Entergy 2002 Annual Report Download - page 29

equalize the partners’ legal capital accounts. Profit allocations
for weather trading and international trading remain dispro-
portionate to the ownership interests. Earnings allocated under
the terms of the partnership agreement constitute equity, not
subject to reallocation, for the partners.
2001 Compared to 2000
The increase in earnings for Energy Commodity Services in
2001 was primarily due to:
the gain on the sale of the Saltend plant discussed below;
the favorable results from Entergy-Koch discussed below;
the $33.5 million ($23.5 million net of tax) cumulative
effect of an accounting change marking to market the
Damhead Creek gas contract;
liquidated damages of $13.9 million ($9.7 million net of
tax) received in 2001 from the Damhead Creek construc-
tion contractor as compensation for lost operating margin
from the plant due to construction delays; and
a $12.2 million ($7.9 million net of tax) gain on the sale of
a permitted site in Desoto County, Florida, in May 2001.
Partially offsetting the increase in earnings for Energy
Commodity Services in 2001 was the following:
$60.1 million ($49.9 million net of tax) of losses or asset
impairments recorded on Latin American investments and
other development projects;
a $9.8 million ($6.4 million net of tax) loss recorded
primarily because of the pending cancellation of four
gas turbines scheduled for delivery in 2004;
liquidated damages of $55.1 million ($38.6 million net
of tax) received in 2000 from the Saltend contractor as
compensation for lost operating margin from the plant
due to construction delays;
a $19.7 million ($12.8 million net of tax) gain on the sale
of the Freestone project located in Fairfield, Texas, in
June 2000;
increased depreciation expense of $23.6 million in 2001,
primarily due to the commencement of the commercial
operation of the Saltend and Damhead Creek plants; and
increased interest expense of $78.7 million in 2001, primarily
because of the commencement of commercial operation of
the Saltend and Damhead Creek plants.
Revenues decreased for Energy Commodity Services by
$983.3 million in 2001, primarily due to the contribution of
substantially all of Entergy’s power marketing and trading
business to Entergy-Koch in 2001. As a result, in 2001,
revenues from this activity were lower by $1,957.0 million
compared to 2000 revenue for Entergy’s power marketing and
trading segment, and purchased power expenses were lower
by $1,830.0 million. The net income effect in 2001 of the lower
revenue was more than offset by the equity in earnings from
Entergy’s interest in Entergy-Koch. Entergy’s earnings from
this activity increased in 2001 as a result of increased electricity
and gas trading volumes as well as a broader range of com-
modity sources and options provided to customers by the joint
venture than provided previously by Entergy.
The decrease in revenues in 2001 was partially offset by an
increase in operating revenues primarily due to an increase of
$409.8 million from Highland Energy and an increase of
$450.1 million from the Saltend and Damhead Creek plants.
Highland Energy was acquired in June 2000, and the Saltend
and Damhead Creek plants began commercial operation in
late November 2000 and early 2001, respectively. Highland
Energy was sold in the fourth quarter of 2001. The increase in
revenues from Highland Energy, Damhead Creek, and Saltend
is largely offset by increased fuel and purchased power expenses
of $644.1 million and increased other operation and mainte-
nance expenses of $94.6 million.
Entergy sold the Saltend plant in August 2001 and revenues
include the $88.1 million ($57.2 million net of tax) gain on
the sale.
PARENT & OTHER
The loss from Parent & Other decreased in 2002 from $58 million
to $39 million primarily due to:
a decrease in income tax expense of $12.1 million resulting
from the allocation of intercompany tax benefits; and
a decrease in interest charges of $6.0 million.
The loss from Parent & Other increased in 2001 from $11 million
to $58 million primarily due to:
a decrease in interest income of $41.2 million;
$21.8 million ($14.1 million net of tax) of merger-related
expenses incurred by Entergy Corporation in the first
quarter of 2001; and
an increase in interest charges of $19.5 million.
The increased loss in 2001 was partially offset by the write-down
in 2000 of investments in Latin American projects to their
estimated fair values.
INCOME TAXES
The effective income tax rates for 2002, 2001, and 2000 were
32.1%, 38.3%, and 40.3%, respectively. See Note 3 to the
consolidated financial statements for a reconciliation of the fed-
eral statutory rate of 35.0% to the effective income tax rates.
ENTERGY CORPORATION AND SUBSIDIARIES 2002 27
Although the gain/loss days ratio declined in 2002,
EKT made relatively more money on the gain days
than the loss days, and thus had an increase
in earnings for the year.