Entergy 2004 Annual Report Download - page 85

Entergy Corporation and Subsidiaries 2004
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In the fourth quarter of 2004, Entergy recorded a charge of
approximately $55 million ($36 million net-of-tax) as a result of an
impairment of the value of the Warren Power plant. Entergy
concluded that the value of the plant, which is owned in the
non-nuclear wholesale assets business, was impaired. Entergy
reached this conclusion based on valuation studies prepared in
connection with the sale of preferred stock in a subsidiary in the
non-nuclear wholesale assets business.
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 millionnet-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 sparkspreads 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 approximately 135 affected
employees. These restructuring costs, which are included in the
“Provision for turbine commitments, asset impairments, and
restructuring charges” in the accompanying consolidated
statement of income, were comprised of the following
(in millions): Paid in Remaining
Cash Accrual
Restructuring through Non-Cash as of
Costs Dec. 2004 Portion Dec. 31, 2004
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
For the years ended December 31, 2004 and 2003, Entergy derived
less than 1% of its revenue from outside of the United States. For
the year ended December 31, 2002 Entergy derived 3% of its
revenue from outside of the United States.
As of December 31, 2004 and 2003, Entergy had almost no
long-lived assets located outside of the United States.
NOTE 12. EQUITY METHOD INVESTMENTS
As of December 31, 2004, Entergy owns investments in the follow-
ing companies that it accounts for under the equity method of
accounting:
Company Ownership Description
Entergy-Koch, LP 50% partnership Engaged in two major busi-
interest nesses: energy commodity
marketing and trading
through Entergy-Koch
Trading, and gas transporta-
tionand storage through Gulf
South Pipeline. Entergy-
Kochsold both of these busi-
nesses in the fourth quarter of
2004, and Entergy-Koch is no
longer an operating entity.
RSCogen LLC 50% member Co-generation project that
interest produces power and steam
onan industrial and
merchant basis in the Lake
Charles, Louisiana area.
Top Deer 50% member Wind-powered electric gener-
interest ation joint venture.
Following is a reconciliationof Entergy’sinvestments in equity
affiliates (in thousands):
2004 2003 2002
Beginning of year $1,053,328 $ 824,209 $ 766,103
Additional investments 157,020 4,668 36,372
Income (loss) from the investments (78,727) 271,647 183,878
Other income 6,232 45,583 21,462
Distributions received (888,260) (105,142) (73,902)
Dispositions and other adjustments (17,814) 12,363 (109,704)
End of year $ 231,779 $1,053,328 $ 824,209
The following is a summaryof combined financial information
reported by Entergy’s equity method investees (in thousands):
2004 2003 2002
Income Statement Items
Operating revenues $ 270,177 $ 585,404 $ 551,853
Operating income $(111,535) $ 207,301 $ 159,342
Net income $ 739,858(1) $ 172,595 $ 68,095
Balance Sheet Items
Current assets $ 540,386 $2,576,630
Noncurrent assets $ 418,038 $1,675,334
Current liabilities $ 180,009 $1,757,663
Noncurrent liabilities $ 463,899 $1,166,540
(1) Includes gains recorded by Entergy-Koch on the sales of its energy trading and
pipeline businesses.
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued