Entergy 2010 Annual Report Download - page 111

ENTERGY CORPORATION AND SUBSIDIARIES 2010
Notes to Consolidated Financial Statements concluded
Restoration Funding issued senior secured transition bonds
(securitization bonds) to finance Entergy Texas’s Hurricane Ike
and Hurricane Gustav restoration costs. With the proceeds,
the variable interest entities purchased from Entergy Texas the
transition property, which is the right to recover from customers
through a transition charge amounts sufficient to service the
securitization bonds. The transition property is reflected as
a regulatory asset on the consolidated Entergy Texas balance
sheet. The creditors of Entergy Texas do not have recourse to
the assets or revenues of the variable interest entities, including
the transition property, and the creditors of the variable interest
entities do not have recourse to the assets or revenues of Entergy
Texas. Entergy Texas has no payment obligations to the variable
interest entities except to remit transition charge collections. See
Note 5 to the financial statements for additional details regarding
the securitization bonds.
Entergy Arkansas Restoration Funding, LLC, a company wholly-
owned and consolidated by Entergy Arkansas, is a variable
interest entity and Entergy Arkansas is the primary beneficiary. In
August 2010, Entergy Arkansas Restoration Funding issued storm
cost recovery bonds to finance Entergy Arkansas’s January 2009
ice storm damage restoration costs. With the proceeds, Entergy
Arkansas Restoration Funding purchased from Entergy Arkansas
the storm recovery property, which is the right to recover from
customers through a storm recovery charge amounts sufficient
to service the securitization bonds. The storm recovery property
is reflected as a regulatory asset on the consolidated Entergy
Arkansas balance sheet. The creditors of Entergy Arkansas do
not have recourse to the assets or revenues of Entergy Arkansas
Restoration Funding including the storm recovery property, and
the creditors of Entergy Arkansas Restoration Funding do not
have recourse to the assets or revenues of Entergy Arkansas.
Entergy Arkansas has no payment obligations to Entergy Arkansas
Restoration Funding except to remit storm recovery charge
collections. See Note 5 to the financial statements for additional
details regarding the storm cost recovery bonds.
Entergy Louisiana and System Energy are also considered
to each hold a variable interest in the lessors from which they
lease undivided interests representing approximately 9.3%
of the Waterford 3 and 11.5% of the Grand Gulf nuclear plants,
respectively. Entergy Louisiana and System Energy are the lessees
under these arrangements, which are described in more detail
in Note 10 to the financial statements. Entergy Louisiana made
payments on its lease, including interest, of $35.1 million in 2010,
$32.5 million in 2009, and $22.6 million in 2008. System Energy
made payments on its lease, including interest, of $48.6 million
in 2010, $47.8 million in 2009, and $47.1 million in 2008. The
lessors are banks acting in the capacity of owner trustee for the
benefit of equity investors in the transactions pursuant to trust
agreements entered solely for the purpose of facilitating the lease
transactions. It is possible that Entergy Louisiana and System
Energy may be considered as the primary beneficiary of the
lessors, but Entergy is unable to apply the revised authoritative
accounting guidance with respect to these VIEs because the
lessors are not required to, and could not, provide the necessary
financial information to consolidate the lessors. Because Entergy
accounts for these leasing arrangements as capital financings,
however, Entergy believes that consolidating the lessors would
not materially affect the financial statements. In the unlikely
event of default under a lease, remedies available to the lessor
include payment by the lessee of the fair value of the undivided
interest in the plant, payment of the present value of the basic
rent payments, or payment of a predetermined casualty value.
Entergy believes, however, that the obligations recorded on the
balance sheets materially represent each company’s potential
exposure to loss.
Entergy has also reviewed various lease arrangements, power
purchase agreements, and other agreements in which it holds a
variable interest. In these cases, Entergy has determined that it
is not the primary beneficiary of the related VIE because it does
not have the power to direct the activities of the VIE that most
significantly affect the VIE’s economic performance, or it does not
have the obligation to absorb losses or the right to residual returns
that would potentially be significant to the entity, or both.
Note 19. Quarterly Financial Data (Unaudited)
Operating results for the four quarters of 2010 and 2009 for
Entergy Corporation and subsidiaries were (in thousands):
Net Income
Consolidated Attributable
Operating Operating Net to Entergy
Revenues Income Income Corporation
2010:
First Quarter $2,759,347 $476,714 $218,814 $213,799
Second Quarter $2,862,950 $626,241 $320,283 $315,266
Third Quarter $3,332,176 $770,642 $497,901 $492,886
Fourth Quarter $2,533,104 $393,780 $233,307 $228,291
2009:
First Quarter $2,789,112 $506,527 $240,333 $235,335
Second Quarter $2,520,789 $474,496 $231,811 $226,813
Third Quarter $2,937,095 $800,304 $460,167 $455,169
Fourth Quarter $2,498,654 $503,119 $318,739 $313,775
Earnings per Average Common Share
2010 2009
Basic Diluted Basic Diluted
First Quarter $1.13 $1.12 $1.22 $1.20
Second Quarter $1.67 $1.65 $1.16 $1.14
Third Quarter $2.65 $2.62 $2.35 $2.32
Fourth Quarter $1.27 $1.26 $1.66 $1.64
The business of the Utility operating companies is subject to
seasonal fluctuations with the peak periods occurring during the
third quarter.
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