Entergy 2002 Annual Report Download - page 77

ENTERGY CORPORATION AND SUBSIDIARIES 2002 75
Energy Commodity Services’ net loss for the year ended
December 31, 2002 includes net charges of $428.5 million to
operating expenses ($238.3 million net of tax). These charges
reflect the effect of Entergy’s decision to discontinue additional
greenfield power plant development and the asset impairments
resulting from the deteriorating economics of wholesale power
markets in the United States and the United Kingdom. The net
charges consist of the following:
The power development business obtained contracts in
October 1999 to acquire 36 turbines from General
Electric. Entergy’s rights and obligations under the
contracts for 22 of the turbines were sold to an independent
special-purpose entity in May 2001. $178.0 million of the
charges, including an offsetting benefit of $28.5 million
($18.5 million net of tax) related to the sale of four
turbines to a third party, is a provision for the net costs
resulting from cancellation or sale of the turbines subject
to purchase commitments with the special-purpose entity.
$204.4 million of the charges result from the write-off of
Entergy Power Development Corporation’s equity invest-
ment in the Damhead Creek project and the impairment
of the values of the Warren Power power plant, the Crete
project, and the RS Cogen project. This portion of the
charges reflects Entergy’s estimate of the effects of
reduced spark spreads in the United States and the
United Kingdom. These estimates are based on various
sources of information, including discounted cash flow
projections and current market prices.
$39.1 million of the charges relate to the restructuring
of Entergy Wholesale Operations, including impairments
of administrative fixed assets, estimated sublease losses,
and employee-related costs for approximately 135 affected
employees. These restructuring costs, which are included
in the “Provision for turbine commitments, asset impair-
ments and restructuring charges” in the accompanying
consolidated statement of income as of December 31,
2002, were comprised of the following (in millions):
Restructuring Paid in Non-Cash Remaining
Costs Cash Portion Accrual
Fixed asset
impairments $22.5 $ – $22.5 $ –
Sublease losses 10.7 0.9 – 9.8
Severance and
related costs 5.9 2.5 – 3.4
Total $39.1 $3.4 $22.5 $13.2
$32.7 million of the charges result from the write-off of
capitalized project development costs for projects that will
not be completed.
The net charges include a gain of $25.7 million ($15.9 million
net of tax) on the sale of projects under development in Spain
in August 2002 and the after-tax gain of $31.4 million realized
on the sale of Damhead Creek in December 2002.
GEOGRAPHIC AREAS
The following table shows Entergy’s domestic and foreign
operating revenues for the years ended December 31,
(in thousands):
2002 2001 2000
Domestic $8,051,992 $9,098,861 $ 9,950,229
Foreign 253,043 522,038 71,900
Consolidated $8,305,035 $9,620,899 $10,022,129
Long-lived assets as of December 31 were as follows
(in thousands):
2002 2001 2000
Domestic $17,194,179 $16,468,059 $15,425,915
Foreign 773 421,870 1,019,831
Consolidated $17,194,952 $16,889,929 $16,445,746
NOTE 13. EQUITY METHOD INVESTMENTS
Entergy owns investments in the following companies that it
accounts for under the equity method of accounting: Entergy-
Koch, LP (in which Entergy holds a 50% member interest), a
company engaged in two major businesses: energy commodity
trading, which includes power, gas, weather derivatives,
emissions, and cross-commodities, and gas transportation and
storage; RS Cogen LLC (in which Entergy holds a 50% member
interest), a co-generation project that provides power on an
industrial and merchant basis in the Lake Charles, Louisiana
area; EntergyShaw LLC (in which Entergy holds a 50% member
interest), a company which provides management, engineering,
procurement, construction, and commissioning services for
electric power plants; and Crete Energy Ventures, LLC (in
which Entergy holds a 50% member interest), a merchant
power plant located in Crete, Illinois. Following is a reconcilia-
tion of Entergy’s investments in equity affiliates (in thousands):
2002 2001 2000
Beginning of year $ 766,103 $ 136,487 $ 117,378
Additional investments 36,372 471,102 25,943
Equity in net income 205,340 180,956 13,715
Dividends received (73,902) (21,191) (20,468)
Currency translation adjustments – 138 (891)
Dispositions and other adjustments (109,704) (1,389) 810
End of year $ 824,209 $ 766,103 $ 136,487
The following is a summary of combined financial information
reported by Entergy’s equity method investees (in thousands):
2002 2001 2000
Income Statement Items
Operating revenues $ 551,853 $ 693,400 $ 200,026
Operating income $ 192,173 $ 309,752 $ 90,694
Net income $ 100,926 $ 226,039 $ 74,042
Balance Sheet Items
Current assets $2,334,133 $2,969,132
Noncurrent assets $1,490,355 $3,309,752
Current liabilities $1,777,142 $2,729,769
Noncurrent liabilities $ 734,816 $1,491,957