Entergy 2009 Annual Report Download - page 120
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
116
As of December 31, 2009, Entergy Louisiana had future minimum lease payments (reflecting an overall
implicit rate of 7.45%) in connection with the Waterford 3 sale and leaseback transactions, which are recorded as
long-term debt, as follows:
Amount
(In Thousands)
2010 $35,138
2011 50,421
2012 39,067
2013 26,301
2014 31,036
Years thereafter 106,821
Total 288,784
Less: Amount representing interest 47,656
Present value of net minimum lease payments $241,128
Grand Gulf Lease Obligations
In December 1988, in two separate but substantially identical transactions, System Energy sold and leased
back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The interests represent
approximately 11.5% of Grand Gulf. The leases expire in 2015. Under certain circumstances, System Entergy may
repurchase the leased interests prior to the end of the term of the leases. At the end of the lease terms, System Energy
has the option to repurchase the leased interests in Grand Gulf at fair market value or to renew the leases for either
fair market value or, under certain conditions, a fixed rate.
In May 2004, System Energy caused the Grand Gulf lessors to refinance the outstanding bonds that they had
issued to finance the purchase of their undivided interest in Grand Gulf. The refinancing is at a lower interest rate,
and System Energy's lease payments have been reduced to reflect the lower interest costs.
System Energy is required to report the sale-leaseback as a financing transaction in its financial statements.
For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant
depreciation. However, operating revenues include the recovery of the lease payments because the transactions are
accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a
FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of
the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a
regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of
the lease term. The amount was a net regulatory liability of $2.5 million and a net regulatory asset of $19.2 million
as of December 31, 2009 and 2008, respectively.
As of December 31, 2009, System Energy had future minimum lease payments (reflecting an implicit rate of
5.13%), which are recorded as long-term debt as follows:
Amount
(In Thousands)
2010 $48,569
2011 49,437
2012 49,959
2013 50,546
2014 51,637
Years thereafter 52,253
Total 302,401
Less: Amount representing interest 35,537
Present value of net minimum lease payments $266,864
118