Entergy 2002 Annual Report Download - page 78

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Two of the unconsolidated 50/50 joint ventures, Entergy-
Koch and RS Cogen, have obtained debt financing for their
operations. As of December 31, 2002, the debt financing
outstanding for those two entities totals $818 million, which
is included in the liability figures given above. This debt is
nonrecourse to Entergy.
RELATED-PARTY TRANSACTIONS AND GUARANTEES
During 2002 and 2001, Entergy procured various services from
Entergy-Koch consisting primarily of pipeline transportation
services for natural gas and risk management services for
electricity and natural gas. The total cost of such services in 2002
and 2001 was approximately $11.2 million and $7.8 million,
respectively. Entergy’s operating transactions with its other equity
method investees were not material in 2002, 2001, or 2000.
One of the contracts transferred to Entergy-Koch by Entergy’s
power marketing and trading business is backed by an Entergy
Corporation guarantee authorized in the amount of $35 million.
The guarantee term is through the expiration of the underlying
contract, which ends in 2018.
EntergyShaw is currently constructing the Harrison County
project for Entergy. Entergy has guaranteed the obligations of
EntergyShaw to construct the plant, and Entergy’s maximum
liability on the guarantee is $232.5 million. The project is
expected to be completed in 2003.
NOTE 14. ACQUISITIONS AND DISPOSITIONS
ASSET ACQUISITIONS
Vermont Yankee
In July 2002, Entergy’s Non-Utility Nuclear business purchased
the 510 MW Vermont Yankee nuclear power plant located in
Vernon, Vermont, from Vermont Yankee Nuclear Power
Corporation for $180 million. Entergy received the plant,
nuclear fuel, inventories, and related real estate. The liability
to decommission the plant, as well as related decommissioning
trust funds of approximately $310 million, was also transferred
to Entergy. The acquisition included a 10-year power purchase
agreement (PPA) under which the former owners will buy the
power produced by the plant, which is through the expiration
of the current operating license for the plant. The PPA
includes an adjustment clause where the prices specified in
the PPA will be adjusted downward annually, beginning in
2006, if power market prices drop below the PPA prices.
The acquisition was accounted for using the purchase
method. The results of operations of Vermont Yankee
subsequent to the purchase date have been included in
Entergy’s consolidated results of operations. The purchase
price has been preliminarily allocated to the assets acquired
and liabilities assumed based on their estimated fair values on
the purchase date. The allocation was based on preliminary
information and the final allocation may differ, although
management does not expect the difference to be material.
Indian Point 2
In September 2001, Entergy’s Non-Utility Nuclear business
acquired the 970 MW Indian Point 2 nuclear power plant
located in Westchester County, New York from Consolidated
Edison. Entergy paid approximately $600 million in cash at the
closing of the purchase and received the plant, nuclear fuel,
materials and supplies, a purchase power agreement (PPA), and
assumed certain liabilities. On the second anniversary of the
Indian Point 2 acquisition, Entergy’s nuclear business will also
begin to pay NYPA $10 million per year for up to 10 years in
accordance with the Indian Point 3 purchase agreement. Under
the PPA, Consolidated Edison will purchase 100% of Indian
Point 2’s output through 2004. Consolidated Edison transferred
a $430 million decommissioning trust fund, along with the
liability to decommission Indian Point 2 and Indian Point 1, to
Entergy. Entergy acquired Indian Point 1 in the transaction,
a plant that has been shut down and in safe storage since
the 1970s.
The acquisition was accounted for using the purchase method.
The results of operations of Indian Point 2 subsequent to the
purchase date have been included in Entergy’s consolidated
results of operations. The purchase price has been allocated to
the acquired assets, including identifiable intangible assets, and
liabilities assumed based on their estimated fair values on the
purchase date. Intangible assets are being amortized straight-line
over the remaining life of the plant.
Indian Point 3 and FitzPatrick
In November 2000, Entergy’s Non-Utility Nuclear business
acquired from NYPA the 825 MW James A. FitzPatrick nuclear
power plant near Oswego, New York, and the 980 MW Indian
Point 3 nuclear power plant located in Westchester County,
New York, in exchange for $50 million at closing and notes to
NYPA with payments totaling $906 million. Entergy will also be
required to make certain additional payments to NYPA in the
event that the plants’ license lives are extended.
The acquisition encompassed the nuclear plants, materials
and supplies, and nuclear fuel, as well as the assumption of
$124 million in liabilities. The purchase agreement provides
that NYPA will purchase a substantial majority of the output of
the units at specified prices through 2004. The purchase
agreement also provides that NYPA will retain the decommis-
sioning obligations and related trust funds through the
original license expiration date (approximately 2015). At that
time, NYPA is required either to transfer the decommissioning
liability to Entergy along with a specified amount in the
decommissioning trust funds, or to retain Entergy to perform
decommissioning services for a specified price that may be
limited by the amount in the trust. In the purchase price
allocation, Entergy recorded an asset representing its estimate
of the net present value of the decommissioning contract
obtained in the acquisition, based on an independent
decommissioning cost study and other projections. The asset
increases by monthly accretion based on the discount rate
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued