Entergy 2003 Annual Report Download - page 76

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
Provisions within the Articles of Incorporation or pertinent
indentures and various other agreements relating to the
long-term debt and preferred stock of certain of Entergy
Corporation’s subsidiaries restrict the payment of cash
dividends or other distributions on their common and pre-
ferred stock. As of December 31, 2003, Entergy Arkansas
and Entergy Mississippi had restricted retained earnings
unavailable for distribution to Entergy Corporation of
$309.4 million and $41.9 million, respectively. Additionally,
PUHCA prohibits Entergy Corporation’s subsidiaries from
making loans or advances to Entergy Corporation. In 2003,
Entergy Corporation received dividend payments totaling
$425 million from subsidiaries.
Investments in affiliates that are not controlled by
Entergy Corporation, but over which it has significant
influence, are accounted for using the equity method.
Entergy’s retained earnings include undistributed earnings
of equity method investees of $472.0 million in 2003 and
$304.1 million in 2002. Equity method investments are dis-
cussed in Note 13 to the consolidated financial statements.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Entergy is involved in a number of legal, tax, and regulatory
proceedings before various courts, regulatory commissions,
and governmental agencies in the ordinary course of its
business. While management is unable to predict the outcome
of such proceedings, management does not believe that the
ultimate resolution of these matters will have a material
adverse effect on Entergy’s results of operations, cash flows,
or financial condition.
SALES WARRANTIES AND INDEMNITIES
In the Saltend sales transaction discussed further in
Note 14 to the consolidated financial statements, Entergy
or its subsidiaries made certain warranties to the pur-
chasers relating primarily to the performance of certain
remedial work on the facility and the assumption of respon-
sibility for certain contingent liabilities. Entergy believes
that it has provided adequately for the warranties as of
December 31, 2003.
VIDALIA PURCHASED POWER AGREEMENT
Entergy Louisiana has an agreement extending through
the year 2031 to purchase energy generated by a hydro-
electric facility known as the Vidalia project. Entergy
Louisiana made payments under the contract of approxi-
mately $112.6 million in 2003, $104.2 million in 2002,
and $86.0 million in 2001. If the maximum percentage
(94%) of the energy is made available to Entergy
Louisiana, current production projections would require
estimated payments of approximately $116.5 million in
2004, and a total of $3.6 billion for the years 2005
through 2031. Entergy Louisiana currently recovers the
costs of the purchased energy through its fuel adjustment
clause. In an LPSC-approved settlement related to tax
benefits from the tax treatment of the Vidalia contract,
Entergy Louisiana agreed to credit rates by $11 million
each year for up to ten years, beginning in October 2002.
NUCLEAR INSURANCE
Third Party Liability Insurance
The Price-Anderson Act provides insurance for the public in
the event of a nuclear power plant accident. The costs of this
insurance are borne by the nuclear power industry.
Originally passed by Congress in 1957 and most recently
amended in 1988, the Price-Anderson Act requires nuclear
power plants to show evidence of financial protection in the
event of a nuclear accident. This protection must consist of
two levels:
1. The primary level is private insurance underwritten by
American Nuclear Insurers and provides liability
insurance coverage of $300 million. If this amount is
not sufficient to cover claims arising from the accident,
the second level, Secondary Financial Protection, applies.
An industry-wide aggregate limitation of $300 million
exists for domestically-sponsored terrorist acts. There is
no limitation for foreign-sponsored terrorist acts.
2. Within the Secondary Financial Protection level, each
nuclear plant must pay a retrospective premium, equal
to its proportionate share of the loss in excess of the
primary level, up to a maximum of $100.6 million per
reactor per incident. This consists of a $95.8 million
maximum retrospective premium plus a five percent
surcharge that may be applied, if needed, at a rate that
is presently set at $10 million per year per nuclear
power reactor. There are no domestically- or foreign-
sponsored terrorism limitations.
Currently, 105 nuclear reactors are participating in the
Secondary Financial Protection program - 103 operating
reactors and two closed units that still store used nuclear
fuel on site. The product of the maximum retrospective
premium assessment to the nuclear power industry and the
number of nuclear power reactors provides over $10 billion
in insurance coverage to compensate the public in the event
of a nuclear power reactor accident.
Entergy owns and operates ten of the nuclear power
reactors, and owns the shutdown Indian Point 1 reactor (10%
of Grand Gulf 1 is owned by a non-affiliated company which
would share on a pro-rata basis in any retrospective premium
assessment under the Price-Anderson Act).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
continued