10-QPeriod: Q1 FY2009

ENTERGY CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:ETR

Summary

Entergy Corporation's first quarter 2009 filing indicates a mixed financial performance across its operating subsidiaries. While some entities, like Entergy Arkansas and Entergy Louisiana, saw increased operating cash flow driven by factors such as storm cost recovery and fuel cost adjustments, others, such as Entergy Texas, experienced significant negative cash flow from operations, largely due to hurricane restoration expenses. Overall, the company's subsidiaries are managing their capital structures effectively, with most maintaining balanced debt-to-capital ratios. However, significant storm restoration costs from Hurricanes Gustav, Ike, and Rita continue to be a material factor affecting liquidity and financial results, with ongoing efforts to recover these costs through regulatory mechanisms like securitization. Key developments include Entergy Arkansas seeking approval for environmental compliance projects at its White Bluff coal plant and Entergy Gulf States Louisiana and Entergy Arkansas progressing with the Ouachita power plant acquisition. Notably, Entergy Louisiana has recommended suspending its Little Gypsy repowering project for an extended period due to market and environmental concerns, potentially incurring substantial costs. Entergy Texas is navigating regulatory proceedings related to Hurricane Ike restoration costs and transitioning to retail competition. Investors should monitor the progress and outcomes of these regulatory and project-related matters, as well as the impact of potential environmental regulations on future operations.

Financial Statements
Beta
Operating Expenses$2.28B
Operating Income$506.53M
Interest Expense$127.97M
Net Income$240.33M
EPS (Basic)$0.61
EPS (Diluted)$0.60
Shares Outstanding (Basic)385.19M
Shares Outstanding (Diluted)396.12M

Key Highlights

  • 1Entergy Arkansas' net income decreased primarily due to higher taxes, depreciation, and effective income tax rates, though net revenue increased due to storm cost recovery and pricing adjustments.
  • 2Entergy Gulf States Louisiana's net income decreased due to lower other income, impacted by a reduction in interest and dividend income and cessation of carrying charges on storm restoration costs.
  • 3Entergy Louisiana's net income increased significantly, driven by higher other income and lower operation and maintenance expenses, despite lower net revenue.
  • 4Entergy Mississippi's net income saw a slight increase, aided by higher net revenue and a lower effective income tax rate, but offset by increased taxes other than income.
  • 5Entergy New Orleans' net income decreased due to lower net revenue and higher operation and maintenance expenses, particularly litigation costs.
  • 6Entergy Texas experienced a slight decrease in net income, mainly due to higher other operation and maintenance expenses, despite increased other income.
  • 7System Energy Resources, Inc. reported relatively unchanged net income, with operating revenues derived from its unit power sales agreement for the Grand Gulf facility.
  • 8Significant storm restoration costs related to Hurricanes Gustav and Ike are impacting several subsidiaries, with ongoing efforts to seek regulatory recovery through various mechanisms.

Frequently Asked Questions

The primary drivers varied by subsidiary. For Entergy Arkansas, a decrease in net income was mainly due to higher taxes, depreciation, and effective income tax rates. Entergy Gulf States Louisiana saw a decrease due to lower other income. Entergy Louisiana reported an increase driven by higher other income and lower operating expenses. Entergy Mississippi's slight increase was due to higher net revenue and a lower tax rate, while Entergy New Orleans' decrease stemmed from lower net revenue and higher operating expenses. Entergy Texas experienced a slight decrease due to higher operational expenses, and System Energy's net income remained stable.

The costs associated with Hurricanes Gustav and Ike are a significant factor for subsidiaries like Entergy Gulf States Louisiana and Entergy Texas. Entergy Gulf States Louisiana expects to initiate storm cost recovery proceedings, while Entergy Texas has filed a case seeking recovery of $577.5 million in restoration costs, with plans to use securitization. These efforts aim to recover the incurred expenses and mitigate the financial impact on the respective companies.

Entergy Arkansas is proceeding with filings for environmental compliance projects at its White Bluff coal plant. Entergy Gulf States Louisiana and Entergy Arkansas are advancing with the Ouachita power plant acquisition. However, Entergy Louisiana has recommended suspending the Little Gypsy repowering project for at least three years due to market and environmental factors, which could result in approximately $300 million in costs. Entergy Texas is also involved in regulatory proceedings regarding its transition to retail competition and cost recovery for Hurricane Ike restoration.

Most subsidiaries maintain balanced capital structures with manageable debt-to-capital ratios. Liquidity is being managed through various means, including credit facilities, inter-company money pools, and efforts to recover storm-related costs. For example, Entergy Mississippi drew on its credit facility, and several subsidiaries are actively engaged in regulatory processes to recover significant storm expenses, which is crucial for maintaining financial flexibility.