Entergy 2003 Annual Report Download - page 86

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
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
investment 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 the non-nuclear wholesale assets business, including
impairments of administrative fixed assets, estimated
sublease losses, and employee-related costs for approxi-
mately 135 affected employees. These restructuring
costs are included in the “Provision for turbine commit-
ments, asset impairments, and restructuring charges”
in the accompanying consolidated statement of income
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 5.6 – 5.1
Severance and related costs 5.9 5.9 – –
Total $39.1 $11.5 $22.5 $5.1
$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):
2003 2002 2001
Domestic $9,122,827 $8,051,992 $9,098,861
Foreign 72,093 253,043 522,038
Consolidated $9,194,920 $8,305,035 $9,620,899
Long-lived assets as of December 31 were as follows
(in thousands):
2003 2002 2001
Domestic $18,296,934 $17,664,230 $16,468,059
Foreign 1,863 773 421,870
Consolidated $18,298,797 $17,665,003 $16,889,929
NOTE 13. EQUITY METHOD INVESTMENTS
As of December 31, 2003, Entergy owns material invest-
ments in the following companies that it accounts for under
the equity method of accounting:
Company Ownership Description
Entergy-Koch, LP 50% partnership Engaged in two major
interest businesses: energy
commodity trading, which
includes power, gas, weather
derivatives, emissions, and
cross-commodities, and gas
transportation and storage
RS Cogen LLC 50% member Co-generation project that
interest produces power and steam
on an industrial and
merchant basis in the Lake
Charles, Louisiana area
EntergyShaw LLC 50% member Provides management,
interest engineering, procurement,
construction, and commis-
sioning services for
electric power plants
Crete Energy 50% member Own a merchant power
Ventures, LLC interest plant located in Crete,
Crete Turbine Illinois
Holding, LLC
Entergy sold its interest in the Crete project in January
2004 and realized an insignificant gain on the sale.
Following is a reconciliation of Entergy’s investments in
equity affiliates (in thousands):
2003 2002 2001
Beginning of year $ 824,209 $ 766,103 $136,487
Additional investments 4,668 36,372 471,102
Income from the investments 271,647 183,878 162,882
Other income 45,583 21,462 18,074
Dividends received (105,142) (73,902) (21,191)
Currency translation adjustments – – 138
Dispositions and other adjustments 12,363 (109,704) (1,389)
End of year $1,053,328 $ 824,209 $766,103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued