Entergy 2006 Annual Report Download - page 51

ENTERGY CORPORATION AND SUBSIDIARIES 2
2000066
FERC Short-Term Order authorized the Registrant Subsidiaries
(except Entergy New Orleans which is authorized by an SEC
PUHCA 1935 order) to continue as participants in the Entergy
System money pool. The money pool is an intercompany borrowing
arrangement designed to reduce Entergy’s subsidiaries’ dependence on
external short-term borrowings. Borrowings from the money pool
and external short-term borrowings combined may not exceed
authorized limits. As of December 31, 2006, Entergy’s subsidiaries’
aggregate money pool and external short-term borrowings authorized
limit was $2.0 billion, the aggregate outstanding borrowing from the
money pool was $251.6 million, and Entergy’s subsidiaries had no
outstanding short-term borrowing from external sources. To the
extent that the Registrant Subsidiaries wish to rely on SEC financing
orders under PUHCA 1935, there are capitalization and investment
grade ratings conditions that must be satisfied in connection with
security issuances, other than money pool borrowings. See Note 4 to
the financial statements for further discussion of Entergy’s short-term
borrowing limits.
CASH FLOW ACTIVITY
As shown in Entergy’s Statements of Cash Flows, cash flows for
the years ended December 31, 2006, 2005, and 2004 were as follows
(in millions):
2006 2005 2004
Cash and cash equivalents
at beginning of period $ 583 $ 620 $ 507
Effect of deconsolidating
Entergy New Orleans in 2005 – (8) –
Cash flow provided by (used in):
Operating activities 3,419 1,468 2,929
Investing activities (1,899) (1,992) (1,143)
Financing activities (1,084) 496 (1,672)
Effect of exchange rates on
cash and cash equivalents (3) (1) (1)
Net increase (decrease) in
cash and cash equivalents 433 (29) 113
Cash and cash equivalents
at end of period $ 1,016 $ 583 $ 620
Operating Cash Flow Activity
2006 Compared to 2005
Entergy’s cash flow provided by operating activities increased
by $1,952 million in 2006 compared to 2005 primarily due to the
following activity:
■Utility provided $2,564 million in cash from operating activities
in 2006 compared to providing $964 million in 2005 primarily
due to increased recovery of fuel costs, the receipt of an income
tax refund (discussed below), a decrease in storm restoration
spending, and the effect in 2005 of a $90 million refund paid
to customers in Louisiana, partially offset by an increase of
$136 million in pension funding payments.
■Non-Utility Nuclear provided $833 million in cash from
operating activities in 2006 compared to providing $551 million
in 2005 primarily due to an increase in net revenue and the
receipt of an income tax refund (discussed below).
Entergy Corporation received a $344 million income tax refund
(including $71 million attributable to Entergy New Orleans) as a
result of net operating loss carryback provisions contained in the Gulf
Opportunity Zone Act of 2005. The Gulf Opportunity Zone Act was
enacted in December 2005. The Act contains provisions that allow a
public utility incurring a net operating loss as a result of Hurricane
Katrina to carry back the casualty loss portion of the net operating loss
ten years to offset previously taxed income. The Act also allows a five-
year carry back of the portion of the net operating loss attributable to
Hurricane Katrina repairs expense and first year depreciation deduc-
tions, including 50% bonus depreciation, on Hurricane Katrina
capital expenditures. In accordance with Entergy’s intercompany tax
allocation agreement, $273 million of the refund was distributed to
the Utility (including Entergy New Orleans) in April 2006, with the
remainder distributed primarily to Non-Utility Nuclear.
2005 Compared to 2004
Entergy’s cash flow provided by operating activities decreased
by $1,461 million in 2005 compared to 2004 primarily due to the
following activity:
■The Utility provided $964 million in cash from operating
activities compared to providing $2,208 million in 2004. The
decrease resulted primarily from restoration spending and lost net
revenue caused by Hurricanes Katrina and Rita. Changes in the
timing of fuel cost recovery compared to the prior period due to
higher natural gas prices, which caused an increase in deferred
fuel cost balances, also contributed to the decrease in cash from
operating activities. Also contributing to the decrease in the
Utility segment were increases in income tax payments and in
pension plan contributions, and a $90 million refund to
customers in the Louisiana jurisdiction made as a result of an
LPSC-approved settlement.
■Entergy received dividends from Entergy-Koch of $529 million in
2004 and did not receive any dividends from Entergy-Koch
in 2005.
■Offsetting the decreases in those two businesses, the Non-Utility
Nuclear business provided $551 million in cash from operating
activities compared to providing $415 million in 2004. The
increase resulted primarily from lower intercompany income tax
payments and increases in generation and contract pricing that
led to an increase in revenues.
Investing Activities
2006 Compared to 2005
Net cash used in investing activities decreased slightly in 2006
compared to 2005 and was affected by the following activity:
■The proceeds from the sale of the retail electric portion of the
Competitive Retail Services business operating in the ERCOT
region of Texas and the sale of the non-nuclear wholesale asset
business’ remaining interest in a power development project.
■Entergy Mississippi purchased the 480 MW Attala power plant in
January 2006 for $88 million and Entergy Louisiana purchased the
718 MW Perryville power plant in June 2005 for $162 million.
■Liquidation of other temporary investments net of purchases
provided $188 million in 2005. Entergy had no activity in other
temporary investments in 2006.
■The Utility used $390 million in 2005 for other regulatory
investments as a result of fuel cost under-recovery. See Note 1 to
the financial statements for discussion of the accounting
treatment of these fuel cost under-recoveries.
MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS continued
35