Entergy 2008 Annual Report Download - page 104

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
Notes to Consolidated Financial Statements continued
102
NOTE 17. DECOMMISSIONING TRUST FUNDS
Entergy holds debt and equity securities, classified as available-for-
sale, in nuclear decommissioning trust accounts. The NRC requires
Entergy to maintain trusts to fund the costs of decommissioning
ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim,
Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA
currently retains the decommissioning trusts and liabilities for
Indian Point 3 and FitzPatrick). The funds are invested primarily
in equity securities; fixed-rate, fixed-income securities; and cash and
cash equivalents. The securities held at December 31, 2008 and 2007
are summarized as follows (in millions):
Total Total
Fair Unrealized Unrealized
Value Gains Losses
2008
Equity securities $1,436 $ 85 $177
Debt securities 1,396 77 21
Total $2,832 $162 $198
2007
Equity securities $1,928 $466 $ 9
Debt securities 1,380 40 3
Total $3,308 $506 $ 12
The debt securities have an average coupon rate of approximately
4.95%, an average duration of approximately 5.13 years, and an
average maturity of approximately 8.9 years. The equity securities
are generally held in funds that are designed to approximate or
somewhat exceed the return of the Standard & Poor’s 500 Index.
A relatively small percentage of the securities are held in funds
intended to replicate the return of the Wilshire 4500 Index or the
Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale
equity and debt securities, summarized by investment type and
length of time that the securities have been in a continuous loss
position, are as follows at December 31, 2008 (in millions):
Equity Securities Debt Securities
Gross Gross
Fair Unrealized Fair Unrealized
Value Losses Value Losses
Less than 12 months $968 $160 $271 $18
More than 12 months 29 17 17 3
Total $997 $177 $288 $21
The unrealized losses in excess of twelve months above relate to
Entergy’s Utility operating companies and System Energy.
The fair value of debt securities, summarized by contractual
maturities, at December 31, 2008 and 2007 are as follows
(in millions):
2008 2007
Less than 1 year $ 21 $ 83
1 year – 5 years 526 388
5 years – 10 years 490 535
10 years – 15 years 146 127
15 years – 20 years 52 81
20 years+ 161 166
Total $1,396 $1,380
During the years ended December 31, 2008, 2007, and 2006,
proceeds from the dispositions of securities amounted to $1,652
million, $1,583 million, and $778 million, respectively. During
the years ended December 31, 2008, 2007, and 2006, gross gains
of $26 million, $5 million, and $5 million, respectively, and gross
losses of $20 million, $4 million, and $10 million, respectively, were
reclassified out of other comprehensive income into earnings.
OT H E R TH A N TE M P O R A R Y IM P A I R M E N T S A N D
UN R E A L I Z E D GA I N S A N D LO S S E S
Entergy evaluates unrealized losses at the end of each period to
determine whether an other than temporary impairment has
occurred. The assessment of whether an investment has suffered
an other than temporary impairment is based on a number of factors
including, first, whether Entergy has the ability and intent to hold
the investment to recover its value, the duration and severity of
any losses, and, then, whether it is expected that the investment
will recover its value within a reasonable period of time. Entergy’s
trusts are managed by third parties who operate in accordance with
agreements that define investment guidelines and place restrictions
on the purchases and sales of investments. Non-Utility Nuclear
recorded charges of $50 million in 2008 to interest income resulting
from the recognition of the other than temporary impairment of
certain securities held in its decommissioning trust funds. Non-
Utility Nuclear did not record any significant impairments in 2007
on these assets.
Due to the regulatory treatment of decommissioning collections
and trust fund earnings, Entergy Arkansas, Entergy Gulf States
Louisiana, Entergy Louisiana, and System Energy record regulatory
assets or liabilities for unrealized gains and losses on trust investments.
For the unregulated portion of River Bend, Entergy Gulf States
Louisiana has recorded an offsetting amount of unrealized gains
or losses in other deferred credits due to existing contractual
commitments with the former owner.
NOTE 18. ENTERGY NEW ORLEANS
BANKRUPTCY PROCEEDING
As a result of the effects of Hurricane Katrina and the effect of
extensive flooding that resulted from levee breaks in and around
the New Orleans area, on September 23, 2005, Entergy New
Orleans filed 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
confirming 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 effective on May 8, 2007. Following are significant 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 (9.5%) plus 1% for 2007 through the date of payment.