Entergy 2003 Annual Report Download - page 87

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
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In accordance with the partnership agreement, Entergy
contributed $72.7 million to Entergy-Koch in January 2004.
The following is a summary of combined financial
information reported by Entergy’s equity method investees
(in thousands):
2003 2002 2001
Income Statement Items
Operating revenues $ 585,404 $ 551,853 $693,400
Operating income $ 207,301 $ 159,342 $309,752
Net income $ 172,595 $ 68,095 $226,039
Balance Sheet Items
Current assets $2,576,630 $2,334,133
Noncurrent assets $1,675,334 $1,490,355
Current liabilities $1,757,663 $1,782,385
Noncurrent liabilities $1,166,540 $ 729,817
Two of the unconsolidated 50/50 joint ventures, Entergy-
Koch and RS Cogen, have obtained debt financing for their
operations. As of December 31, 2003, the debt financing
outstanding for those two entities totals $773.8 million,
which is included in the liability figures given above. This
debt is nonrecourse to Entergy.
RELATED-PARTY TRANSACTIONS AND GUARANTEES
During 2003, 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 2003, 2002, and 2001 was
approximately $15.9 million, $11.2 million, and $7.8 million,
respectively. In 2003, Entergy Louisiana and Entergy New
Orleans entered purchase power agreements with RS
Cogen, and purchased a total of $26.0 million of capacity
and energy from RS Cogen in 2003. Entergy’s operating
transactions with its other equity method investees were
not material in 2003, 2002, or 2001.
EntergyShaw constructed the Harrison County project
for Entergy that was completed in 2003. Entergy guaran-
teed EntergyShaw’s obligation to construct the plant until
approximately June 2004. Entergy’s maximum liability on
the guarantee is $232.5 million.
RS Cogen has an interest rate swap agreement that
hedges the interest rate on a portion of its debt. Entergy
guaranteed RS Cogen’s obligations under the interest
rate swap agreement. The guarantee is in the amount of
$16.5 million and terminates in October 2017.
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 adjust-
ment clause which provides that 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 subse-
quent to the purchase date have been included in Entergy’s
consolidated results of operations. The purchase price has
been allocated to the assets acquired and liabilities assumed
based on their estimated fair values on the purchase date.
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 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 accor-
dance 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 trans-
ferred 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 subse-
quent 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.