Entergy 2003 Annual Report Download - page 80

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
Lease payments are based on nuclear fuel use. The total
nuclear fuel lease payments (principal and interest) as well
as the separate interest component charged to operations
by the domestic utility companies and System Energy
were $142.0 million (including interest of $11.8 million) in
2003, $137.8 million (including interest of $11.3 million) in
2002, and $149.3 million (including interest of $17.2 million)
in 2001.
SALE AND LEASEBACK TRANSACTIONS
In 1988 and 1989, System Energy and Entergy Louisiana,
respectively, sold and leased back portions of their owner-
ship interests in Grand Gulf 1 and Waterford 3 for 26 1/2-
year and 28-year lease terms, respectively. Both companies
have options to terminate the leases, to repurchase the sold
interests, or to renew the leases at the end of their terms.
Under System Energy’s sale and leaseback arrange-
ments, letters of credit are required to be maintained to
secure certain amounts payable for the benefit of the equi-
ty investors by System Energy under the leases. The cur-
rent letters of credit are effective until March 20, 2003.
Entergy Louisiana did not exercise its option to repur-
chase the undivided interests in Waterford 3 in September
1994. As a result, Entergy Louisiana was required to provide
collateral for the equity portion of certain amounts payable
by Entergy Louisiana under the leases. Such collateral was
in the form of a new series of non-interest bearing first mort-
gage bonds in the aggregate principal amount of $208.2 mil-
lion issued by Entergy Louisiana in September 1994.
In July 1997, Entergy Louisiana caused the Waterford 3
lessors to issue $307.6 aggregate principal amount of
Waterford 3 Secured Lease Obligation Bonds, 8.09% Series
due 2017, to refinance the outstanding bonds originally
issued to finance the purchase of the undivided interests by
the lessors. The lease payments have been reduced to reflect
the lower interest costs.
As of December 31, 2003, System Energy and Entergy
Louisiana had future minimum lease payments, recorded
as long-term debt (reflecting an overall implicit rate of
7.02% and 7.45%, respectively) as follows (in thousands):
Entergy System
Louisiana Energy
2004 $ 31,739 $ 36,133
2005 14,554 52,253
2006 18,262 52,253
2007 18,754 52,253
2008 22,606 52,253
Years thereafter 366,514 365,176
Total $472,429 $610,321
Less: Amount representing interest 209,895 206,853
Present value of net
minimum lease payments $262,534 $403,468
NOTE 11. RETIREMENT, OTHER
POSTRETIREMENT BENEFITS, AND
DEFINED CONTRIBUTION PLANS
PENSION PLANS
Entergy has seven pension plans covering substantially all
of its employees: “Entergy Corporation Retirement Plan
for Non-Bargaining Employees,” “Entergy Corporation
Retirement Plan for Bargaining Employees,” “Entergy
Corporation Retirement Plan II for Non-Bargaining
Employees,” “Entergy Corporation Retirement Plan II for
Bargaining Employees,” “Entergy Corporation Retirement
Plan III,” “Entergy Corporation Retirement Plan IV for
Non-Bargaining Employees,” and “Entergy Corporation
Retirement Plan IV for Bargaining Employees.” Except for
the Entergy Corporation Retirement Plan III, the pension
plans are noncontributory and provide pension benefits that
are based on employees’ credited service and compensation
during the final years before retirement. The Entergy
Corporation Retirement Plan III includes a mandatory
employee contribution of 3% of earnings during the first 10
years of plan participation, and allows voluntary contribu-
tions from 1% to 10% of earnings for a limited group of
employees. Entergy Corporation and its subsidiaries fund
pension costs in accordance with contribution guidelines
established by the Employee Retirement Income Security Act
of 1974, as amended, and the Internal Revenue Code of 1986,
as amended. The assets of the plans include common and
preferred stocks, fixed-income securities, interest in a money
market fund, and insurance contracts. As of December 31,
2003 and December 31, 2002, Entergy recognized an
additional minimum pension liability for the excess of the
accumulated benefit obligation over the fair market value
of plan assets. In accordance with FASB 87, an offsetting
intangible asset, up to the amount of any unrecognized prior
service cost, was also recorded, with the remaining offset to
the liability recorded as a regulatory asset reflective of the
recovery mechanism for pension costs in Entergy’s jurisdic-
tions. Entergy’s domestic utility companies’ and System
Energy’s pension costs are recovered from customers as a
component of cost of service in each of its jurisdictions.
Entergy uses a December 31 measurement date for its
pension plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
continued