Entergy 2012 Annual Report Download - page 108

Entergy Corporation and Subsidiaries 2012
Entergy Louisiana Investment Recovery Funding I, L.L.C., a
company wholly-owned and consolidated by Entergy Louisiana,
is a variable interest entity and Entergy Louisiana is the primary
beneficiary. In September 2011, Entergy Louisiana Investment
Recovery Funding issued investment recovery bonds to recover
Entergy Louisiana’s investment recovery costs associated with the
cancelled Little Gypsy repowering project. With the proceeds,
Entergy Louisiana Investment Recovery Funding purchased from
Entergy Louisiana the investment recovery property, which is the
right to recover from customers through an investment recovery
charge amounts sufficient to service the bonds. The investment
recovery property is reflected as a regulatory asset on the consolidated
Entergy Louisiana balance sheet. The creditors of Entergy Louisiana
do not have recourse to the assets or revenues of Entergy Louisiana
Investment Recovery Funding, including the investment recovery
property, and the creditors of Entergy Louisiana Investment Recovery
Funding do not have recourse to the assets or revenues of Entergy
Louisiana. Entergy Louisiana has no payment obligations to Entergy
Louisiana Investment Recovery Funding except to remit investment
recovery charge collections. See Note 5 to the financial statements for
additional details regarding the investment 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 in the Waterford 3 and 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 $39.1 million in 2012,
$50.4 million in 2011, and $35.1 million in 2010. System Energy
made payments on its lease, including interest, of $50 million in
2012, $49.4 million in 2011, and $48.6 million in 2010. 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 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 2012 and 2011 for Entergy
Corporation and subsidiaries were (in thousands):
Net Income
(Loss)
Operating Consolidated Attributable
Operating Income Net Income to Entergy
Revenues (Loss) (Loss) Corporation
2012:
First Quarter $2,383,659 $ (56,857) $(146,740) $(151,683)
Second Quarter $2,518,600 $342,984 $ 370,583 $ 365,001
Third Quarter $2,963,560 $690,852 $ 342,670 $ 337,088
Fourth Quarter $2,436,260 $324,202 $ 301,850 $ 296,267
2011:
First Quarter $2,541,208 $510,891 $ 253,678 $ 248,663
Second Quarter $2,803,279 $558,738 $ 320,598 $ 315,583
Third Quarter $3,395,553 $600,909 $ 633,069 $ 628,054
Fourth Quarter $2,489,033 $342,696 $ 160,027 $ 154,139
Earnings per Average Common Share
2012 2011
Basic Diluted Basic Diluted
First Quarter $(0.86) $(0.86) $1.39 $1.38
Second Quarter $ 2.06 $ 2.06 $1.77 $1.76
Third Quarter $ 1.90 $ 1.89 $3.55 $3.53
Fourth Quarter $ 1.67 $ 1.67 $0.88 $0.88
As discussed in more detail in Note 1 to the financial statements,
results of operations for 2012 include a $355.5 million ($223.5
million after-tax) impairment charge to write down the carrying
values of Vermont Yankee and related assets to their fair values.
The business of the Utility operating companies is subject to seasonal
fluctuations with the peak periods occurring during the third quarter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS concluded
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