a02512.htm
 

 __________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
  
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the Quarterly Period Ended March 31, 2012
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from ____________ to ____________

 
Commission
File Number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
  
 
Commission
File Number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
  
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
         
         
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
  
0-05807
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
         
         
0-20371
ENTERGY GULF STATES LOUISIANA, L.L.C.
(a Louisiana limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
74-0662730
  
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 981-2000
61-1435798
         
         
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
75-3206126
  
1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
         

__________________________________________________________________________________________


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes þ No o

Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 
Large
accelerated
filer
  
 
Accelerated
filer
  
Non-
accelerated
filer
  
Smaller
reporting
company
Entergy Corporation
Ö
            
Entergy Arkansas, Inc.
        
Ö
    
Entergy Gulf States Louisiana, L.L.C.
        
Ö
    
Entergy Louisiana, LLC
        
Ö
    
Entergy Mississippi, Inc.
        
Ö
    
Entergy New Orleans, Inc.
        
Ö
    
Entergy Texas, Inc.
        
Ö
    
System Energy Resources, Inc.
        
Ö
    

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ

Common Stock Outstanding
  
Outstanding at April 30, 2012
Entergy Corporation
($0.01 par value)
177,159,198

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2011, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2012

 
Page Number
   
iii
v
Entergy Corporation and Subsidiaries
  
1
16
17
18
20
22
23
24
63
Entergy Arkansas, Inc. and Subsidiaries
  
64
70
71
72
74
75
Entergy Gulf States Louisiana, L.L.C.
  
76
83
84
85
86
88
89
Entergy Louisiana, LLC and Subsidiaries
  
90
95
96
97
98
100
101
Entergy Mississippi, Inc.
  
102
106
107
108
110
111


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2012

 
Page Number
   
Entergy New Orleans, Inc.
  
112
116
117
118
120
121
Entergy Texas, Inc. and Subsidiaries
  
122
126
127
128
130
131
System Energy Resources, Inc.
  
132
135
137
138
140
 
141
141
141
142
145
149



FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance.  Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as "may," "will," "could," "project," "believe," "anticipate," "intend," "expect," "estimate," "continue," "potential," "plan," "predict," "forecast," and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve a number of risks and uncertainties.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management's Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):

·  
resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy's utility supply plan, and recovery of fuel and purchased power costs;
·  
the termination of Entergy Arkansas’s and Entergy Mississippi’s participation in the System Agreement in December 2013 and November 2015, respectively;
·  
regulatory and operating challenges and uncertainties associated with the Utility operating companies’ proposal to move to the MISO RTO, the operations of the independent coordinator of transmission for Entergy's utility service territory, and the scheduled expiration of the current independent coordinator of transmission arrangement in November 2012;
·  
risks associated with the proposed spin-off and subsequent merger of Entergy’s electric transmission business into a subsidiary of ITC Holdings Corp., including the risk that Entergy and the Utility operating companies may not be able to timely satisfy the conditions or obtain the approvals required to complete such transaction or such approvals may contain material restrictions or conditions, and the risk that if completed, the transaction may not achieve its anticipated results;
·  
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC;
·  
changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those owned or operated by the Entergy Wholesale Commodities business, and the effects of new or existing safety concerns regarding nuclear power plants and nuclear fuel;
·  
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications of nuclear generating facilities;
·  
the performance of and deliverability of power from Entergy's generation resources, including the capacity factors at its nuclear generating facilities;
·  
Entergy's ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
·  
prices for power generated by Entergy's merchant generating facilities and the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;
·  
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy's ability to meet credit support requirements for fuel and power supply contracts;


 
 
FORWARD-LOOKING INFORMATION (Concluded)

·  
volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities;
·  
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
·  
changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances, and changes in costs of compliance with environmental and other laws and regulations;
·  
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal;
·  
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
·  
effects of climate change;
·  
Entergy's ability to manage its capital projects and operation and maintenance costs;
·  
Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms;
·  
the economic climate, and particularly economic conditions in Entergy's Utility service territory and the Northeast United States and events that could influence economic conditions in those areas;
·  
the effects of Entergy's strategies to reduce tax payments;
·  
changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions;
·  
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria;
·  
changes in inflation and interest rates;
·  
the effect of litigation and government investigations or proceedings;
·  
advances in technology;
·  
the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
·  
Entergy's ability to attract and retain talented management and directors;
·  
changes in accounting standards and corporate governance;
·  
declines in the market prices of marketable securities and resulting funding requirements for Entergy's defined benefit pension and other postretirement benefit plans;
·  
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites;
·  
factors that could lead to impairment of long-lived assets; and
·  
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture.


DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
 
Abbreviation or Acronym
Term
   
AFUDC
Allowance for Funds Used During Construction
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council or Council
Council of the City of New Orleans, Louisiana
D.C. Circuit
U.S. Court of Appeals for the District of Columbia
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Texas
Entergy Texas, Inc., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale
Commodities (EWC)
Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers
  
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2011 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service
ISO
Independent System Operator


DEFINITIONS (Concluded)

Abbreviation or Acronym
Term
   
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
MISO
Midwest Independent Transmission System Operator, Inc., a regional transmission organization
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
SPP
Southwest Power Pool
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather






ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.

·  
The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.  As discussed in more detail in “Plan to Spin Off the Utility’s Transmission Business,” in the Form 10-K, in December 2011, Entergy entered into an agreement to spin off its transmission business and merge it with a newly-formed subsidiary of ITC Holdings Corp.
·  
The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  This business also provides services to other nuclear power plant owners.  Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Results of Operations

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2012 to the first quarter 2011 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
  
Entergy
Wholesale Commodities
  
 
Parent &
Other (1)
  
 
 
Entergy
   
(In Thousands)
                 
1st Qtr 2011 Consolidated Net Income (Loss)
  
$168,653 
  
$123,233 
  
($38,208)
  
$253,678 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
  
 
 
(42,398)
  
 
 
(72,981)
  
 
 
(1,155)
  
 
 
(116,534)
Other operation and maintenance expenses
  
42,025 
  
23,597 
  
265 
  
65,887 
Asset impairment
  
- 
  
355,524 
  
- 
  
355,524 
Taxes other than income taxes
  
3,508 
  
8,357 
  
71 
  
11,936 
Depreciation and amortization
  
7,481 
  
7,840 
  
9 
  
15,330 
Other income
  
10,335 
  
4,850 
  
(2,513)
  
12,672 
Interest expense
  
5,565 
  
2,403 
  
1,786 
  
9,754 
Other expenses
  
1,296 
  
1,241 
  
- 
  
2,537 
Income taxes (benefit)
  
9,503 
  
(175,348)
  
1,433 
  
(164,412)
                 
1st Qtr 2012 Consolidated Net Income (Loss)
  
$67,212 
  
($168,512)
  
($45,440)
  
($146,740)

(1)
Parent & Other includes eliminations, which are primarily intersegment activity.

 
1
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Refer to "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS" for further information with respect to operating statistics.

As discussed in more detail in Note 11 to the financial statements, first quarter 2012 results of operations 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.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the first quarter 2012 to the first quarter 2011.

  
  
Amount
  
  
(In Millions)
     
2011 net revenue
  
$1,148 
Volume/weather
  
(48)
Net gas revenue
  
(8)
Retail electric price
  
12 
Other
  
2 
2012 net revenue
  
$1,106 

           The volume/weather variance is primarily due to the effect of milder weather on residential and commercial sales.  This was partially offset by an increase of 748 GWh in weather-adjusted usage, primarily in the industrial sector.  Industrial sales growth was largely due to expansions.  This sector had growth from both large and small industrial customers.  Improvements in chemicals were partially offset by declines in refineries and pipelines.

The net gas revenue variance is primarily due to milder weather compared to the same period in the prior year.

The retail electric price variance is primarily due to:

·  
a special formula rate plan rate increase at Entergy Louisiana effective May 2011 in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center; and
·  
a base rate increase at Entergy Texas beginning May 2011 as a result of the settlement of the December 2009 rate case.

These increases were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2011.  See Note 2 to the financial statements in the Form 10-K for further discussion of these proceedings.


 
2
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2012 to the first quarter 2011.

  
  
Amount
  
  
(In Millions)
     
2011 net revenue
  
$525 
Realized price changes
  
(63)
Volume
  
(7)
Other
  
(3)
2012 net revenue
  
$452 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $73 million, or 14%, in the first quarter 2012 compared to the first quarter 2011 primarily due to lower pricing in its contracts to sell power and lower volume in its nuclear fleet resulting from more planned and unplanned outage days in 2012 compared to the same period in 2011.

Following are key performance measures for Entergy Wholesale Commodities for the first quarter 2012 and 2011:

   
2012
  
2011
         
Owned capacity
  
6,612
  
6,016
GWh billed
  
11,193
  
10,519
Average realized price per MWh
  
$49.68
  
$56.98
         
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor
  
88%
  
91%
GWh billed
  
9,838
  
9,913
Average realized revenue per MWh
  
$50.32
  
$57.46
Refueling Outage Days:
        
Indian Point 2
  
27
  
-
Indian Point 3
  
-
  
23

Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants

See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s average realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $54.73 in 2011 from $59.16 in 2010.  Entergy Wholesale Commodities’ nuclear business is likely to continue to experience a decrease again in 2012 from 2011 because, as shown in the contracted sale of energy table in "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 89% of its planned nuclear energy output for the remainder of 2012 for an average contracted energy price of $48 per MWh.  In addition, Entergy Wholesale Commodities has sold forward 84% of its planned nuclear energy output for 2013 for an average contracted energy price of $45-50 per MWh.
 
 
3
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $448 million for the first quarter 2011 to $490 million for the first quarter 2012 primarily due to:
 
·  
an increase of $14 million in compensation and benefits costs primarily due to decreasing discount rates and changes in certain actuarial assumptions resulting from a recent experience study.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
·  
an increase of $13 million in fossil-fueled generation expenses resulting from higher outage costs primarily because the scope of outages was greater than the same period in the prior year and the timing of the outages;
·  
$6 million of costs incurred in 2012 related to the planned spin-off and merger of the Utility’s transmission business;
·  
an increase of $6 million in nuclear generation expenses primarily due to higher labor costs, including higher contract labor;
·  
nuclear insurance refunds of $5 million received in 2011; and
·  
an increase of $4 million in contract costs due to the transition and implementation of joining the MISO RTO.

Depreciation and amortization expense increased primarily due to an increase in plant in service.

Other income increased primarily due to an increase of $6 million in realized earnings on decommissioning trust fund investments and AFUDC accrued on projects under construction, primarily from the Grand Gulf uprate project.

Interest expense increased primarily due to net debt issuances by certain of the Utility operating companies.

Entergy Wholesale Commodities

           Other operation and maintenance expenses increased from $209 million for the first quarter 2011 to $233 million for the first quarter 2012 primarily due to:

·  
an increase of $12 million in compensation and benefits costs primarily due to decreasing discount rates and changes in certain actuarial assumptions resulting from a recent experience study.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
·  
an increase of $4 million due to the operations of the Rhode Island State Energy Center, which was acquired in December 2011; and
·  
several individually insignificant items.

The asset impairment variance is due to 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.  See Note 11 to the financial statements for further discussion of this charge.

Taxes other than income taxes increased primarily due to increased property taxes at FitzPatrick.  Previously, Fitzpatrick was granted an exemption from property taxation and paid taxes according to a payment in lieu of property taxes agreement.  This agreement expired on June 30, 2011 and FitzPatrick is now being taxed under the current property tax system.
 
 
4
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


Depreciation expense increased primarily due to an increase in plant in service, including the acquisition of the Rhode Island State Energy Center in December 2011.

Income Taxes

The effective income tax rates for the first quarters 2012 and 2011 were 0.11% and 39.3%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2012 was primarily because the expected tax benefit of the pre-tax loss that Entergy incurred in the first quarter 2012 was partially offset by the write-off of a portion of the regulatory asset for income taxes that is discussed in Note 2 to the financial statements.  The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2011 was primarily due to state income taxes and certain book and tax differences for utility plant items.
 
Plan to Spin Off the Utility’s Transmission Business

See the Form 10-K for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants

The NRC operating licenses for Pilgrim, Indian Point 2, and Indian Point 3 expire in June 2012, September 2013, and December 2015, respectively.  NRC license renewal applications are pending for each plant.  Under federal law, nuclear power plants may continue to operate beyond their license expiration dates while their renewal applications are pending NRC approval.  In addition, in March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032.  For additional discussion regarding activity in Vermont and the continued operation of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 11 to the financial statements herein.

In the Pilgrim license renewal proceeding, there remain pending two matters that could present an obstacle to the NRC staff’s issuance of a renewed license.  First, the NRC referred to the Atomic Safety and Licensing Board (ASLB) an intervenor request to reopen the record to admit a new contention with a request for decision on admissibility by May 29, 2012.  Second, while four intervenor appeals of ASLB decisions were denied by the NRC during the first quarter 2012, one such appeal remains pending.  On April 23, 2012, the NRC staff issued a request to the NRC Commissioner asking for authorization to issue a renewed Pilgrim license notwithstanding the pendency of these matters.  The NRC Staff asked that the NRC act by May 8, 2012.  Outside of the NRC license renewal process, intervenors have taken steps to slow or block license renewal.  Such steps include the Commonwealth of Massachusetts’s appeal to the U.S. Court of Appeals for the First Circuit of an NRC decision affirming the ASLB’s decision not to admit a late-filed contention and an April 2012 letter sent by certain parties to the Massachusetts Office of Coastal Zone Management (OCZM) requesting that OCZM suspend its 2006 consistency determination issued for Pilgrim license renewal.

In April 2007, Entergy submitted an application to the NRC to renew the operating licenses for Indian Point 2 and 3 for an additional 20 years.  The ASLB has admitted 21 contentions raised by the State of New York or other parties, which were combined into 16 discrete issues.  Two of the issues have been resolved, leaving 14 issues that are currently subject to ASLB hearings.  In July 2011, the ASLB granted the State of New York’s motion for summary disposition of an admitted contention challenging the adequacy of a section of Indian Point’s environmental analysis as incorporated in the Final Supplemental Environmental Impact Statement (FSEIS) (discussed below).  That section provided cost estimates for Severe Accident Mitigation Alternatives (SAMAs), which are hardware and procedural changes that could be implemented to mitigate estimated impacts of off-site radiological releases in case of a hypothesized severe accident.  In addition to finding that the SAMA cost analysis was insufficient, the ASLB directed the NRC staff to explain why cost-beneficial SAMAs should not be required to be implemented.  Entergy appealed the ASLB’s decision to the NRC and the NRC staff supported Entergy’s appeal, while the State of New York opposed it.  In December 2011 the NRC denied Entergy’s appeal as premature, stating that the appeal could be renewed at the conclusion of the ASLB proceedings.
 
 
5
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

 In November 2011 the ASLB issued an order establishing deadlines for the submission of several rounds of testimony on most of the contentions pending before the ASLB and for the filing of motions to limit or exclude testimony.  Most of the testimony on those contentions has now been completed and filed, and the ASLB has scheduled the commencement of hearings for October 15, 2012.  Hearings on the remaining issues will follow the submission of testimony on dates yet to be set.

The NRC staff currently is also performing its technical and environmental reviews of the application.  The NRC staff issued a Final Safety Evaluation Report (FSER) in August 2009, a supplement to the FSER in August 2011, and a FSEIS in December 2010.  The NRC staff has stated its intent to issue a draft supplemental FSEIS in May 2012 and, following an opportunity for comment, to issue a final supplement FSEIS later in 2012.  The NRC staff also plans to issue a supplemental SER in August 2012.
 
The New York State Department of Environmental Conservation has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process.  In addition, the consistency of Indian Point’s operations with New York State’s coastal management policies must be resolved as required by the Coastal Zone Management Act.  Entergy Wholesale Commodities’ efforts to obtain these certifications and determinations continue in 2012.

The hearing process is an integral component of the NRC’s regulatory framework, and evidentiary hearings on license renewal applications are not uncommon.  Entergy intends to participate fully in the hearing process as permitted by the NRC’s hearing rules.  As noted in Entergy’s responses to the various intervenor filings, Entergy believes the contentions proposed by the intervenors are unsupported and without merit.  Entergy will continue to work with the NRC staff as it completes its technical and environmental reviews of the license renewal application.

Liquidity and Capital Resources

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy’s capital structure, capital expenditure plans and other uses of capital, and sources of capital.  Following are updates to that discussion.

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.

   
March 31,
2012
  
December 31,
2011
         
Debt to capital
  
57.8 %
  
57.3 %
Effect of excluding the securitization bonds
  
(2.1)%
  
(2.3)%
Debt to capital, excluding securitization bonds (1)
  
55.7 %
  
55.0 %
Effect of subtracting cash
  
(1.5)%
  
(1.5)%
Net debt to net capital, excluding securitization bonds (1)
  
54.2 %
  
53.5 %

(1)
Calculation excludes the Arkansas, Louisiana, and Texas securitization bonds, which are non-recourse to Entergy Arkansas, Entergy Louisiana, and Entergy Texas, respectively.

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents.  Entergy uses the net debt to net capital ratio and the ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition.
 
 
6
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2017.  Entergy Corporation has the ability to issue letters of credit against 50% of the total borrowing capacity of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2012.


 
Capacity
  
 
Borrowings
  
Letters
of Credit
  
Capacity
Available
(In Millions)
             
$3,500 
  
$1,465
  
$8
  
$2,027
 
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with the covenant.  If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.

See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," that sets forth the amounts of planned construction and other capital investments by operating segment for 2012 through 2014.  Following are updates to the discussion in the Form 10-K.

Grand Gulf Uprate

As discussed in more detail in the Form 10-K, the estimated capital investments for 2012-2014 include System Energy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant.  Considering the progress of the uprate project during Grand Gulf’s spring 2012 refueling outage, including additional work scope that has emerged during the outage; additional information from the project's engineering, procurement and construction contractor; the costs required to install instrumentation in the steam dryer in response to evolving guidance from the NRC staff; and delays in obtaining NRC approval; System Energy now estimates the total capital investment to be made in the course of the implementation of the Grand Gulf uprate project is approximately $874 million, including SMEPA’s share.  Implementation of the uprate and the NRC’s review continues.  System Energy expects to complete the project during the summer of 2012.

Ninemile Point Unit 6 Self-Build Project

See the Form 10-K for a discussion of Entergy Louisiana’s Ninemile Point Unit 6 self-build project.  The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  In February 2012 the City Council passed a resolution authorizing Entergy New Orleans to purchase 20% of the Ninemile 6 energy and capacity.  In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of the facility.  Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of its allocated share of the capacity and energy generated by Ninemile 6.  In March 2012 the LPSC unanimously voted to grant the certifications requested by Entergy Louisiana and Entergy Gulf States Louisiana, and Entergy Louisiana has given the contractor a full notice to proceed with the construction. Under the terms approved by the LPSC, costs may be recovered through Entergy Louisiana’s and Entergy Gulf States Louisiana’s formula rate plans, if one is in effect when the project is placed in service; alternatively, Entergy Louisiana and Entergy Gulf States Louisiana’s must file rate cases approximately 12 months prior to the expected in-service date.
 
 
7
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Hot Spring Energy Facility Purchase Agreement

See the Form 10-K for a discussion of Entergy Arkansas’s agreement to acquire the Hot Spring Energy Facility.  The parties have satisfied their obligations under the Hart-Scott-Rodino Act, and the U.S. Department of Justice’s review of the transaction is ongoing.

In July 2011, Entergy Arkansas filed its application with the APSC requesting approval of the acquisition and full cost recovery.  In January 2012, Entergy Arkansas, the APSC General Staff, and the Arkansas Attorney General filed a Motion to Suspend the Procedural Schedule and Joint Stipulation and Settlement for consideration by the APSC.  Under the settlement, the parties agreed that the acquisition costs may be recovered through a capacity acquisition rider and agreed that the level of the return on equity reflected in the rider would be submitted to the APSC for resolution.  Because the transmission upgrade costs remained uncertain, the parties requested that the APSC suspend the procedural schedule and cancel the hearing scheduled for January 24, 2012, pending resolution of the transmission costs.  The APSC issued an order accepting the settlement as part of the record and directing Entergy Arkansas to file the transmission studies when available and directing the parties to propose a procedural schedule to address the results of those studies.

On April 6, 2012, facilities studies were issued indicating that long-term transmission service is available for the Hot Spring facility provided that supplemental transmission upgrades estimated at approximately $440,000 are made.  In addition, the studies noted that surveys of two lines should be conducted, which may result in additional upgrade requirements not expected to exceed $25 million.  On April 16, 2012, Entergy Arkansas filed the facilities studies with the APSC and reiterated its request for a public interest finding and timely cost recovery.  Assuming timely regulatory approvals and the satisfaction of all other closing conditions, closing is targeted for around mid-2012.

Hinds Energy Facility Purchase Agreement

See the Form 10-K for a discussion of Entergy Mississippi’s agreement to acquire the Hinds Energy Facility.  In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery.  The parties have satisfied their obligations under the Hart-Scott-Rodino Act, and the U.S. Department of Justice’s review of the transaction is ongoing.  In February 2012 the MPSC granted a certificate of public convenience and necessity and approved the estimated acquisition cost.  In April 2012, facilities studies were issued indicating that long-term transmission service is available for the Hinds facility provided that supplemental transmission upgrades estimated at approximately $580,000 are made and assuming that various projects already included in the transmission construction plan are completed.  The retail cost recovery proceeding remains pending before the MPSC.  Assuming timely regulatory approvals and the satisfaction of all other closing conditions, closing is targeted for around mid-2012.

Dividends and Stock Repurchases

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities.  At its April 2012 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.
 
 
8
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2012 and 2011 were as follows:

   
2012
  
2011
   
(In Millions)
         
Cash and cash equivalents at beginning of period
  
$694 
  
$1,294 
         
Cash flow provided by (used in):
        
Operating activities
  
601 
  
323 
Investing activities
  
(749)
  
(897)
Financing activities
  
139 
  
6 
Net decrease in cash and cash equivalents
  
(9)
  
(568)
         
Cash and cash equivalents at end of period
  
$685 
  
$726 
 
Operating Activities

Entergy's cash flow provided by operating activities increased by $278 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011 primarily due to a decrease of $172 million in pension contributions and an increase in deferred fuel cost collections.  Partially offsetting these factors were the decreases in net revenue that are discussed above.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash used in investing activities decreased by $148 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011 primarily due to:

·  
a decrease 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;
·  
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statements of Cash Flows, as Entergy received $95 million in net deposits from Entergy Wholesale Commodities’ counterparties during 2012 and returned net deposits of $21 million in 2011.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the Market and Credit Risk Sensitive Instruments section below; and
·  
an increase in construction expenditures, primarily in the Utility business resulting from spending on the power uprate project at Grand Gulf.  Entergy’s construction spending plans for 2012 through 2014 are discussed in the Form 10-K and are updated in the Capital Expenditure Plans and Other Uses of Capital section in this report.

Financing Activities

Net cash provided by financing activities increased by $133 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011 primarily due to the following:

·  
Entergy repurchased $54 million of its common stock in the three months ended March 31, 2011.  Entergy’s share repurchase programs are discussed in the Form 10-K.
·  
$51 million in proceeds from the sale in 2012 of a portion of Entergy Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests to a third party.
 
 
 
9
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

·  
Long-term debt activity provided approximately $175 million of cash in 2012 compared to $133 million of cash in 2011.  For details of Entergy's long-term debt activity in 2012 see Note 4 to the financial statements herein.

Rate, Cost-recovery, and Other Regulation

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Rate, Cost-recovery, and Other Regulation" in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.

State and Local Rate Regulation and Fuel-Cost Recovery

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.

Federal Regulation

Entergy’s Proposal to Join the MISO RTO

See the Form 10-K for a discussion of the Utility operating companies proposal to join the MISO RTO.  Following are updates to that discussion.

On March 14, 2012, the LPSC Staff and intervenors filed direct testimony in Entergy Louisiana’s and Entergy Gulf States Louisiana’s joint change of control proceeding.  In Entergy Arkansas’s proceeding, the APSC Staff and intervenors filed direct testimony on March 16, 2012.  Intervenors began filing direct testimony in the Entergy New Orleans and Entergy Mississippi proceedings on March 23, 2012 and April 23, 2012, respectively.  Most parties were conditionally supportive of or did not oppose certifying the move to MISO as in the public interest.  Several parties, including the LPSC Staff, proposed various conditions.  The APSC Staff argued Entergy Arkansas has not proven that it is in the public interest to join MISO and noted that Entergy Arkansas should maintain the option to join SPP.  On April 13, 2012, Entergy Arkansas filed rebuttal testimony addressing the claims made by parties challenging the MISO proposal, and on April 19, 2012, Entergy Gulf States Louisiana and Entergy Louisiana filed responsive testimony to the prefiled testimony of the LPSC Staff and intervenors.  The LPSC hearing on the merits was completed on May 2, 2012.  The APSC has established a procedural schedule with hearing the hearing on the merits commencing May 30, 2012.  The MPSC has scheduled a hearing in July 2012.  The City Council has scheduled a hearing in September 2012.  Entergy Texas submitted its change of control filing on April 30, 2012.

In June 2011, MISO filed with the FERC a request for a transitional waiver of provisions of its open access transmission, energy, and operating reserve markets tariff regarding allocation of transmission network upgrade costs, in order to establish a transition for the integration of the Utility operating companies.  In September 2011 the FERC issued an order denying on procedural grounds MISO’s request, further advising MISO that submitting modified tariff sheets is the appropriate method for implementing the transition that MISO seeks for the Utility operating companies.  The FERC did not address the merits of any transition arrangements that may be appropriate to integrate the Utility operating companies into MISO.  MISO worked with its stakeholders to prepare the appropriate changes to its tariff and filed the proposed tariff changes with the FERC in November 2011.  On April 19, 2012, the FERC conditionally accepted MISO’s proposal related to the allocation of transmission upgrade costs in connection with the transition and integration of the Utility operating companies into MISO.
 
 
10
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


In addition, the Utility operating companies have agreed to give authority to the Entergy Regional State Committee (E-RSC), upon unanimous vote and within the first five years after the Utility operating companies join the MISO RTO, (i) to direct the allocation of certain transmission upgrade costs among the Utility operating companies’ transmission pricing zones in a manner that differs from the allocation that would occur under the MISO OATT and (ii) to direct the Utility operating companies as transmission owners to add projects to MISO’s transmission expansion plan.

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets.  In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward fixed price physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.  In addition to its forward fixed price physical power contracts, Entergy Wholesale Commodities also uses financial contracts to hedge a portion of its commodity price risk.  The following is a summary of the amount of Entergy Wholesale Commodities’ planned energy output that is currently sold forward under physical or financial contracts (2012 represents the remainder of the year):
 
Entergy Wholesale Commodities Nuclear Portfolio
                    
                     
   
2012
  
2013
  
2014
  
2015
  
2016
                     
Energy
                    
Percent of planned generation sold forward (a):
                    
Unit-contingent (b)
  
60%
  
41%
  
14%
  
12%
  
12%
      Unit-contingent with guarantee of availability (c)
  
18%
  
19%
  
15%
  
 13%
  
 13%
Firm LD (d)
  
24%
  
24%
  
20%
  
-%
  
-%
Offsetting positions (e)
  
(13)%
  
-%
  
-%
  
-%
  
-%
Total energy sold forward
  
89%
  
84%
  
49%
  
25%
  
25%
Planned generation (TWh) (f) (g)
  
31
  
40
  
41
  
41
  
40
Average revenue under contract per MWh (h)
  
$48
  
$45-50
  
$47-51
  
$49-57
  
$50-59
                     

Capacity
                    
Percent of capacity sold forward (i):
                    
       Bundled capacity and energy contracts (j)
  
16%
  
16%
  
16%
  
16%
  
16%
Capacity contracts (k)
  
43%
  
31%
  
25%
  
17%
  
 5%
Total capacity sold forward
  
59%
  
47%
  
41%
  
33%
  
21%
Planned net MW in operation (g) (l)
  
5,011
  
5,011
  
5,011
  
5,011
  
5,011
Average revenue under contract per kW per month
(applies to capacity contracts only) (h)
  
$2.3
  
$2.9
  
$3.1
  
$3.2
  
$3.4
                     
Blended Capacity and Energy Recap (based on revenues)
                    
% of planned generation and capacity sold forward
  
92%
  
85%
  
54%
  
31%
  
30%
Average revenue under contract per MWh (h)
  
$50
  
$46
  
$48
  
$52
  
$51
 
 
11
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Entergy Wholesale Commodities Non-Nuclear Portfolio
                    
                     
   
2012
  
2013
  
2014
  
2015
  
2016
                     
Energy
                    
Percent of planned generation sold forward (a):
                    
Cost-based contracts (m)
  
41%
  
36%
  
30%
  
35%
  
32%
Firm LD (d)
  
5%
  
5%
  
5%
  
6%
  
6%
Total energy sold forward
  
46%
  
41%
  
35%
  
41%
  
38%
Planned generation (TWh) (f) (n)
  
5
  
7
  
7
  
6
  
6
                     
 
Capacity
                    
Percent of capacity sold forward (i):
                    
Cost-based contracts (m)
  
35%
  
29%
  
24%
  
24%
  
24%
Bundled capacity and energy contracts (j)
  
8%
  
8%
  
8%
  
8%
  
8%
Capacity contracts (k)
  
52%
  
47%
  
47%
  
48%
  
20%
Total capacity sold forward
  
95%
  
84%
  
79%
  
80%
  
52%
Planned net MW in operation (l) (n)
  
1,052
  
1,052
  
1,052
  
1,052
  
1,052
                     

 
(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights
(b)
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, seller is generally not liable to buyer for any damages
(c)
A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(d)
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract; a portion of which may be capped through the use of risk management products
(e)
Transactions for the purchase of energy, generally to offset a Firm LD transaction
(f)
Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that effect dispatch
(g)
Assumes NRC license renewal for plants whose current licenses expire within five years and uninterrupted normal operation at all plants.  NRC license renewal applications are in process for three units, as follows (with current license expirations in parentheses): Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015).  For a discussion regarding the continued operation of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 1 to the financial statements in the Form 10-K and “Vermont Yankee” in Note 11 to the financial statements herein.
(h)
Revenue on a per unit basis at which generation output, capacity, or a combination of both is expected to be sold to third parties (including offsetting positions), given existing contract or option exercise prices based on expected dispatch or capacity, excluding the revenue associated with the amortization of the below-market PPA for Palisades.  Revenue may fluctuate due to factors including positive or negative basis differentials, option premiums and market prices at time of option expiration, costs to convert firm LD to unit-contingent, and other risk management costs.  Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA.
 
 
 
12
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

(i) Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions. 
(j)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold
(k)
A contract for the sale of an installed capacity product in a regional market
(l)
Amount of capacity to be available to generate power and/or sell capacity considering uprates planned to be completed during the year.  The increased capacity figure for the nuclear portfolio from the 10-K reflects the final testing and confirmation of a small incremental increase in output associated with equipment replacements at Palisades.
(m)
Contracts priced in accordance with cost-based rates, a ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the service; these contracts are on owned non-utility resources located within Entergy’s service territory, which do not operate under market-based rate authority.  The percentage sold assumes approval of long-term transmission rights.  Includes sales to the Utility through 2013 of 121 MW of capacity and energy from Entergy Power sourced from Independence Steam Electric Station Unit 2.
(n)
Non-nuclear planned generation and net MW in operation include purchases from affiliated and non-affiliated counterparties under long-term contracts and exclude energy and capacity from Entergy Wholesale Commodities’ wind investment accounted for under the equity method of accounting and from the 544 MW Ritchie plant that is not planned to operate.

Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2012 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $41 million in 2012.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2012, based on power prices at that time, Entergy had liquidity exposure of $271 million under the guarantees in place supporting Entergy Wholesale Commodities transactions, $20 million of guarantees that support letters of credit, and $6 million of posted cash collateral to the ISOs.  As of March 31, 2012, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $71 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2012, Entergy would have been required to provide approximately $45 million of additional cash or letters of credit under some of the agreements.

As of March 31, 2012, substantially all of the counterparties or their guarantors for 100% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2016 have public investment grade credit ratings.

Nuclear Matters

After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States.  The task force issued a near term (90-day) report in July 2011 that made initial recommendations, which were subsequently refined and prioritized after input from stakeholders.  The task force then issued a second report in September 2011.  Based upon the task force’s recommendations, the NRC issued three orders effective on March 12, 2012.  The three orders require U.S. nuclear operators, including Entergy, to undertake plant modifications or perform additional analyses that will, among other things, result in increased operating and capital costs associated with operating Entergy’s nuclear plants.  The orders are being analyzed and an estimate of the increased costs cannot be made at this time.
 
 
13
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


With the issuance of the three orders, the NRC also provided members of the public an opportunity to request a hearing.  Two established anti-nuclear groups, Pilgrim Watch and Beyond Nuclear, have filed hearing requests, focused on Pilgrim, regarding two of the three orders.  These requests seek to have the NRC impose expanded remedial requirements to address the issues raised by the NRC’s orders.  Entergy has filed oppositions to these hearing requests.

Critical Accounting Estimates

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets and trust fund investments, qualified pension and other postretirement benefits, and other contingencies.  For updates of the impairment of long-lived assets discussion regarding Vermont Yankee see Note 11 to the financial statements herein.

New Accounting Pronouncements

The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.  Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.


 
 
 
 

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CONSOLIDATED STATEMENTS OF INCOME (LOSS)
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited)
  
   
2012
    
2011
  
   
(In Thousands, Except Share Data)
  
             
OPERATING REVENUES
            
Electric
   $ 1,784,841     $ 1,865,899  
Natural gas
     46,008       71,123  
Competitive businesses
     552,810       604,186  
TOTAL
     2,383,659       2,541,208  
                 
OPERATING EXPENSES
                
Operating and Maintenance:
                
   Fuel, fuel-related expenses, and
                
     gas purchased for resale
     538,837       507,693  
   Purchased power
     284,966       362,618  
   Nuclear refueling outage expenses
     63,884       63,985  
   Asset impairment
     355,524       -  
   Other operation and maintenance
     721,635       655,748  
Decommissioning
     57,903       55,265  
Taxes other than income taxes
     137,170       125,234  
Depreciation and amortization
     280,215       264,885  
Other regulatory charges (credits) - net
     382       (5,111 )
TOTAL
     2,440,516       2,030,317  
                 
OPERATING INCOME (LOSS)
     (56,857 )     510,891  
                 
OTHER INCOME
                
Allowance for equity funds used during construction
     24,307       17,289  
Interest and investment income
     40,992       26,747  
Miscellaneous - net
     (17,990 )     (9,399 )
TOTAL
     47,309       34,637  
                 
INTEREST EXPENSE
                
Interest expense
     146,745       136,134  
Allowance for borrowed funds used during construction
     (9,391 )     (8,534 )
TOTAL
     137,354       127,600  
                 
INCOME (LOSS) BEFORE INCOME TAXES
     (146,902 )     417,928  
                 
Income tax expense (benefit)
     (162 )     164,250  
                 
CONSOLIDATED NET INCOME (LOSS)
     (146,740 )     253,678  
                 
Preferred dividend requirements of subsidiaries
     4,943       5,015  
                 
NET INCOME (LOSS) ATTRIBUTABLE TO ENTERGY CORPORATION
   $ (151,683 )   $ 248,663  
                 
                 
Earnings (loss) per average common share:
                
    Basic
   $ (0.86 )   $ 1.39  
    Diluted
   $ (0.86 )   $ 1.38  
Dividends declared per common share
   $ 0.83     $ 0.83  
                 
Basic average number of common shares outstanding
     176,865,363       178,834,342  
Diluted average number of common shares outstanding
     177,388,045       180,083,830  
                 
See Notes to Financial Statements.
                
                 
                 
 
 

 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited)
  
             
   
2012
    
2011
  
   
(In Thousands)
  
             
Net Income (loss)
   $ (146,740 )   $ 253,678  
                 
Other comprehensive income (loss)
                
   Cash flow hedges net unrealized gain (loss)
                
     (net of tax expense (benefit) of $75,494 and ($34,635))
     145,435       (58,208 )
   Pension and other postretirement liabilities
                
     (net of tax expense of $3,876 and $1,093)
     6,266       4,259  
   Net unrealized investment gains
                
     (net of tax expense of $49,138 and $25,340)
     50,107       24,685  
   Foreign currency translation
                
     (net of tax expense of $167 and $161)
     311       299  
         Other comprehensive income (loss)
     202,119       (28,965 )
                 
Comprehensive Income
     55,379       224,713  
                 
Preferred dividend requirements of subsidiaries
     4,943       5,015  
                 
Comprehensive Income Attributable to Entergy Corporation
   $ 50,436     $ 219,698  
                 
                 
See Notes to Financial Statements.
                
 


 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited)
  
   
2012
    
2011
  
   
(In Thousands)
  
             
OPERATING ACTIVITIES
            
Consolidated net income (loss)
   $ (146,740 )   $ 253,678  
Adjustments to reconcile consolidated net income (loss) to net cash flow
                
 provided by operating activities:
                
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
     450,009       422,411  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
     38,858       173,784  
  Asset impairment
     355,524       -  
  Changes in working capital:
                
     Receivables
     156,202       102,711  
     Fuel inventory
     (20,213 )     (12,508 )
     Accounts payable
     (145,599 )     (154,398 )
     Prepaid taxes and taxes accrued
     (89,583 )     (63,918 )
     Interest accrued
     (32,194 )     (67,978 )
     Deferred fuel
     77,405       (66,548 )
     Other working capital accounts
     (34,753 )     (102,294 )
  Changes in provisions for estimated losses
     (15,030 )     (779 )
  Changes in other regulatory assets
     60,857       48,889  
  Changes in pensions and other postretirement liabilities
     (4,764 )     (190,958 )
  Other
     (49,479 )     (18,991 )
Net cash flow provided by operating activities
     600,500       323,101  
                 
  INVESTING ACTIVITIES
                
Construction/capital expenditures
     (563,539 )     (486,561 )
Allowance for equity funds used during construction
     25,448       17,289  
Nuclear fuel purchases
     (201,059 )     (300,975 )
Changes in securitization account
     940       6,360  
NYPA value sharing payment
     (72,000 )     (72,000 )
Payments to storm reserve escrow account
     (1,483 )     (1,736 )
Receipts from storm reserve escrow account
     861       -  
Decrease (increase) in other investments
     93,786       (21,212 )
Proceeds from nuclear decommissioning trust fund sales
     535,551       492,682  
Investment in nuclear decommissioning trust funds
     (567,780 )     (530,672 )
Net cash flow used in investing activities
     (749,275 )     (896,825 )
                 
See Notes to Financial Statements.
                
 



ENTERGY CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited)
  
   
2012
    
2011
  
   
(In Thousands)
  
             
FINANCING ACTIVITIES
            
Proceeds from the issuance of:
            
  Long-term debt
     1,034,945       411,444  
  Preferred stock
     51,000       -  
  Common stock and treasury stock
     32,826       12,280  
Retirement of long-term debt
     (859,648 )     (278,084 )
Repurchase of common stock
     -       (54,404 )
Changes in credit borrowings - net
     32,782       68,244  
Dividends paid:
                
  Common stock
     (146,674 )     (148,678 )
  Preferred stock
     (5,582 )     (5,015 )
Net cash flow provided by financing activities
     139,649       5,787  
                 
Effect of exchange rates on cash and cash equivalents
     (310 )     (298 )
                 
Net decrease in cash and cash equivalents
     (9,436 )     (568,235 )
                 
Cash and cash equivalents at beginning of period
     694,438       1,294,472  
                 
Cash and cash equivalents at end of period
   $ 685,002     $ 726,237  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
  Cash paid (received) during the period for:
                
    Interest - net of amount capitalized
   $ 134,655     $ 164,563  
    Income taxes
   $ 35,992     $ (4,380 )
                 
See Notes to Financial Statements.
                
                 
 



 
CONSOLIDATED BALANCE SHEETS
  
ASSETS
  
March 31, 2012 and December 31, 2011
  
(Unaudited)
  
             
   
2012
    
2011
  
   
(In Thousands)
  
             
CURRENT ASSETS
            
Cash and cash equivalents:
            
  Cash
   $ 63,117     $ 81,468  
  Temporary cash investments
     621,885       612,970  
     Total cash and cash equivalents
     685,002       694,438  
Securitization recovery trust account
     49,364       50,304  
Accounts receivable:
                
  Customer
     452,926       568,558  
  Allowance for doubtful accounts
     (30,079 )     (31,159 )
  Other
     145,677       166,186  
  Accrued unbilled revenues
     260,539       298,283  
     Total accounts receivable
     829,063       1,001,868  
Deferred fuel costs
     69,924       209,776  
Accumulated deferred income taxes
     4,650       9,856  
Fuel inventory - at average cost
     222,345       202,132  
Materials and supplies - at average cost
     896,633       894,756  
Deferred nuclear refueling outage costs
     230,514       231,031  
System agreement cost equalization
     36,800       36,800  
Prepayments and other
     452,042       291,742  
TOTAL
     3,476,337       3,622,703  
                 
OTHER PROPERTY AND INVESTMENTS
                
Investment in affiliates - at equity
     45,769       44,876  
Decommissioning trust funds
     4,039,319       3,788,031  
Non-utility property - at cost (less accumulated depreciation)
     259,867       260,436  
Other
     419,661       416,423  
TOTAL
     4,764,616       4,509,766  
                 
PROPERTY, PLANT AND EQUIPMENT
                
Electric
     39,300,676       39,385,524  
Property under capital lease
     808,790       809,449  
Natural gas
     345,981       343,550  
Construction work in progress
     2,025,005       1,779,723  
Nuclear fuel
     1,499,219       1,546,167  
TOTAL PROPERTY, PLANT AND EQUIPMENT
     43,979,671       43,864,413  
Less - accumulated depreciation and amortization
     18,392,874       18,255,128  
PROPERTY, PLANT AND EQUIPMENT - NET
     25,586,797       25,609,285  
                 
DEFERRED DEBITS AND OTHER ASSETS
                
Regulatory assets:
                
  Regulatory asset for income taxes - net
     730,467       799,006  
  Other regulatory assets (includes securitization property of
                
     $989,503 as of March 31, 2012 and $1,009,103 as of
                
     December 31, 2011)
     4,577,018       4,636,871  
  Deferred fuel costs
     258,534       172,202  
Goodwill
     377,172       377,172  
Accumulated deferred income taxes
     31,271       19,003  
Other
     1,128,012       955,691  
TOTAL
     7,102,474       6,959,945  
                 
TOTAL ASSETS
   $ 40,930,224     $ 40,701,699  
                 
See Notes to Financial Statements.
                
 



ENTERGY CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED BALANCE SHEETS
  
LIABILITIES AND EQUITY
  
March 31, 2012 and December 31, 2011
  
(Unaudited)
  
             
   
2012
    
2011
  
   
(In Thousands)
  
             
CURRENT LIABILITIES
            
Currently maturing long-term debt
   $ 315,275     $ 2,192,733  
Notes payable
     141,113       108,331  
Accounts payable
     916,248       1,069,096  
Customer deposits
     354,178       351,741  
Taxes accrued
     188,652       278,235  
Accumulated deferred income taxes
     94,126       99,929  
Interest accrued
     151,318       183,512  
Deferred fuel costs
     279,723       255,839  
Obligations under capital leases
     3,692       3,631  
Pension and other postretirement liabilities
     46,341       44,031  
System agreement cost equalization
     74,207       80,090  
Other
     345,781       283,531  
TOTAL
     2,910,654       4,950,699  
                 
NON-CURRENT LIABILITIES
                
Accumulated deferred income taxes and taxes accrued
     8,163,494       8,096,452  
Accumulated deferred investment tax credits
     282,140       284,747  
Obligations under capital leases
     37,471       38,421  
Other regulatory liabilities
     809,729       728,193  
Decommissioning and asset retirement cost liabilities
     3,352,820       3,296,570  
Accumulated provisions
     370,761       385,512  
Pension and other postretirement liabilities
     3,126,583       3,133,657  
Long-term debt (includes securitization bonds of $1,048,894 as of
          
   March 31, 2012 and $1,070,556 as of December 31, 2011)
     12,121,105       10,043,713  
Other
     560,697       501,954  
TOTAL
     28,824,800       26,509,219  
                 
Commitments and Contingencies
                
                 
Subsidiaries' preferred stock without sinking fund
     186,510       186,511  
                 
EQUITY
                
Common Shareholders' Equity:
                
Common stock, $.01 par value, authorized 500,000,000 shares;
                
  issued 254,752,788 shares in 2012 and in 2011
     2,548       2,548  
Paid-in capital
     5,352,256       5,360,682  
Retained earnings
     9,148,262       9,446,960  
Accumulated other comprehensive income (loss)
     33,667       (168,452 )
Less - treasury stock, at cost (77,601,080 shares in 2012 and
                
  78,396,988 shares in 2011)
     5,622,473       5,680,468  
Total common shareholders' equity
     8,914,260       8,961,270  
Subsidiaries' preferred stock without sinking fund
     94,000       94,000  
TOTAL
     9,008,260       9,055,270  
                 
TOTAL LIABILITIES AND EQUITY
   $ 40,930,224     $ 40,701,699  
                 
See Notes to Financial Statements.
                
 


 
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited) (In Thousands)
  
                                           
         
Common Shareholders' Equity
        
   
Subsidiaries' Preferred Stock
    
Common Stock
    
Treasury Stock
    
Paid-in Capital
    
Retained Earnings
    
Accumulated Other Comprehensive Income (Loss)
    
Total
  
Balance at December 31, 2010
   $ 94,000     $ 2,548     $ (5,524,811 )   $ 5,367,474     $ 8,689,401     $ (38,212 )   $ 8,590,400  
                                                         
Consolidated net income (a)
     5,015       -       -       -       248,663       -       253,678  
Other comprehensive loss
     -       -       -       -       -       (28,965 )     (28,965 )
Common stock repurchases
     -       -       (54,404 )     -       -       -       (54,404 )
Common stock issuances related to stock plans
     -       -       22,930       (956 )     -       -       21,974  
Common stock dividends declared
     -       -       -       -       (148,530 )     -       (148,530 )
Preferred dividend requirements of subsidiaries (a)
     (5,015 )     -       -       -       -       -       (5,015 )
                                                         
Balance at March 31, 2011
   $ 94,000     $ 2,548     $ (5,556,285 )   $ 5,366,518     $ 8,789,534     $ (67,177 )   $ 8,629,138  
                                                         
                                                         
Balance at December 31, 2011
   $ 94,000     $ 2,548     $ (5,680,468 )   $ 5,360,682     $ 9,446,960     $ (168,452 )   $ 9,055,270  
                                                         
Consolidated net income (loss) (a)
     4,943       -       -       -       (151,683 )     -       (146,740 )
Other comprehensive income
     -       -       -       -       -       202,119       202,119  
Common stock issuances related to stock plans
     -       -       57,995       (8,426 )     -       -       49,569  
Common stock dividends declared
     -       -       -       -       (147,015 )     -       (147,015 )
Preferred dividend requirements of subsidiaries (a)
     (4,943 )     -       -       -       -       -       (4,943 )
                                                         
Balance at March 31, 2012
   $ 94,000     $ 2,548     $ (5,622,473 )   $ 5,352,256     $ 9,148,262     $ 33,667     $ 9,008,260  
                                                         
See Notes to Financial Statements.
                                                        
                                                         
(a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for both 2011 and 2012 include $3.3 million of preferred dividends on subsidiaries' preferred stock without sinking fund that is not presented as equity.
  
                                                         


 

 
SELECTED OPERATING RESULTS
  
For the Three Months Ended March 31, 2012 and 2011
  
(Unaudited)
  
                         
                         
               
Increase/
        
Description
  
2012
    
2011
    
(Decrease)
    
%
  
   
(Dollars in Millions)
        
Utility Electric Operating Revenues:
                        
  Residential
   $ 670     $ 748     $ (78 )     (10 )
  Commercial
     503       501       2       -  
  Industrial
     489       479       10       2  
  Governmental
     48       47       1       2  
    Total retail
     1,710       1,775       (65 )     (4 )
  Sales for resale
     39       64       (25 )     (39 )
  Other
     36       27       9       33  
    Total
   $ 1,785     $ 1,866     $ (81 )     (4 )
                                 
Utility Billed Electric Energy
                                
 Sales (GWh):
                                
  Residential
     7,760       9,042       (1,282 )     (14 )
  Commercial
     6,414       6,449       (35 )     (1 )
  Industrial
     9,958       9,516       442       5  
  Governmental
     578       583       (5 )     (1 )
    Total retail
     24,710       25,590       (880 )     (3 )
  Sales for resale
     732       947       (215 )     (23 )
    Total
     25,442       26,537       (1,095 )     (4 )
                                 
                                 
Entergy Wholesale Commodities:
                                
Operating Revenues
   $ 560     $ 610     $ (50 )     (8 )
Billed Electric Energy Sales (GWh)
     11,193       10,519       674       6  
                                 
 


ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.  COMMITMENTS AND CONTINGENCIES  (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business.  While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report.  Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein, discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein, and discusses a judicial proceeding involving Vermont Yankee in Note 1 to the financial statements in the Form 10-K and in Note 11 to the financial statements herein.

Nuclear Insurance

See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.

Conventional Property Insurance

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.

Employment Litigation

The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees and third parties not selected for open positions.  These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans.  Entergy and the Registrant Subsidiaries are responding to these lawsuits and proceedings and deny liability to the claimants.

Asbestos Litigation  (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas.