Entergy 2009 Annual Report Download - page 142

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
138
Asset Dispositions
Entergy-Koch Businesses
In the fourth quarter 2004, Entergy-Koch sold its energy trading and pipeline businesses to third parties. The
sales came after a review of strategic alternatives for enhancing the value of Entergy-Koch. Entergy received
$862 million of cash distributions in 2004 from Entergy-Koch after the business sales. Due to the November 2006
expiration of contingencies on the sale of Entergy-Koch's trading business, and the corresponding release to Entergy-
Koch of sales proceeds held in escrow, Entergy recorded a gain related to its Entergy-Koch investment of
approximately $55 million, net-of-tax, in the fourth quarter 2006 and received additional cash distributions of
approximately $163 million. In December 2009, Entergy reorganized its investment in Entergy-Koch, received a
$25.6 million cash distribution, and received a distribution of certain software owned by the joint venture.
Other
In the second quarter 2008, Entergy sold its remaining interest in Warren Power and realized a gain of $11.2
million ($6.9 million net-of-tax) on the sale.
NOTE 16. RISK MANAGEMENT AND FAIR VALUES
Market and Commodity Risks
In the normal course of business, Entergy is exposed to a number of market and commodity risks. Market
risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular
instrument or commodity. All financial and commodity-related instruments, including derivatives, are subject to
market risk. Entergy is subject to a number of commodity and market risks, including:
Type of Risk Affected Businesses
Power price risk Utility, Non-Utility Nuclear, Non-nuclear wholesale assets
Fuel price risk Utility, Non-Utility Nuclear, Non-nuclear wholesale assets
Foreign currency exchange rate risk Utility, Non-Utility Nuclear, Non-nuclear wholesale assets
Equity price and interest rate risk - investments Utility, Non-Utility Nuclear
Entergy manages a portion of these risks using derivative instruments, some of which are classified as cash
flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sales
transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include
power purchase and sales agreements and fuel purchase agreements, capacity contracts, and tolling agreements.
Financially-settled cash flow hedges can include natural gas and electricity futures, forwards, swaps, and options;
foreign currency forwards; and interest rate swaps. Entergy enters into derivatives only to manage natural risks
inherent in its physical or financial assets or liabilities.
Entergy manages fuel price risk for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy
Louisiana, and Entergy New Orleans) and Entergy Mississippi primarily through the purchase of short-term natural
gas swaps. These swaps are marked-to-market with offsetting regulatory assets or liabilities. The notional volumes
of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter
purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.
140