company will maintain its
principal corporate offices and headquarters in Juno Beach, Florida,
and will maintain its utility headquarters in New Orleans, Louisiana.
The Merger is conditioned, among other things, upon approvals of the
shareholders of FPL Group and Entergy and approvals of various local,
state, and federal regulatory agencies and commissions. Entergy and
FPL Group will seek to consummate the Merger by late 2001.
__________________________________
In the opinion of the management of Entergy Corporation, 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
reclassification of previously reported amounts to conform to current
classifications) necessary for a fair statement of the results for
the interim periods presented. However, the business of the domestic
utility companies and System Energy is subject to seasonal
fluctuations with the peak periods occurring during the third
quarter. The results for the interim periods presented should not be
used as a basis for estimating results of operations for a full year.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Other Regulation and Litigation" in the
Form 10-K for a discussion of legal proceedings affecting Entergy.
Set forth below are updates to the information contained in the
Form 10-K.
Union Pacific Railroad (Entergy Corporation and Entergy Arkansas)
See "Union Pacific Railroad" in Item 1 of Part 1 of the Form 10-
K for information relating to the civil suit filed by Entergy
Arkansas and Entergy Services against Union Pacific Railroad Company
(Union Pacific) seeking damages and the termination of coal shipping
contracts with Union Pacific because of its failure to meet its
contractual obligations to ship coal to Entergy Arkansas' two coal-
fired plants. In addition to rescission of the contracts and
monetary damages, Entergy is seeking restitution for amounts paid to
Union Pacific since the date of material breach that are above
reasonable market rates. The case is scheduled for trial beginning
in October 2000.
Aquila Power Corporation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans)
See "Aquila Power Corporation" in Item 1 of Part 1 of the Form
10-K and in Item 1 of Part II of the 2000 first quarter Form 10-Q for
information relating to the lawsuit filed by Aquila Power Corporation
(Aquila) against Entergy Services, as agent for the domestic utility
companies.
Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans)
See "Ratepayer Lawsuits" in Item 1 of Part I of the Form 10-K
for a discussion of the lawsuits filed by ratepayers with the LPSC,
the Council, and in Louisiana state courts in Orleans and East Baton
Rouge Parishes. See "Fuel Adjustment Clause Litigation" in Note 2 to
the financial statements herein for developments that have occurred
since the filing of the Form 10-K.
In the lawsuit filed in state court in Orleans Parish alleging
violations of Entergy New Orleans' limit on rate of return, in May
2000 a court of appeal granted Entergy New Orleans' exception to
jurisdiction in the case and dismissed the proceeding.
Franchise Service Area Litigation (Entergy Gulf States)
See "Franchise Service Area Litigation" in Item 1 of Part 1 of
the Form 10-K for information relating to the request filed by
Beaumont Power and Light Company (BP&L) with the PUCT to obtain a
certificate of convenience and necessity for those portions of
Jefferson County, Texas, outside the boundaries of any municipality,
except for the city of Beaumont, for which Entergy Gulf States
provides retail electric service. In April 2000, the ALJ recommended
denial of BP&L's application. In May 2000, the PUCT voted to remand
the proceeding back to the ALJ to allow BP&L to provide further
evidence. No procedural schedule has been set.
Ice Storm Litigation (Entergy Corporation and Entergy Gulf States)
See "Ice Storm Litigation" in Part I of the Form 10-K for
information relating to the lawsuit filed by a group of Entergy Gulf
States customers in Texas against Entergy Corporation, Entergy Gulf
States, and other Entergy subsidiaries in state court in Jefferson
County, Texas purportedly on behalf of all Entergy Gulf States
customers in Texas who sustained outages in a January 1997 ice storm.
In March 2000, an appellate court affirmed the district court's
decision to certify the class. In response to Entergy's motion for
rehearing the appellate court reversed the district court, denied
class certification, and remanded the case to the district court for
proceedings consistent with its ruling.
Litigation Environment (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, and System Energy)
The four states in which Entergy and the domestic utility
companies operate have proven to be unusually litigious environments.
Judges and juries in these states, and in particular Louisiana and
Texas, have demonstrated a willingness to grant large verdicts,
including punitive damages, to plaintiffs in personal injury,
property damage, and business tort cases. Entergy uses all
appropriate legal means to contest litigation threatened or filed
against it, but the litigation environment in these states poses a
business risk.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was
held on May 12, 2000. The following matters were voted on and
received the specified number of votes for, abstentions, votes
withheld (against), and broker non-votes:
<TABLE>
<CAPTION>
1. Election of Directors:
Broker
Name of Nominee Votes For Abstentions Votes Withheld Non-Votes
<S> <C> <C> <C> <C>
W. Frank Blount 198,741,281 N/A 2,074,693 N/A
George W. Davis 198,679,193 N/A 2,136,781 N/A
Norman C. Francis 198,690,587 N/A 2,125,387 N/A
J. Wayne Leonard 198,748,165 N/A 2,067,809 N/A
Robert v.d. Luft 198,678,214 N/A 2,137,760 N/A
Thomas F. McLarty, III 198,492,950 N/A 2,323,024 N/A
Paul W. Murrill 197,859,191 N/A 2,956,783 N/A
James R. Nichols 198,736,072 N/A 2,079,902 N/A
William A. Percy, II 198,689,700 N/A 2,126,274 N/A
D. H. Reilley 198,702,828 N/A 2,113,146 N/A
Wm. Clifford Smith 197,940,015 N/A 2,875,959 N/A
Bismark A. Steinhagen 198,737,362 N/A 2,078,612 N/A
</TABLE>
2. Ratify the appointment of independent public accountants,
PricewaterhouseCoopers LLP for the year 2000: 199,568,691 votes for;
470,300 votes against; 791,145 abstentions; and broker non-votes are
not applicable.
(Entergy Arkansas)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Arkansas: Hugh T. McDonald, Donald C.
Hintz, Jerry D. Jackson, and C. John Wilder.
(Entergy Gulf States)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Gulf States: E. Renae Conley, Joseph
F. Domino, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder.
(Entergy Louisiana)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Louisiana: E. Renae Conley, Donald C.
Hintz, Jerry D. Jackson, and C. John Wilder.
(Entergy Mississippi)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Mississippi: Carolyn C. Shanks, Donald
C. Hintz, Jerry D. Jackson, and C. John Wilder.
(Entergy New Orleans)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy New Orleans: Daniel F. Packer, Donald
C. Hintz, Jerry D. Jackson, and C. John Wilder.
(System Energy)
A consent in lieu of the annual meeting of common stockholders
was executed on July 31, 2000. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of System Energy: Jerry W. Yelverton, Donald C.
Hintz, and C. John Wilder.
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, June 30,
1995 1996 1997 1998 1999 2000
Entergy Arkansas 2.56 2.93 2.54 2.63 2.08 2.62
Entergy Gulf States 1.86 1.47 1.42 1.40 2.18 2.49
Entergy Louisiana 3.18 3.16 2.74 3.18 3.48 2.82
Entergy Mississippi 2.92 3.40 2.98 3.12 2.44 2.66
Entergy New Orleans 3.93 3.51 2.70 2.65 3.00 2.99
System Energy 2.07 2.21 2.31 2.52 1.90 2.38
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, June 30,
1995 1996 1997 1998 1999 2000
Entergy Arkansas 2.12 2.44 2.24 2.28 1.80 2.26
Entergy Gulf States (a) 1.54 1.19 1.23 1.20 1.86 2.16
Entergy Louisiana 2.60 2.64 2.36 2.75 3.09 2.50
Entergy Mississippi 2.51 2.95 2.69 2.80 2.18 2.39
Entergy New Orleans 3.56 3.22 2.44 2.41 2.74 2.67
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
** 2(a) - Agreement and Plan of Merger dated as of July 30, 2000,
among FPL Group, Inc., Entergy Corporation, WCB Holding
Corp., Ranger Acquisition Corp. and Ring Acquisition
Corp (filed as Exhibit 2.1 to Form 8-K dated July 31,
2000 in 1-11299).
** 4(a) - Fifty-fifth Supplemental Indenture, dated as of May 15,
2000, to Entergy Louisiana's Mortgage and Deed of Trust,
dated as of April 1,1944 (filed as Exhibit A-2(c) to Rule
24 Certificate dated June 2, 2000 in File No. 70-9141).
4(b) - Second Amended and Restated Credit Agreement, dated as of
May 18, 2000, among Entergy, the Banks (The Bank of New
York, The Chase Manhattan Bank, Citibank, N.A., ABN AMRO
Bank N.V., The Bank of Nova Scotia, Bank One, N.A.,
Bayerische Landesbank Girozentrale, The Royal Bank of
Scotland PLC, Barclays Bank PLC, Credit Agricole
Indosuez, The Industrial Bank of Japan, KBC Bank NV,
Union Bank of California, N.A., Westdeutsche Landesbank
Girozentrale, and Mellon Bank, N.A.), and Citibank, N.A.,
as Agent.
** 4(c) - Fifty-ninth Supplemental Indenture, dated as of June 1,
2000, to Entergy Gulf States' Mortgage and Deed of Trust,
dated as of September 1, 1926 (filed as Exhibit A-2(a) to
Rule 24 Certificate dated June 23, 2000 in File No. 70-
8721).
4(d) - Eighth Supplemental Indenture, dated as of July 1, 2000,
to Entergy New Orleans' Mortgage and Deed of Trust, dated
as of May 1, 1987.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of June 30, 2000.
27(b) - Financial Data Schedule for Entergy Arkansas as of June
30, 2000.
27(c) - Financial Data Schedule for Entergy Gulf States as of
June 30, 2000.
27(d) - Financial Data Schedule for Entergy Louisiana as of June
30, 2000.
27(e) - Financial Data Schedule for Entergy Mississippi as of
June 30, 2000.
27(f) - Financial Data Schedule for Entergy New Orleans as of
June 30, 2000.
27(g) - Financial Data Schedule for System Energy as of June 30,
2000.
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 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, 1999,
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, 2000, 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, 1-27031, 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 June 30, 2000, 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 June 30, 2000.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation
A Current Report on Form 8-K, dated April 24, 2000,
was filed with the SEC on April 28, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated July 26, 2000,
was filed with the SEC on July 27, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2000,
was filed with the SEC on July 31, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2000,
was filed with the SEC on August 3, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
<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/ Nathan E. Langston
Nathan E. Langston
Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
Date: August 8, 2000
