Entergy 2007 Annual Report Download - page 32

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Entergy Corporation and Subsidiaries 2007
Katrina infrastructure restoration costs. Entergy Mississippi also led
a Petition for Financing Order with the MPSC for authorization of
state bond nancing of $169 million for Hurricane Katrina restoration
costs and future storm costs. e $169 million amount included the
$89 million of Hurricane Katrina restoration costs plus $80 million
to build Entergy Mississippi’s storm damage reserve for the future.
Entergy Mississippi’s ling stated that the amount actually nanced
through the state bonds would be net of any CDBG funds that Entergy
Mississippi received.
In October 2006, the Mississippi Development Authority approved
for payment and Entergy Mississippi received $81 million in CDBG
funding for Hurricane Katrina costs. e MPSC then issued a nancing
order authorizing the issuance of state bonds to nance $8 million of
Entergy Mississippi’s certied Hurricane Katrina restoration costs and
$40 million for an increase in Entergy Mississippi’s storm damage
reserve. $30 million of the storm damage reserve was set aside in a
restricted account. A Mississippi state entity issued the bonds in
May 2007, and Entergy Mississippi received proceeds of $48 million.
Entergy Mississippi will not report the bonds on its balance sheet
because the bonds are the obligation of the state entity, and there is
no recourse against Entergy Mississippi in the event of a bond default.
To service the bonds, Entergy Mississippi is collecting a system
restoration charge on behalf of the state, and will remit the collections
to the state. By analogy to and in accordance with Entergy’s accounting
policy for collection of sales taxes, Entergy Mississippi will not report
the collections as revenue because it is merely acting as the billing and
collection agent for the state.
AD D I T I O N A L SE C U R I T I Z AT I O N PR O C E E D I N G S
Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Texas
have led with their respective retail regulators for recovery of storm
restoration costs, including through securitization. ese lings and
their results are discussed in Note 2 to the nancial statements.
EN T E R G Y NE W OR L E A N S BA N K R U P T C Y
As a result of the eects of Hurricane Katrina and the eect of extensive
ooding that resulted from levee breaks in and around the New Orleans
area, on September 23, 2005, Entergy New Orleans led a voluntary
petition in bankruptcy court seeking reorganization relief under Chapter
11 of the U.S. Bankruptcy Code. On May 7, 2007, the bankruptcy
judge entered an order conrming Entergy New Orleans’ plan of
reorganization. With the receipt of CDBG funds, and the agreement on
insurance recovery with one of its excess insurers, Entergy New Orleans
waived the conditions precedent in its plan of reorganization, and the
plan became eective on May 8, 2007. Following are signicant terms in
Entergy New Orleans’ plan of reorganization:
n฀ Entergy New Orleans paid in full, in cash, the allowed third-party
prepetition accounts payable (approximately $29 million, including
interest). Entergy New Orleans paid interest from September 23,
2005 at the Louisiana judicial rate of interest for 2005 (6%) and
2006 (8%), and at the Louisiana judicial rate of interest plus 1% for
2007 through the date of payment. e Louisiana judicial rate of
interest for 2007 is 9.5%.
n฀ Entergy New Orleans issued notes due in three years in satisfaction
of its aliate prepetition accounts payable (approximately $74
million, including interest), including its indebtedness to the
Entergy System money pool. Entergy New Orleans included in the
principal amount of the notes accrued interest from September 23,
2005 at the Louisiana judicial rate of interest for 2005 (6%)
and 2006 (8%), and at the Louisiana judicial rate of interest plus
1% for 2007 through the date of issuance of the notes. Entergy
New Orleans will pay interest on the notes from their date of
issuance at the Louisiana judicial rate of interest plus 1%. e
Louisiana judicial rate of interest is 9.5% for 2007 and 8.5% for 2008.
n฀ Entergy New Orleans repaid in full, in cash, the outstanding
borrowings under the debtor-in-possession credit agreement
between Entergy New Orleans and Entergy Corporation
(approximately $67 million).
n฀ Entergy New Orleans’ rst mortgage bonds will remain
outstanding with their current maturity dates and interest terms.
Pursuant to an agreement with its rst mortgage bondholders,
Entergy New Orleans paid the rst mortgage bondholders an
amount equal to the one year of interest from the bankruptcy
petition date that the bondholders had waived previously in the
bankruptcy proceeding (approximately $12 million).
n฀ Entergy New Orleans’ preferred stock will remain outstanding
on its current dividend terms, and Entergy New Orleans paid its
unpaid preferred dividends in arrears (approximately $1 million).
n฀ Litigation claims will generally be unaltered, and will generally
proceed as if Entergy New Orleans had not led for bankruptcy
protection, with exceptions for certain claims.
With conrmation of the plan of reorganization, Entergy
reconsolidated Entergy New Orleans in the second quarter 2007,
retroactive to January 1, 2007. Because Entergy owns all of the
common stock of Entergy New Orleans, reconsolidation does not
aect the amount of net income that Entergy recorded from Entergy
New Orleans’ operations for the current or prior periods, but does
result in Entergy New Orleans’ nancial results being included in each
individual income statement line item in 2007, rather than only its
net income being presented as “Equity in earnings of unconsolidated
equity aliates,” as will remain the case for 2005 and 2006.
RESULTS OF OPERATIONS
2007 CO M P A R E D T O 2006
Following are income statement variances for Utility, Non-Utility
Nuclear, Parent & Other business segments, and Entergy comparing
2007 to 2006 showing how much the line item increased or (decreased)
in comparison to the prior period (in thousands):
Non-Utility Parent &
Utility Nuclear Other Entergy
2006 Consolidated
Net Income $691,160 $309,496 $131,946 $1,132,602
Net revenue (operating revenue
less fuel expense,
purchased power, and
other regulatory charges
(credits) 346,753 451,374 (62,994) 735,133
Other operation and
maintenance expenses 207,468 122,511 (15,689) 314,290
Taxes other than
income taxes 42,553 16,265 1,679 60,497
Depreciation 46,307 27,510 2,103 75,920
Other income 8,732 (12,193) (90,071) (93,532)
Interest charges 15,405 (12,686) 81,633 84,352
Other (including discontinued
operations) (3,285) (30,129) 492 (32,922)
Income taxes 48,920 25,748 (3,295) 71,373
2007 Consolidated
Net Income (Loss) $682,707 $539,200 $(87,058) $1,134,849
Management’s Financial Discussion and Analysis conti nued