10-QPeriod: Q3 FY2005

ENTERGY CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 9, 2005For Securities:ETR

Summary

This 10-Q filing for Entergy Corp. as of September 30, 2005, details the company's operational status and ongoing legal and regulatory matters. Despite the significant disruption caused by Hurricanes Katrina and Rita, including temporary relocation of its corporate headquarters, Entergy maintained business continuity and its existing financial controls. The company reported that these changes did not materially affect its internal control over financial reporting, with no data loss and a timely resumption of billing and meter reading activities, though initial billings in impacted areas were estimated. Investors should note the various ongoing legal proceedings, including those related to fuel clauses, rates of return, and fiber optic cable installations across several subsidiaries. Additionally, regulatory matters are prominent, with updates on FERC audits, customer-initiated proceedings concerning power purchase agreements and reactive power charges, and new environmental regulations impacting mercury, SO2, and NOx emissions. These environmental regulations are expected to require significant capital expenditures through 2009. The company also announced the election of new board members. The filing includes updated earnings ratios for its utility subsidiaries, showing generally healthy coverage. Entergy also continued its share repurchase program, extending its $1.5 billion repurchase plan through 2008 due to hurricane impacts, in addition to repurchases to fund employee stock options. Overall, the report highlights Entergy's resilience in the face of natural disasters and its active engagement with a complex regulatory and legal landscape.

Key Highlights

  • 1Entergy maintained business continuity and effective internal controls despite temporary relocation of corporate headquarters due to Hurricanes Katrina and Rita, with no material impact on financial reporting controls.
  • 2Several legal proceedings are ongoing across various subsidiaries concerning fuel clauses, rates of return, and property easements related to fiber optic cable installations.
  • 3The company is actively managing significant regulatory matters, including FERC audits, disputes over power purchase agreements (PPAs), and challenges related to reactive power charges from independent generators.
  • 4New EPA regulations for mercury and SO2/NOX emissions are expected to necessitate approximately $116 million in capital expenditures for Entergy's coal and fossil fuel facilities through 2009.
  • 5Entergy extended its $1.5 billion common stock repurchase program through 2008, in addition to its ongoing program to fund employee stock options.
  • 6The earnings to fixed charges and earnings to combined fixed charges and preferred dividends ratios for Entergy's utility subsidiaries are generally strong, indicating solid coverage.
  • 7Three new directors were elected to the Entergy Corporation Board of Directors during the quarter.

Frequently Asked Questions

Entergy reported that despite temporary relocation of its corporate headquarters and modification of certain processes due to Hurricanes Katrina and Rita, its business continuity plan was implemented effectively. Existing systems and controls were used to ensure accuracy, completeness, and timeliness of financial records. While there was a short-term interruption in financial application processing, no data was lost. Management concluded that these changes did not materially affect, and are not reasonably likely to affect, the company's internal control over financial reporting.

Entergy is dealing with several regulatory issues, including ongoing FERC audits concerning wholesale sales and purchases, customer-initiated proceedings on power purchase agreements (PPAs) and transmission tariffs, and disputes over reactive power charges from independent generators. Additionally, new environmental regulations from the EPA concerning mercury, SO2, and NOX emissions are expected to require significant capital investments and potentially impact operating costs.

A lawsuit by ratepayers alleged that Entergy New Orleans and affiliates overcharged customers by potentially more than $100 million over several years through fuel procurement and power purchasing practices. The City Council ordered an $11.3 million refund, which was affirmed by the Civil District Court. Plaintiffs have appealed this decision to the Louisiana Fourth Circuit Court of Appeal.

Entergy estimates capital expenditures of approximately $26 million through 2009 for compliance with the Clean Air Mercury Rule, focusing on mercury emissions from coal-fired power plants. For the Clean Air Interstate Rule (CAIR), aimed at reducing SO2 and NOX emissions, Entergy estimates capital expenditures of approximately $90 million through 2009 for its fossil generation fleet. These costs could be offset by emission markets, but Entergy is concerned about the fairness of allowance allocations and is pursuing petitions for reconsideration and review.