Entergy 2008 Annual Report Download - page 91

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
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Notes to Consolidated Financial Statements continued
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increased costs of labor, materials, and equipment. As described
below, during 2006, 2007, and 2008 Entergy updated decommission-
ing cost estimates for certain Non-Utility Nuclear plants.
In the third quarter 2008, Entergy’s Non-Utility Nuclear business
recorded an increase of $13.7 million in decommissioning liabilities
for certain of its plants as a result of revised decommissioning cost
studies. The revised estimates resulted in the recognition of a
$13.7 million asset retirement obligation asset that will be depreciated
over the remaining life of the units.
In the fourth quarter 2007, Entergy’s Non-Utility Nuclear business
recorded an increase of $100 million in decommissioning liabilities
for certain of its plants as a result of revised decommissioning cost
studies. The revised estimates resulted in the recognition of a $100
million asset retirement obligation asset that will be depreciated
over the remaining life of the units.
In the third quarter 2006, Entergy’s Non-Utility Nuclear business
recorded a reduction of $27.0 million in decommissioning
liability for a plant as a result of a revised decommissioning cost
study and changes in assumptions regarding the timing of when
decommissioning of the plant will begin. The revised estimate
resulted in miscellaneous income of $27.0 million ($16.6 million
net-of-tax), reflecting the excess of the reduction in the liability over
the amount of undepreciated asset retirement cost recorded at the
time of adoption of SFAS 143.
For the Indian Point 3 and FitzPatrick plants purchased in
2000, NYPA retained the decommissioning trusts and the
decommissioning liability. NYPA and Entergy executed
decommissioning agreements, which specify their decommissioning
obligations. NYPA has the right to require Entergy to assume
the decommissioning liability provided that it assigns the
corresponding decommissioning trust, up to a specified level,
to Entergy. If the decommissioning liability is retained by NYPA,
Entergy will perform the decommissioning of the plants at a price
equal to the lesser of a pre-specified level or the amount in the
decommissioning trusts.
Entergy maintains decommissioning trust funds that are
committed to meeting the costs of decommissioning the nuclear
power plants. The fair values of the decommissioning trust funds and
the related asset retirement obligation regulatory assets of Entergy
as of December 31, 2008 are as follows (in millions):
Decommissioning Trust Fair Values Regulatory Asset
Utility:
ANO 1 and ANO 2 $ 390.5 $159.5
River Bend $ 303.2 $ 8.7
Waterford 3 $ 180.9 $ 77.7
Grand Gulf $ 268.8 $ 96.1
Non-Utility Nuclear $1,688.9 $ –
NOTE 10. LEASES
GE N E R A L
As of December 31, 2008, Entergy Corporation and subsidiaries
had capital leases and non-cancelable operating leases for
equipment, buildings, vehicles, and fuel storage facilities
(excluding nuclear fuel leases and the Grand Gulf and Waterford
3 sale and leaseback transactions) with minimum lease payments
as follows (in thousands):
Operating Capital
Year Leases Leases
2009 $ 90,085 $ 4,435
2010 113,775 4,810
2011 52,572 4,810
2012 39,373 4,810
2013 34,050 4,810
Years thereafter 118,968 44,613
Minimum lease payments 448,823 68,288
Less: Amount representing interest – 28,187
Present value of net minimum lease payments $448,823 $40,101
Total rental expenses for all leases (excluding nuclear fuel leases
and the Grand Gulf and Waterford 3 sale and leaseback transactions)
amounted to $66.4 million in 2008, $78.8 million in 2007, and
$78.0 million in 2006.
In addition to the above rental expense, railcar operating lease
payments and oil tank facilities lease payments are recorded in
fuel expense in accordance with regulatory treatment. Railcar
operating lease payments were $10.2 million in 2008, $9.0 million
in 2007, and $12.1 million in 2006 for Entergy Arkansas and $3.4
million in 2008, $4.8 million in 2007, and $3.1 million in 2006 for
Entergy Gulf States Louisiana. Oil tank facilities lease payments for
Entergy Mississippi were $3.4 million in 2008, $3.4 million in 2007,
and $3.8 million for 2006.
NU C L E A R FU E L LE A S E S
As of December 31, 2008, arrangements to lease nuclear fuel existed
in an aggregate amount up to $145 million for Entergy Arkansas,
$150 million for Entergy Gulf States Louisiana, $110 million for
Entergy Louisiana, and $205 million for System Energy. As of
December 31, 2008, the unrecovered cost base of nuclear fuel leases
amounted to approximately $125.1 million for Entergy Arkansas,
$120.2 million for Entergy Gulf States Louisiana, $74.2 million for
Entergy Louisiana, and $125.4 million for System Energy. The lessors
finance the acquisition and ownership of nuclear fuel through loans
made under revolving credit agreements, the issuance of commercial
paper, and the issuance of intermediate-term notes. The credit
agreements for Entergy Arkansas, Entergy Gulf States Louisiana,
Entergy Louisiana, and System Energy each have a termination date
of August 12, 2010. The termination dates may be extended from
time to time with the consent of the lenders. The intermediate-
term notes issued pursuant to these fuel lease arrangements have
varying maturities through September 15, 2013. It is expected that
additional financing under the leases will be arranged as needed to
acquire additional fuel, to pay interest, and to pay maturing debt.
However, if such additional financing cannot be arranged, the lessee
in each case must repurchase sufficient nuclear fuel to allow the
lessor to meet its obligations in accordance with the fuel lease.
Lease payments are based on nuclear fuel use. The table below
represents the total nuclear fuel lease payments (principal and
interest), as well as the separate interest component charged
to operations, in 2008, 2007, and 2006 for the four Registrant
Subsidiaries that own nuclear power plants (in millions):
2008 2007 2006
Lease Lease Lease
Payments Interest Payments Interest Payments Interest
Entergy
Arkansas $ 63.5 $ 4.7 $ 61.7 $ 5.8 $ 55.0 $ 5.0
Entergy Gulf
States Louisiana 29.3 2.5 31.5 2.8 28.1 3.6
Entergy Louisiana 44.6 3.0 44.2 4.0 35.5 2.4
System Energy 33.0 2.9 30.4 4.0 32.8 3.6
Total $170.4 $13.1 $167.8 $16.6 $151.4 $14.6
SA L E A N D LE A S E B A C K TR A N S A C T I O N S
Waterford 3 Lease Obligations
In 1989, in three separate but substantially identical transactions,
Entergy Louisiana sold and leased back undivided interests in
Waterford 3 for the aggregate sum of $353.6 million. The interests
represent approximately 9.3% of Waterford 3. The leases expire
in 2017. Under certain circumstances, Entergy Louisiana may
repurchase the leased interests prior to the end of the term of
the leases. At the end of the lease terms, Entergy Louisiana has
the option to repurchase the leased interests in Waterford 3 at fair