Entergy 2012 Annual Report Download - page 106

Entergy Corporation and Subsidiaries 2012
NOTE 17. DECOMMISSIONING TRUST FUNDS
Entergy holds debt and equity securities, classified as available-for-
sale, in nuclear decommissioning trust accounts. The NRC requires
Entergy subsidiaries to maintain trusts to fund the costs of decom-
missioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf,
Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA
currently retains the decommissioning trusts and liabilities for Indian
Point 3 and FitzPatrick). The funds are invested primarily in equity
securities, fixed-rate fixed-income securities, and cash and cash
equivalents.
Entergy records decommissioning trust funds on the balance sheet
at their fair value. Because of the ability of the Registrant Subsidiaries
to recover decommissioning costs in rates and in accordance with the
regulatory treatment for decommissioning trust funds, the Registrant
Subsidiaries have recorded an offsetting amount of unrealized gains/
(losses) on investment securities in other regulatory liabilities/assets.
For the nonregulated portion of River Bend, Entergy Gulf States
Louisiana has recorded an offsetting amount of unrealized gains/
(losses) in other deferred credits. Decommissioning trust funds for
Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not
meet the criteria for regulatory accounting treatment. Accordingly,
unrealized gains recorded on the assets in these trust funds are recog-
nized in the accumulated other comprehensive income component of
shareholders’ equity because these assets are classified as available for
sale. Unrealized losses (where cost exceeds fair market value) on the
assets in these trust funds are also recorded in the accumulated other
comprehensive income component of shareholders’ equity unless the
unrealized loss is other than temporary and therefore recorded in
earnings. Generally, Entergy records realized gains and losses on its
debt and equity securities using the specific identification method to
determine the cost basis of its securities.
The securities held as of December 31, 2012 and 2011 are
summarized as follows (in millions):
Total Total
Fair Unrealized Unrealized
Value Gains Losses
2012
Equity securities $2,459 $662 $ 1
Debt securities 1,731 116 5
Total $4,190 $778 $ 6
2011
Equity securities $2,129 $423 $14
Debt securities 1,659 115 5
Total $3,788 $538 $19
Deferred taxes on unrealized gains/(losses) are recorded in other
comprehensive income for the decommissioning trusts which do not
meet the criteria for regulatory accounting treatment as described
above. Unrealized gains/(losses) above are reported before deferred
taxes of $211 million and $149 million as of December 31, 2012
and 2011, respectively. The amortized cost of debt securities was
$1,637 million as of December 31, 2012 and $1,530 million as of
December 31, 2011. As of December 31, 2012, the debt securities
have an average coupon rate of approximately 3.78%, an average
duration of approximately 5.43 years, and an average maturity of
approximately 8.50 years. The equity securities are generally held
in funds that are designed to approximate or somewhat exceed the
return of the Standard & Poor’s 500 Index. A relatively small per-
centage of the securities are held in funds intended to replicate the
return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale
equity and debt securities, summarized by investment type and length
of time that the securities have been in a continuous loss position, are
as follows as of December 31, 2012 (in millions):
Equity Securities Debt Securities
Gross Gross
Fair Unrealized Fair Unrealized
Value Losses Value Losses
Less than 12 months $37 $1 $175 $1
More than 12 months 20 – 48 4
Total $57 $1 $223 $5
The fair value and gross unrealized losses of available-for-sale
equity and debt securities, summarized by investment type and length
of time that the securities have been in a continuous loss position, are
as follows as of December 31, 2011 (in millions):
Equity Securities Debt Securities
Gross Gross
Fair Unrealized Fair Unrealized
Value Losses Value Losses
Less than 12 months $130 $ 9 $123 $3
More than 12 months 43 5 60 2
Total $173 $14 $183 $5
The unrealized losses in excess of twelve months on equity
securities above relate to Entergy’s Utility operating companies and
System Energy.
The fair value of debt securities, summarized by contractual matur-
ities, as of December 31, 2012 and 2011 are as follows (in millions):
2012 2011
Less than 1 year $ 53 $ 69
1 year - 5 years 681 566
5 years - 10 years 562 583
10 years - 15 years 164 187
15 years - 20 years 61 42
20 years+ 210 212
Total $1,731 $1,659
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
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