Entergy 2004 Annual Report Download - page 79

Entergy Corporation and Subsidiaries 2004
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On April 19, 2004, CashPoint failed to pay funds due to
the domestic utility companies that had been collected through
payment agents. The domestic utility companies then obtained a
temporary restraining order from the Civil District Court for the
Parish of Orleans, State of Louisiana, enjoining CashPoint from
distributing funds belonging to Entergy, except by paying those
funds to Entergy. On April 22, 2004, a petition for involuntary
Chapter 7 bankruptcy was filed against CashPoint by other
creditors in the United States Bankruptcy Court for the Southern
District of New York. In response to these events, the domestic
utility companies expanded an existing contract with another
company to manage all of their payment agents. The domestic
utility companies filed proofs of claim in the CashPoint
bankruptcy proceeding in September 2004. Although Entergy
cannot precisely determine at this time the amount that CashPoint
owes to the domestic utility companies that may not be repaid, it
has accrued an estimate of loss based on current information. If no
cash is repaid to the domestic utility companies, an event Entergy
does not believe is likely, the current estimate of maximum exposure
to loss is approximately $25 million.
Employment Litigation
Entergy Corporation and certain subsidiaries are defendants in
numerous lawsuits filed by former employees asserting that they
were wrongfully terminated and/or discriminated against on the
basis of age, race, sex, and/or other protected characteristics.
Entergy Corporation and these subsidiaries are vigorously defend-
ing these suits and deny any liability to the plaintiffs. Nevertheless,
no assurance can be given as to the outcome of these cases.
NOTE 9. LEASES
General
As of December 31, 2004, Entergy had capital leases and non-
cancelable operating leases for equipment, buildings, vehicles, and
fuel storage facilities (excluding nuclear fuel leases and the Grand
Gulf and Waterford 3 sale and leaseback transactions) with
minimum lease payments as follows (in thousands):
Operating Capital
Year Leases Leases
2005 $ 99,246 $ 9,660
2006 85,769 5,724
2007 68,557 3,438
2008 55,155 1,754
2009 45,240 237
Years thereafter 210,474 2,606
Minimum lease payments $564,441 $23,419
Less: Amount representing interest – 3,388
Present value of net
minimum lease payments $564,441 $20,031
Total rental expenses for all leases (excluding nuclear fuel leases
and the Grand Gulf and Waterford 3 sale and leaseback
transactions) amounted to $81.3 million in 2004, $84.3 million in
2003, and $92.2 million in 2002.
Nuclear Fuel Leases
As of December 31, 2004, arrangements to lease nuclear fuel
existed in an aggregate amount up to $150 million for Entergy
Arkansas, $105 million for Entergy Gulf States, $80 million for
Entergy Louisiana, and $110 million for System Energy. As of
December 31, 2004, the unrecovered cost base of nuclear fuel
leases amounted to approximately $93.9 million for Entergy
Arkansas, $71.2 million for Entergy Gulf States, $31.7 million for
Entergy Louisiana, and $65.6 million for System Energy. The
lessors finance the acquisition and ownership of nuclear fuel
through loans made under revolving credit agreements, the issuance
of commercial paper, and the issuance of intermediate-term notes.
The credit agreements for Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and System Energy each have a termination
date of October 30, 2006. The termination dates may be extended
from time to time with the consent of the lenders.The intermediate-
term notes issued pursuant to these fuel lease arrangements have
varying maturities through February 15, 2009. It is expected that
additional financing under the leases will be arranged as needed to
acquire additional fuel, to pay interest, and to pay maturing debt.
However, if such additional financing cannot be arranged, the
lessee in each case must repurchase sufficient nuclear fuel to allow
the lessor to meet its obligations in accordance with the fuel lease.
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 $146.6
million(including interest of $12.8 million) in 2004, $142.0 million
(including interest of $11.8 million) in 2003, and $137.8
million (including interest of $11.3 million) in 2002.
Sale and Leaseback Transactions
In 1988 and 1989, System Energy and Entergy Louisiana,
respectively, sold and leased back portions of their ownership
interests in Grand Gulf and Waterford 3 for 26½-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 arrangements, letters
of credit are required to be maintained to secure certain amounts
payable for the benefit of the equityinvestors by System Energy
under the leases. The current letters of credit are effective until
May2009.
Entergy Louisiana did not exercise its option to repurchase the
undivided interests in Waterford 3 in 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 mortgage bonds in the aggregate principal amount of
$208.2 millionissued by Entergy Louisiana in September 1994.
In July 1997, Entergy Louisiana caused the Waterford 3 lessors
to issue $307.6 million aggregate principal amount of Waterford 3
Secured Lease ObligationBonds, 8.09% Series due 2017, to
refinance the outstanding bonds originally issued to finance the
purchase of the undivided interests by the lessors. In May 2004,
System Energy caused the Grand Gulf lessors to refinance the
outstanding bonds that they had issued to finance the purchase of
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued