Entergy 2007 Annual Report Download - page 30

Entergy Corporation and Subsidiaries 2007
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Entergy operates primarily through two business segments: Utility
and Non-Utility Nuclear.
n฀ UTILITY generates, transmits, distributes, and sells electric power in
a four-state service territory that includes portions of Arkansas,
Mississippi, Texas, and Louisiana, including the City of New
Orleans; and operates a small natural gas distribution business.
n฀ ฀NON-UTILITY NUCLEAR owns and operates six nuclear power
plants located in the northern United States and sells the electric
power produced by those plants primarily to wholesale customers.
is business also provides services to other nuclear power
plant owners.
In addition to its two primary, reportable, operating segments, Entergy
also operates the non-nuclear wholesale assets business. e non-
nuclear wholesale assets business sells to wholesale customers the
electric power produced by power plants that it owns while it focuses
on improving performance and exploring sales or restructuring
opportunities for its power plants. Such opportunities are evaluated
consistent with Entergy’s market-based point-of-view.
Following are the percentages of Entergy’s consolidated revenues
and net income generated by its operating segments and the percentage
of total assets held by them:
% of Revenue
Segment 2007 2006 2005
Utility 80 84 84
Non-Utility Nuclear 18 14 14
Parent Company &
Other Business Segments 2 2 2
% of Net Income
Segment 2007 2006 2005
Utility 60 61 73
Non-Utility Nuclear 48 27 31
Parent Company &
Other Business Segments (8) 12 (4)
% of Total Assets
Segment 2007 2006 2005
Utility 78 81 82
Non-Utility Nuclear 21 17 16
Parent Company &
Other Business Segments 1 2 2
PLAN TO PURSUE SEPARATION OF NON-UTILITY NUCLEAR
In November 2007, the Board approved a plan to pursue a separation
of the Non-Utility Nuclear business from Entergy through a tax-free
spin-o of Non-Utility Nuclear to Entergy shareholders. SpinCo, the
term used to identify the new company that is yet to be named, will
be a new, separate, and publicly-traded company. In addition, under
the plan, SpinCo and Entergy are expected to enter into a nuclear
services business joint venture, with 50% ownership by SpinCo and
50% ownership by Entergy. e nuclear services business board of
directors will be comprised of equal membership from both Entergy
and SpinCo and may include independent directors.
Upon completion of the spin-o, Entergy Corporation’s shareholders
will own 100% of the common equity in both SpinCo and Entergy.
Entergy expects that SpinCo’s business will be substantially comprised
of Non-Utility Nuclear’s assets, including its six nuclear power plants,
and Non-Utility Nuclear’s power marketing operation. Entergy
Corporation’s remaining business will primarily be comprised of the
Utility business. e nuclear services business joint venture is expected
to operate the nuclear assets owned by SpinCo. e nuclear services
business is also expected to oer nuclear services to third parties,
including decommissioning, plant relicensing, and plant operation
support services, including the services currently provided for the
Cooper Nuclear Station in Nebraska.
Entergy Nuclear Operations, Inc., the current Nuclear Regulatory
Commission (NRC)-licensed operator of the Non-Utility Nuclear
plants, led an application in July 2007 with the NRC seeking indirect
transfer of control of the operating licenses for the six Non-Utility
Nuclear power plants, and supplemented that application in December
2007 to incorporate the planned business separation. Entergy Nuclear
Operations, Inc. will remain the operator of those plants aer
the separation. Entergy Operations, Inc., the current NRC-licensed
operator of Entergy’s ve Utility nuclear plants, will remain a wholly-
owned subsidiary of Entergy and will continue to be the operator of
the Utility nuclear plants. In the December 2007 supplement to the
NRC application, Entergy Nuclear Operations provided additional
information regarding the spin-o transaction, organizational structure,
technical and nancial qualications, and general corporate information.
e NRC published a notice in the Federal Register establishing a period
for the public to submit a request for hearing or petition to intervene in
a hearing proceeding. e NRC notice period expired on February 5,
2008 and two petitions to intervene in the hearing proceeding were led
before the deadline. Each of the petitions opposes the NRC’s approval
of the license transfer on various grounds, including contentions that
the approval request is not adequately supported regarding the basis for
the proposed structure, the adequacy of decommissioning funding, and
the adequacy of nancial qualications. Entergy will submit answers to
the petitions, and the NRC or a presiding ocer designated by the NRC
will determine whether a hearing will be granted. If a hearing is granted,
the NRC is expected to issue a procedural schedule providing for
limited discovery, written testimony and a legislative-type hearing. e
NRC will continue to review the application and prepare a Safety
Evaluation Report.
On January 28, 2008, Entergy Nuclear Vermont Yankee and Entergy
Nuclear Operations, Inc. requested approval from the Vermont Public
Service Board for the indirect transfer of control, consent to pledge
assets, guarantees and assignments of contracts, amendment to
certicate of public good to reect name change, and replacement of
guaranty and substitution of a credit support agreement for Vermont
Yankee. A prehearing conference scheduled for February 27, 2008 was
postponed due to weather.
On January 28, 2008, Entergy Nuclear FitzPatrick, Entergy Nuclear
Indian Point 2, Entergy Nuclear Indian Point 3, Entergy Nuclear
Operations, and corporate aliate NewCo (also referred to as SpinCo)
led a petition with the New York Public Service Commission (NYPSC)
requesting a declaratory ruling regarding corporate reorganization or
in the alternative an order approving the transaction and an order
approving debt nancing. Petitioners also requested conrmation
that the corporate reorganization will not have an eect on Entergy
Nuclear FitzPatrick’s, Entergy Nuclear Indian Point 2’s, Entergy
Nuclear Indian Point 3’s, and Entergy Nuclear Operations, Inc.’s
status as lightly regulated entities in New York, given that they will
continue to be competitive wholesale generators. e deadline for
parties to le comments or request intervention is April 7, 2008.
Pursuant to Federal Power Act Section 203, on February 21, 2008, an
application was led with the FERC requesting approval for the indirect
disposition and transfer of control of jurisdictional facilities of a public
utility. e review of the ling by FERC will be focused on determining
that the transaction will have no adverse eects on competition,
wholesale or retail rates, and on federal and state regulation. Also, the
FERC will seek to determine that the transaction will not result in
Management’s Financial Discussion and Analysis