Entergy 2007 Annual Report Download - page 97

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Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
Earnings were negatively aected in the fourth quarter 2007 by
expenses of $22.2 million ($13.6 million net-of-tax) for Utility and
$29.9 million ($18.4 million net-of-tax) for Non-Utility Nuclear
recorded in connection with a nuclear operations eet alignment. is
process was undertaken with the goals of eliminating redundancies,
capturing economies of scale, and clearly establishing organizational
governance. Most of the expenses related to the voluntary severance
program oered to employees. Approximately 200 employees from
the Non-Utility Nuclear business and 150 employees in the Utility
business accepted the voluntary severance program oers.
In the fourth quarter 2005, Entergy decided to divest the retail
electric portion of the Competitive Retail Services business operating
in the ERCOT region of Texas. Due to this planned divestiture, activity
from this business is reported as discontinued operations in the
Consolidated Statements of Income. In connection with the planned
sale, an impairment reserve of $39.8 million ($25.8 million net-of-tax)
was recorded for the remaining net book value of the Competitive
Retail Services business’ information technology systems.
Revenues and pre-tax income (loss) related to the Competitive
Retail Services business’ discontinued operations were as follows
(in thousands):
2007 2006 2005
Operating revenues $– $134,444 $654,333
Pre-tax income (loss) $– $ (429) $(68,854)
ere were no assets or liabilities related to the Competitive Retail
Services business’ discontinued operations as of December 31, 2007
and 2006.
GE O G R A P H I C AR E A S
For the year ended December 31, 2007, Entergy derived none of
its revenue from outside of the United States. For the years ended
December 31, 2006 and 2005, Entergy derived less than 1% of its
revenue from outside of the United States.
As of December 31, 2007 and 2006, Entergy had no long-lived assets
located outside of the United States.
NOTE 14. EQUITY METHOD INVESTMENTS
As of December 31, 2007, Entergy owns investments in the
following companies that it accounts for under the equity method of
accounting:
Company Ownership Description
Entergy-Koch, LP 50% partnership interest Entergy-Koch was in the
energy commodity marketing
and trading business and gas
transportation and storage
business until the fourth
quarter of 2004 when these
businesses were sold.
RS Cogen LLC 50% member interest Co-generation project that
produces power and steam on
an industrial and merchant
basis in the Lake Charles,
Louisiana area.
Top Deer 50% member interest Wind-powered electric
generation joint venture.
Following is a reconciliation of Entergy’s investments in equity aliates
(in thousands):
2007 2006 2005
Beginning of year $229,089 $296,784 $231,779
Entergy New Orleans(a) (153,988) – 154,462
Income from the investments 3,176 93,744 985
Distributions received – (163,697) (80,901)
Dispositions and other adjustments 715 2,258 (9,541)
End of year $ 78,992 $229,089 $296,784
(a) As a result of Entergy New Orleans’ bankruptcy filing in September
2005, Entergy deconsolidated Entergy New Orleans and reflected
Entergy New Orleans’ financial results under the equity method of ac-
counting retroactive to January 1, 2005. In May 2007, with confirma-
tion of the plan of reorganization, Entergy reconsolidated Entergy New
Orleans retroactive to January 1, 2007 and no longer accounts for
Entergy New Orleans under the equity method of accounting. See Note
18 to the financial statements for further discussion of the bankruptcy
proceeding.
e following is a summary of combined nancial information
reported by Entergy’s equity method investees (in thousands):
2007 2006(1) 2005(1)
Income Statement Items
Operating revenues $ 65,600 $ 632,820 $721,410
Operating income $ 22,606 $ 27,452 $ 9,526
Net income $ 6,257 $ 212,210(2) $ 1,592
Balance Sheet Items
Current assets $ 96,624 $ 262,506
Noncurrent assets $372,421 $1,163,392
Current liabilities $ 92,423 $ 389,526
Noncurrent liabilities $229,037 $ 722,524
(1) Includes financial information for Entergy New Orleans which
was accounted for under the equity method of accounting in 2006
and 2005.
(2) Includes gains recorded by Entergy-Koch on the sales of its energy
trading and pipeline businesses.
RE L AT E D -PA R T Y T R A N S A C T I O N S A N D GUA R A N T E E S
See Note 18 to the nancial statements for a discussion of the Entergy
New Orleans bankruptcy proceedings and activity between Entergy
and Entergy New Orleans.
Entergy Louisiana and Entergy New Orleans entered into purchase
power agreements with RS Cogen that expired in April 2006, and
purchased a total of $15.8 million and $61.2 million of capacity
and energy from RS Cogen in 2006 and 2005, respectively. Entergy
Gulf States Louisiana purchased approximately $68.4 million, $64.3
million, and $12.4 million, of electricity generated from Entergy’s
share of RS Cogen in 2007, 2006, and 2005, respectively. Entergy’s
operating transactions with its other equity method investees were not
signicant in 2007, 2006, or 2005.
In the purchase agreements for its energy trading and the pipeline
business sales, Entergy-Koch agreed to indemnify the respective
purchasers for certain potential losses relating to any breaches of
the seller’s representations, warranties, and obligations under each
of the purchase agreements. Entergy Corporation has guaranteed
up to 50% of Entergy-Koch’s indemnication obligations to the
purchasers. Entergy does not expect any material claims under these
indemnication obligations.