Entergy 2011 Annual Report Download - page 46

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
costs pursuant to Act 55 of the Louisiana Regular Session of 2007
(Act 55 financings). In July 2010 the Louisiana Local Government
Environmental Facilities and Community Development Authority
(LCDA) issued $468.9 million in bonds under Act 55. From
the $462.4 million of bond proceeds loaned by the LCDA to the LURC,
the LURC deposited $200 million in a restricted escrow account
as a storm damage reserve for Entergy Louisiana and transferred
$262.4 million directly to Entergy Louisiana. In July 2010 the LCDA
issued another $244.1 million in bonds under Act 55. From the
$240.3 million of bond proceeds loaned by the LCDA to the LURC,
the LURC deposited $90 million in a restricted escrow account
as a storm damage reserve for Entergy Gulf States Louisiana and
transferred $150.3 million directly to Entergy Gulf States Louisiana.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do
not report the bonds on their balance sheets because the bonds are
the obligation of the LCDA, and there is no recourse against Entergy,
Entergy Gulf States Louisiana or Entergy Louisiana in the event of
a bond default. See Note 2 to the financial statements for additional
discussion of the Act 55 financings.
In November 2009, Entergy Texas Restoration Funding, LLC
(Entergy Texas Restoration Funding), a company wholly-owned
and consolidated by Entergy Texas, issued $545.9 million of senior
secured transition bonds (securitization bonds) to finance Entergy
Texas Hurricane Ike and Hurricane Gustav restoration costs. See
Note 2 to the financial statements for a discussion of the proceeding
approving the issuance of the securitization bonds and see
Note 5 to the financial statements for a discussion of the terms of the
securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its
Hurricane Ike claim and Entergy Texas received $75.5 million in
proceeds (Entergy received a total of $76.5 million).
ENTERGY ARKANSAS JANUARY 2009 ICE STORM
In January 2009, a severe ice storm caused significant damage to
Entergy Arkansas’s transmission and distribution lines, equipment,
poles, and other facilities. A law was enacted in April 2009 in
Arkansas that authorizes securitization of storm damage restoration
costs. In June 2010, the APSC issued a financing order authorizing
the issuance of storm cost recovery bonds, including carrying costs
of $11.5 million and $4.6 million of up-front financing costs. In August
2010, Entergy Arkansas Restoration Funding, LLC, a company
wholly-owned and consolidated by Entergy Arkansas, issued $124.1
million of storm cost recovery bonds. See Note 5 to the financial
statements for additional discussion of the issuance of the storm
cost recovery bonds.
ENTERGY LOUISIANA SECURITIZATION BONDS –
LITTLE GYPSY
In August 2011, the LPSC issued a financing order authorizing
the issuance of bonds to recover Entergy Louisiana’s investment
recovery costs associated with the cancelled Little Gypsy repowering
project. In September 2011, Entergy Louisiana Investment Recovery
Funding I, L.L.C., a company wholly-owned and consolidated
by Entergy Louisiana, issued $207.2 million of senior secured
investment recovery bonds. The bonds have an interest rate of
2.04% and an expected maturity date of June 2021. See Note 5 to the
financial statements for additional discussion of the issuance of the
investment recovery bonds.
Cash Flow Activity
As shown in Entergy’s Statements of Cash Flows, cash flows for
the years ended December 31, 2011, 2010, and 2009 were as follows
(in millions):
2011 2010 2009
Cash and Cash Equivalents at
Beginning of Period $1,295 $1,710 $1,920
Cash flow provided by (used in):
Operating activities 3,128 3,926 2,933
Investing activities (3,447) (2,574) (2,094)
Financing activities (282) (1,767) (1,048)
Effect of exchange rates on cash
and cash equivalents – – (1)
Net decrease in cash
and cash equivalents (601) (415) (210)
Cash and Cash Equivalents at
End of Period $ 694 $1,295 $1,710
OPE R ATI N G CAS H FLOW AC TI VI T Y
2011 Compared to 2010
Entergy’s cash flow provided by operating activities decreased by
$797 million in 2011 compared to 2010 primarily due to the receipt
in July 2010 of $703 million from the Louisiana Utilities Restoration
Corporation as a result of the Louisiana Act 55 storm cost financings for
Hurricane Gustav and Hurricane Ike. The Act 55 storm cost financings
are discussed in Note 2 to the financial statements. The decrease in
Entergy Wholesale Commodities net revenue that is discussed above
also contributed to the decrease in operating cash flow.
2010 Compared to 2009
Entergy’s cash flow provided by operating activities increased $993
million in 2010 compared to 2009 primarily due to the receipt in
July 2010 of $703 million from the Louisiana Utilities Restoration
Corporation as a result of the Louisiana Act 55 storm cost financings,
as noted in the preceding paragraph. In addition, the absence of the
Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration
spending that occurred in 2009 also contributed to the increase.
These factors were partially offset by an increase of $323 million in
pension contributions at Utility and Entergy Wholesale Commodities
and a decrease in net revenue at Entergy Wholesale Commodities.
See “Critical Accounting Estimates - Qualified Pension and Other
Postretirement Benefits” below and also Note 11 to the financial
statements for further discussion of pension funding.
INVE S TI N G AC TI V ITI E S
2011 Compared to 2010
Net cash used in investing activities increased $873 million in 2011
compared to 2010 primarily due to the following activity:
n the purchase of the Acadia Power Plant by Entergy Louisiana
for approximately $300 million in April 2011, the purchase of the
Rhode Island State Energy Center for approximately $346 million
by an Entergy Wholesale Commodities subsidiary in December
2011, and the sale of an Entergy Wholesale Commodities
subsidiary’s ownership interest in the Harrison County Power
Project for proceeds of $219 million in 2010. These transactions
are described in more detail in Note 15 to the financial statements;
n an increase in nuclear fuel purchases because of variations from
year to year in the timing and pricing of fuel reload requirements,
material and services deliveries, and the timing of cash payments
during the nuclear fuel cycle; and
n a slight increase in construction expenditures, including
spending resulting from April 2011 storms that caused damage
to transmission and distribution lines, equipment, poles, and
other facilities, primarily in Arkansas. The capital cost of
repairing that damage was approximately $55 million. Entergy’s
construction spending plans for 2012 through 2014 are discussed
in “Management’s Financial Discussion and Analysis - Capital
Expenditure Plans and Other Uses of Capital.”
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