Entergy 2002 Annual Report Download - page 33

2001 Compared to 2000
Entergy’s consolidated net cash flow provided by operating
activities increased in 2001 primarily due to:
an increase of $432 million in cash provided by the parent
company, primarily due to the tax accounting election
made by Entergy Louisiana that is discussed below and the
receipt of a federal tax refund associated primarily with
deductions for 2000 ice storm costs, partially offset by
increased interest expense and the payment of FPL
merger-related costs; and
an increase of $171 million in cash provided by the Non-
Utility Nuclear business, primarily from the operation of
the FitzPatrick and Indian Point 3 plants purchased in the
fourth quarter of 2000 and the Indian Point 2 plant pur-
chased in the third quarter of 2001.
These increases were partially offset by a decrease of
$129 million in cash provided by the U.S. Utility and net cash
used of $128 million in 2001 compared to net cash provided
of $64.3 million in 2000 by the Energy Commodity Services
segment. The Energy Commodity Services segment includes the
non-nuclear wholesale assets business and the Entergy-Koch
joint venture. In 2001, the non-nuclear wholesale assets business
used $73 million of net cash in operating activities; in 2000, the
non-nuclear wholesale assets business provided $37 million of
operating cash flow. This fluctuation is primarily due to a net
loss, excluding the gain on the sale of the Saltend plant, gener-
ated in 2001 compared with net income generated in 2000.
Entergy’s investment in Entergy-Koch used $55 million of net
cash in operating activities in 2001 compared with power mar-
keting and trading providing $27 million of operating cash flow
in 2000. This fluctuation is primarily because, although income
from this activity was higher in 2001, Entergy did not receive
dividends from Entergy-Koch, as the joint venture retained
capital for business opportunities.
Entergy Louisiana Tax Election
In 2001 Entergy Louisiana changed its method of accounting
for tax purposes related to the contract to purchase power from
the Vidalia project (the contract is discussed in Note 9 to the
consolidated financial statements). The new tax accounting
method has provided a cumulative cash flow benefit of approx-
imately $867 million through 2002, which is expected to reverse
in the years 2003 through 2031. The election did not reduce
book income tax expense. The timing of the reversal of this
benefit depends on several variables, including the price of
power. Approximately half of the consolidated cash flow benefit
of the election occurred in 2001 and the remainder occurred in
2002. In accordance with Entergy's intercompany tax allocation
agreement, the cash flow benefit for Entergy Louisiana
occurred in the fourth quarter of 2002.
In a September 2002 settlement of a Louisiana Public Service
Commission (LPSC) proceeding that concerned the Vidalia
contract, the LPSC approved Entergy Louisiana’s proposed
treatment of the regulatory impact of the tax accounting
election. In general, the settlement permits Entergy Louisiana
to keep a portion of the tax benefit in exchange for bearing the
risk associated with sustaining the tax treatment. The LPSC
settlement divided the term of the Vidalia contract into two
segments: 2002-12 and 2013-31. During the first eight years of
the 2002-12 segment, Entergy Louisiana agreed to credit rates
by flowing through its fuel adjustment calculation $11 million
each year, beginning monthly in October 2002. Entergy
Louisiana must credit rates in this way and by this amount even
if Entergy Louisiana is unable to sustain the tax deduction.
Entergy Louisiana also must credit rates by $11 million each
year for an additional two years unless either the tax accounting
method elected is retroactively repealed or the Internal
Revenue Service denies the entire deduction related to the tax
accounting method. Entergy Louisiana agreed to credit rate-
payers additional amounts unless the tax accounting election is
not sustained if it is challenged. During 2013-2031, Entergy
Louisiana and its ratepayers would share the remaining benefits
of this tax accounting election.
Investing Activities
2002 Compared to 2001
Net cash used in investing activities decreased by $836 million
in 2002 primarily due to the following:
Entergy used $420 million less cash in its 2002 nuclear
power plant purchase than it used in its 2001 purchase. In
July 2002, Entergy’s Non-Utility Nuclear business purchased
the 510 MW Vermont Yankee nuclear power plant for
$180 million in cash. In September 2001, Entergy’s Non-
Utility Nuclear business purchased the 970 MW Indian
Point 2 nuclear power plant for $600 million in cash. The
liabilities to decommission both plants, as well as related
decommissioning trust funds, were also transferred to
Entergy. These decommissioning trust transfers are
reflected in the non-cash activity section of the cash
flow statements.
Entergy made cash contributions of approximately
$414 million in 2001 in connection with the formation
of Entergy-Koch.
Entergy did not make an investment in 2002 like the
$272 million cash investment it made in 2001 to provide
collateral for a line of credit that secures the installment
obligations owed to the New York Power Authority (NYPA)
for the acquisition of the FitzPatrick and Indian Point 3
nuclear power plants. As of December 31, 2002, $232 million
remained invested as collateral for the line of credit.
ENTERGY CORPORATION AND SUBSIDIARIES 2002 31
The Non-Utility Nuclear business provided $282 million
in operating cash flow, an increase of $18 million
compared to 2001.