a06211.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 September 30, 2011
 
                                            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 October 31, 2011
Entergy Corporation
($0.01 par value)
176,116,403

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, 2010 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 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
September 30, 2011

 
Page Number
   
iv
vi
Entergy Corporation and Subsidiaries
  
 
1
10
15
16
18
18
18
21
22
24
26
27
28
73
Entergy Arkansas, Inc. and Subsidiaries
  
 
74
76
78
78
79
79
79
80
81
82
84
85
Entergy Gulf States Louisiana, L.L.C.
  
 
86
88
91
92
92
92
92
93
95
96
98
99
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2011

 
Page Number
   
Entergy Louisiana, LLC and Subsidiaries
  
 
100
102
105
106
106
106
106
107
109
110
112
113
Entergy Mississippi, Inc.
  
 
114
116
119
119
119
120
121
122
124
125
Entergy New Orleans, Inc.
  
 
126
128
130
130
130
130
131
133
134
136
137
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2011

 
Page Number
   
Entergy Texas, Inc. and Subsidiaries
  
 
138
141
143
143
143
143
144
145
146
148
149
System Energy Resources, Inc.
  
 
150
150
152
152
152
153
155
156
158
 
159
159
159
160
164
167




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, and other regulatory proceedings, including those related to Entergy’s System Agreement or any successor agreement or arrangement, Entergy’s utility supply plan, recovery of storm costs, and recovery of fuel and purchased power costs
·  
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, the operations of the independent coordinator of transmission for Entergy’s utility service territory and transition to a successor or alternative arrangement, including possible participation in a regional transmission organization, 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 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
·  
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




FORWARD-LOOKING INFORMATION (Concluded)

·  
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 and ice storms 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
·  
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
bundled energy and
capacity contract
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold
capacity contract
A contract for the sale of the installed capacity product in regional markets managed by ISO New England and the New York Independent System Operator
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
firm LD
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, the defaulting party must compensate the other party as specified in the contract
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, 2010 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


DEFINITIONS (Continued)

Abbreviation or Acronym
 
Term
  
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
  
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
  
Offsetting positions
Transactions for the purchase of energy, generally to offset a firm LD transaction
  
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
  
percent of capacity sold forward
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions
  
percent of planned generation sold forward
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 or may not require regulatory approval
  
planned net MW in operation
Amount of capacity to be available to generate power and/or sell capacity considering uprates planned to be completed during the year
  
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-contingent
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages
  


DEFINITIONS (Concluded)

Abbreviation or Acronym
  Term
 
  
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 its two, reportable, operating segments: Utility and Entergy Wholesale Commodities.

·  
Utility generates, transmits, distributes, and sells electric power in service territories in four states that include portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
·  
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.

In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization.  The prior period financial information in this Form 10-Q has been restated to reflect the change in reportable segments.

Results of Operations

Third Quarter 2011 Compared to Third Quarter 2010

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the third quarter 2011 to the third quarter 2010 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)
                 
3rd Qtr 2010 Consolidated Net Income
  
$337,941 
  
$143,721 
  
$16,239 
  
$497,901 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
  
 
 
(203,858)
  
 
 
(32,623)
  
 
 
2,436 
  
 
 
(234,045)
Other operation and maintenance expenses
  
(37,748)
  
(70,511)
  
8,392 
  
(99,867)
Taxes other than income taxes
  
9,022 
  
4,791 
  
14 
  
13,827 
Depreciation and amortization
  
15,570 
  
3,448 
  
(58)
  
18,960 
Other income
  
593 
  
(7,858)
  
8,861 
  
1,596 
Interest expense
  
(6,197)
  
(636)
  
7,295 
  
462 
Other expenses
  
833 
  
1,935 
  
- 
  
2,768 
Income taxes (benefit)
  
(375,263)
  
33,351 
  
38,145 
  
(303,767)
                 
3rd Qtr 2011 Consolidated Net Income
  
$528,459 
  
$130,862 
  
($26,252)
  
$633,069 
 

(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.

Net income for Utility in the third quarter 2011 was significantly affected by a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts, which resulted in a reduction in income tax expense.  The net income effect was partially offset by a regulatory charge, which reduced net revenue, because a portion of the benefits will be shared with customers.  See Note 10 to the financial statements for additional discussion of the settlement and benefit sharing.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the third quarter 2011 to the third quarter 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$1,522 
Mark-to-market tax settlement sharing
  
(199)
Volume/weather
  
(10)
Retail electric price
  
5 
Other
  
1 
2011 net revenue
  
$1,319 

The mark-to-market tax settlement sharing variance results from a regulatory charge because a portion of the benefits of a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts will be shared with customers.  See Note 10 to the financial statements for additional discussion of the settlement and benefit sharing.

The volume/weather variance is primarily due to milder weather compared to the same period in the prior year.  Despite favorable weather in the third quarter 2011, the weather effect declined compared to the even warmer weather experienced in the third quarter 2010.  This was offset by an increase of 785 GWh in weather-adjusted usage, primarily in the industrial sector.  Entergy’s service territory continues to benefit from expansions as well as competitive industries and facilities located within the region.

The retail electric price variance is primarily due to:

·  
rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and
·  
a formula rate plan increase at Entergy Louisiana effective May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K and herein 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 third quarter 2011 to the third quarter 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$574 
Realized price changes
  
(43)
Harrison County
  
(9)
Fuel expenses
  
(9)
Volume
  
41 
Other
  
(12)
2011 net revenue
  
$542 
 
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $32 million, or 6%, in the third quarter 2011 compared to the third quarter 2010 primarily due to:

·  
lower pricing in its contracts to sell power;
·  
the absence of the Harrison County plant, which was sold in December 2010; and
·  
higher fuel expenses at the nuclear plants.

These factors were substantially offset by higher volume resulting from fewer planned and unplanned outage days in 2011 compared to the same period in 2010.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the third quarter 2011 and 2010:
 
   
2011
  
2010
         
Net MW in operation at September 30
  
4,998
  
4,998
Average realized revenue per MWh
  
$56.07
  
$61.41
GWh billed
  
10,645
  
9,888
Capacity factor
  
98%
  
91%
Refueling outage days:
        
FitzPatrick
  
-
  
18

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 11,284 GWh in the third quarter 2011 and 10,736 GWh in the third quarter 2010, with average realized revenue per MWh of $55.87 in the third quarter 2011 and $61.51 in the third quarter 2010.

Realized Price per MWh

See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $59.16 in 2010 from $61.07 for 2009.  Entergy Wholesale Commodities’ nuclear business is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 94% of its planned nuclear energy output for the remainder of 2011 for an average contracted energy price of $52 per MWh.  In addition, Entergy Wholesale Commodities has sold forward 89% of its planned nuclear energy output for 2012 for an average contracted energy price of $49 per MWh.
 
 
3
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

 
Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $516 million for the third quarter 2010 to $478 million for the third quarter 2011 primarily due to:

·  
a decrease of $24 million in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010;
·  
the deferral in 2011 of $13.4 million of 2010 Michoud plant maintenance costs pursuant to the settlement of Entergy New Orleans’ 2010 test year formula rate plan filing approved by the City Council in September 2011.  See Note 2 to the financial statements for further discussion of the 2010 test year formula rate plan filing and settlement; and
·  
the amortization of $11 million of Entergy Texas rate case expenses in 2010.  See Note 2 to the financial statements in the Form 10-K for further discussion of the Entergy Texas rate case settlement.

These decreases were partially offset by an increase of $7 million in nuclear expenses primarily due to higher labor costs.

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

Entergy Wholesale Commodities

           Other operation and maintenance expenses decreased from $299 million for the third quarter 2010 to $229 million for the third quarter 2011 primarily due to:

·  
the write-off of $25 million of capital costs in 2010, primarily for software that would not be utilized, and $11 million of additional costs incurred in 2010 in connection with Entergy's decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business;
·  
a decrease in compensation and benefits costs resulting from an increase of $12 million in the accrual for incentive-based compensation in 2010;
·  
the write-off of $10 million of capitalized engineering costs in 2010 associated with a potential uprate project; and
· 
a decrease of $9 million due to the absence of expenses from the Harrison County plant, which was sold in December 2010.

Income Taxes

The effective income tax rates for the third quarters 2011 and 2010 were (23.2)% and 27.1%, respectively. The difference in the effective income tax rate versus the statutory rate of 35% for the third quarter 2011 is primarily due to a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts, which resulted in a reduction in income tax expense of $422 million.  See Note 10 to the financial statements herein for further discussion of the settlement.  The difference in the effective income tax rate versus the statutory rate of 35% for the third quarter 2010 was primarily due to:

·  
a favorable Tax Court decision holding that the U.K. Windfall Tax can be used as a credit for purposes of computing the U.S. foreign tax credit, which allows Entergy to reverse a previously established partial tax reserve of $43 million, included in Parent and Other, on the issue.  See Note 3 to the financial statements in the Form 10-K for further discussion of this tax litigation;
·  
the recognition of a $14 million Louisiana state income tax benefit related to Act 55 storm cost financing; and
·  
the reversal of a reserve of $13 million with respect to restructuring of business operations within the non-utility nuclear business.
 
 
 
4
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Partially offsetting the decreased effective income tax rate were state income taxes and certain book and tax differences for Utility plant items.

Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 2011 to the nine months ended September 30, 2010 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)
                 
2010 Consolidated Net Income
  
$711,085 
  
$338,820 
  
($12,906)
  
$1,036,999 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
  
 
 
(173,625)
  
 
 
(128,423)
  
 
 
3,778 
  
 
 
(298,270)
Other operation and maintenance expenses
  
(11,046)
  
(140,361)
  
17,091 
  
(134,316)
Taxes other than income taxes
  
7,276 
  
(1,117)
  
(263)
  
5,896 
Depreciation and amortization
  
11,177 
  
12,149 
  
(46)
  
23,280 
Other income
  
10,851 
  
(35,617)
  
3,923 
  
(20,843)
Interest expense
  
(32,679)
  
(52,428)
  
31,014 
  
(54,093)
Other expenses
  
770 
  
9,158 
  
- 
  
9,928 
Income taxes (benefit)
  
(377,041)
  
27,728 
  
9,158 
  
(340,155)
                 
2011 Consolidated Net Income
  
$949,854 
  
$319,651 
  
($62,159)
  
$1,207,346

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

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

Net income for Utility for the nine months ended September 30, 2011 was significantly affected by a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts, which resulted in a reduction in income tax expense.  The net income effect was partially offset by a regulatory charge, which reduced net revenue, because a portion of the benefits will be shared with customers.  See Note 10 to the financial statements for additional discussion of the settlement and benefit sharing.
 
 
 
5
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

 
Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2011 to the nine months ended September 30, 2010.
 
  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$3,945 
Mark-to-market tax settlement sharing
  
(199)
Net wholesale revenue
  
(15)
Purchased power capacity
  
(14)
Volume/weather
  
21 
Retail electric price
  
31 
Other
  
3 
2011 net revenue
  
$3,772 
 
The mark-to-market tax settlement sharing variance results from a regulatory charge because a portion of the benefits of a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts will be shared with customers.  See Note 10 to the financial statements for additional discussion of the settlement and benefit sharing.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

The volume/weather variance is primarily due to an increase of 1,986 GWh in weather-adjusted usage across all sectors.  Weather-adjusted residential retail sales growth reflected an increase in the number of customers.  Industrial sales growth has continued since the beginning of 2010.  Entergy’s service territory has benefited from the national manufacturing economy and exports, as well as industrial facility expansions.  Increases have been offset to some extent by declines in the paper, wood products, and pipeline segments.  The weather effect variance was relatively flat as favorable weather experienced in 2011 was comparable to that experienced in 2010.

The retail electric price variance is primarily due to:

·  
a base rate increase at Entergy Arkansas effective July 2010;
·  
rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and
·  
a formula rate plan increase at Entergy Louisiana effective May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K and herein for further discussion of these proceedings.


 
6
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 nine months ended September 30, 2011 to the nine months ended September 30, 2010.
 
  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$1,669 
Realized price changes
  
(102)
Harrison County
  
(20)
Fuel expenses
  
(17)
Volume
  
22 
Other
  
(11)
2011 net revenue
  
$1,541 
 
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $128 million, or 8%, in the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 primarily due to:

·  
lower pricing in its contracts to sell power;
·  
the absence of the Harrison County plant, which was sold in December 2010; and
·  
higher fuel expenses at the nuclear plants.

These factors were substantially offset by higher volume resulting from fewer planned and unplanned outage days in 2011 compared to the same period in 2010.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the nine months ended September 30, 2011 and 2010:
 
   
2011
  
2010
         
Net MW in operation at September 30
  
4,998
  
4,998
Average realized revenue per MWh
  
$55.31
  
$59.27
GWh billed
  
30,551
  
30,011
Capacity factor
  
93%
  
92%
Refueling outage days:
        
FitzPatrick
  
-
  
18
Indian Point 2
  
-
  
33
Indian Point 3
  
30
  
-
Pilgrim
  
25
  
-
Vermont Yankee
  
-
  
29
 
Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 32,455 GWh in the nine months ended September 30, 2011 and 32,362 GWh in the nine months ended September 30, 2010, with average realized revenue per MWh of $55.07 in the nine months ended September 30, 2011 and $59.32 in the nine months ended September 30, 2010.  See also the discussion in “Realized Price per MWh” in the Third Quarter 2011 Compared to Third Quarter 2010 section.


 
7
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $1,422 million for the nine months ended September 30, 2010 to $1,411 million for the nine months ended September 30, 2011 primarily due to:

·  
a decrease of $31 million in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010;
·  
the deferral in 2011 of $13.4 million of 2010 Michoud plant maintenance costs pursuant to the settlement of Entergy New Orleans’ 2010 test year formula rate plan filing approved by the City Council in September 2011.  See Note 2 to the financial statements for further discussion of the 2010 test year formula rate plan filing and settlement;
·  
a decrease of $15 million in fossil expenses resulting from more outages in the first half of 2010; and
·  
the amortization of $11 million of Entergy Texas rate case expenses in 2010.  See Note 2 to the financial statements in the Form 10-K for further discussion of the Entergy Texas rate case settlement.

These decreases were partially offset by an increase of $24 million in nuclear expenses primarily due to higher labor and benefits costs, an increase of $8 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services, and several individually insignificant items.

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

Interest expense decreased primarily due to:

·  
the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies;
·  
a revision caused by FERC’s acceptance of a change in the treatment of funds received from independent power producers for transmission interconnection projects; and
·  
 interest expense accrued in 2010 related to the expected result of the LPSC Staff audit of Entergy Gulf States Louisiana’s fuel adjustment clause for the period 1995 through 2004.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $809 million for the nine months ended September 30, 2010 to $669 million for the nine months ended September 30, 2011 primarily due to:

·  
the write-off of $58 million of capital costs in 2010, primarily for software that would not be utilized, and $12 million of additional costs incurred in 2010 in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business;
·  
a decrease of $22 million due to the absence of expenses from the Harrison County plant, which was sold in December 2010;
·  
a decrease in compensation and benefits costs resulting from an increase of $18 million in the accrual for incentive-based compensation in 2010;
·  
the write-off of $10 million of capitalized engineering costs in 2010 associated with a potential uprate project; and
·  
a decrease of $11 million in spending on tritium remediation work.

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

Other income decreased primarily due to a decrease in interest income earned on loans to the parent company, Entergy Corporation, and a decrease of $10 million in realized earnings on decommissioning trust fund investments.


 
8
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Interest expense decreased primarily due to the write-off of $39 million of debt financing costs in 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.

Parent & Other

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010, with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.

Income Taxes

           The effective income tax rates for the nine months ended September 30, 2011 and 2010 were 14.0% and 34.1%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the nine months ended September 30, 2011 is primarily due to a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts, which resulted in a reduction in income tax expense of $422 million.  See Note 10 to the financial statements herein for further discussion of the settlement.  The difference in the effective income tax rate versus the statutory rate of 35% for the nine months ended September 30, 2010 was primarily due to:

·  
a favorable Tax Court decision holding that the U.K. Windfall Tax can be used as a credit for purposes of computing the U.S. foreign tax credit, which allows Entergy to reverse a previously established partial tax reserve of $43 million, included in Parent and Other, on the issue.  See Note 3 to the financial statements in the Form 10-K for further discussion of this tax litigation;
·  
a $19 million tax benefit recorded in the first quarter 2010 in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business;
·  
the recognition of a $14 million Louisiana state income tax benefit related to Act 55 storm cost financing; and
·  
the reversal of a reserve of $13 million with respect to restructuring of business operations within the non-utility nuclear business.

These factors were partially offset by:

·  
a charge of $16 million recorded in first quarter 2010 resulting from a change in tax law associated with the federal healthcare legislation enacted in March 2010.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K for a discussion of the federal healthcare legislation;
·  
state income taxes; and
·  
certain book and tax differences for Utility plant items.


 
9
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

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.
 
   
September 30,
2011
  
December 31,
2010
         
Debt to capital
  
57.3%
  
57.3%
Effect of excluding the securitization bonds
  
(2.2)%
  
(2.0)%
Debt to capital, excluding securitization bonds (1)
  
55.1%
  
55.3%
Effect of subtracting cash
  
(2.3)%
  
(3.2)%
Net debt to net capital, excluding securitization bonds (1)
  
52.8%
  
52.1%

(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.

As discussed in the Form 10-K, Entergy Corporation has in place a revolving credit facility that expires in August 2012, which Entergy intends to renew before expiration.  Because the facility is now within one year of its expiration date, borrowings outstanding on the facility are classified as currently maturing long-term debt on the balance sheet.  Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of the facility.  As of September 30, 2011, the capacity and amounts outstanding under the credit facility are:
 
 
Capacity
  
 
Borrowings
  
Letters
of Credit
  
Capacity
Available
(In Millions)
             
$3,463 
  
$1,870 
  
$25 
  
$1,568
 
Entergy Corporation’s credit facility requires it 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 this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation 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.

 
10
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

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 2011 through 2013.  Following are updates to the discussion in the Form 10-K.

Capital Investment Plan Preliminary Estimate for 2012-2014

Entergy is developing its capital investment plan for 2012 through 2014 and currently anticipates that the Utility will make $6.0 billion in capital investments during that period, including approximately $2.9 billion for maintenance of existing assets, and that Entergy Wholesale Commodities will make $1.1 billion in capital investments during that period, including approximately $0.3 billion for maintenance of existing assets.  The remaining $3.1 billion of Utility investments is associated with specific investments such as the Waterford 3 steam generator replacement, the Grand Gulf uprate project, the Ninemile 6 project, the Hot Spring and Hinds purchases, and other investments such as potential opportunities through the Utility’s supply plan initiatives that support its ability to meet load growth.  The remaining $0.8 billion of Entergy Wholesale Commodities investments is associated with specific investments such as dry cask storage, nuclear license renewal, component replacement and identified repairs, spending in response to the Indian Point Safety Evaluation, NYPA value sharing, and wedgewire screens at Indian Point.

Grand Gulf Uprate

As discussed in the Form 10-K, the estimated capital investments for 2011-2013 included $575 million of spending associated with System Energy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant.  After performing more detailed project design, engineering, analysis and major materials purchases, System Energy’s current updated estimate of the total capital investment to be made in the course of the implementation of the Grand Gulf uprate project is approximately $734 million, including SMEPA’s share.  As in the original estimate, this estimate includes spending on certain major equipment refurbishment and replacement that would have been required over the normal course of the plant’s life even if the uprate were not done.  The purpose of performing this major equipment refurbishment and replacement in connection with the uprate is to avoid additional plant outages and construction costs in the future while improving plant reliability.  The investment estimate may be revised in the future as System Energy evaluates the progress of the project.

Acadia Unit 2 Purchase Agreement

See the Form 10-K for a discussion of the agreement Entergy Louisiana signed to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer.  Entergy Louisiana acquired the plant on April 29, 2011.

Rhode Island State Energy Center Purchase Agreement

In October 2011, Entergy signed an agreement with a subsidiary of NextEra Energy Resources to acquire the Rhode Island State Energy Center, a 550 MW natural gas-fired combined cycle generating plant located in Johnston, Rhode Island, for approximately $346 million, subject to closing adjustments.  If acquired the plant will become a part of the Entergy Wholesale Commodities business.  The Rhode Island State Energy Center is in the process of uprating to 583 MW, which is scheduled for completion in November 2011.  The transaction is contingent upon, among other things, obtaining regulatory approval from the FERC and notification pursuant to the Hart-Scott-Rodino antitrust law.  Closing is scheduled to occur in late 2011.
 
 
11
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Summer 2009 Long-Term Request for Proposal

As discussed in the Form 10-K, the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal were included in the 2011-2013 capital expenditure estimates in the Form 10-K.  In addition to the self-build option at Entergy Louisiana’s Ninemile site noted in the Form 10-K, in April 2011 two Entergy Utility operating companies announced that they have signed agreements to acquire the other two resources, the 620 MW Hot Spring Energy Facility and the 450 MW Hinds Energy Facility.

Ninemile Point Unit 6 Self-Build Project

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 a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  Ninemile 6 will be a nominally-sized 550 MW unit that is estimated to cost approximately $721 million to construct, excluding interconnection and transmission upgrades.  Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35% of the capacity and energy generated by Ninemile 6.  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.  Entergy New Orleans filed a request with the City Council to approve its purchase under a life-of-unit power purchase agreement of this capacity and energy.  The City Council has approved a procedural schedule that leads to a decision in the first quarter 2012.  If the City Council does not approve this power purchase agreement in a timely manner, then an allocation of 65% to Entergy Louisiana and 35% to Entergy Gulf States Louisiana is proposed.  If approvals are obtained from the LPSC and other permitting agencies, Ninemile 6 construction is expected to begin in 2012, and the unit is expected to commence commercial operation by mid-2015.  The ALJ has established a schedule for the LPSC proceeding that includes February 27 - March 7, 2012, hearing dates.

Hot Spring Energy Facility Purchase Agreement

In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $253 million.  Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million.  A new transmission service request has been submitted to determine if investments for supplemental upgrades in the Entergy transmission system are needed to make the Hot Spring Energy Facility deliverable to Entergy Arkansas for the period after Entergy Arkansas exits the System Agreement.  The initial results of the service request are expected in January 2012; accordingly there are still uncertainties that must be resolved.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Arkansas filed its application with the APSC requesting approval of the acquisition and full cost recovery.  The APSC has established a procedural schedule that includes a January 24, 2012 evidentiary hearing.

Hinds Energy Facility Purchase Agreement

In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $206 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million.  A new transmission service request has been submitted to determine if investments for supplemental upgrades in the Entergy transmission system are needed to make the Hinds Energy Facility deliverable to Entergy Mississippi for the period after Entergy Mississippi exits the System Agreement.  The initial results of the service request are expected in January 2012; accordingly there are still uncertainties that must be resolved.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state
 
 
12
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

 
regulatory and permitting agencies.  These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery.

Waterford 3 Steam Generator Replacement Project

See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project.  With regard to the delay in the delivery of the steam generators, Entergy Louisiana worked with the manufacturer to fully develop and evaluate repair options, and expects the replacement steam generators to be delivered in time for the Fall 2012 refueling outage.  Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011.  The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators.  Entergy Louisiana has formally reported its findings to the NRC.  At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated.  Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.

Entergy Louisiana’s existing formula rate plan provides for rate treatment of the Waterford 3 project costs, including in-service rate recovery without regulatory lag and treatment outside of the formula rate plan earnings sharing formula; however, these provisions contemplated the project being placed in service during the term of the current formula rate plan and will not apply at the time of the expected in-service date in the Fall 2012.  Through a motion filed in September 2011, Entergy Louisiana has sought to re-establish comparable rate recovery provisions for the project through renewal or extension of the current formula rate plan provisions.  The LPSC is scheduled to review this motion at its November 2011 meeting.  As set forth in the motion, if Entergy Louisiana cannot establish comparable rate relief through the extension of the current formula rate plan provisions, it will be necessary to seek such relief through a base rate filing.

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 January, April, July, and October 2011 meetings, the Board declared dividends of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 2011 and 2010 were as follows:

   
2011
  
2010
   
(In Millions)
         
Cash and cash equivalents at beginning of period
  
$1,294 
  
$1,710 
         
Cash flow provided by (used in):
        
Operating activities
  
2,130 
  
3,165 
Investing activities
  
(2,395)
  
(1,995)
Financing activities
  
(42)
  
(949)
Net increase (decrease) in cash and cash equivalents
  
(307)
  
221 
         
Cash and cash equivalents at end of period
  
$987 
  
$1,931 

 
 
13
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Operating Activities

Entergy's cash flow provided by operating activities decreased by $1,035 million for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 primarily due to the receipt in July 2010 of $703 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings for Hurricane Gustav and Hurricane Ike.  The Act 55 storm cost financings are discussed in Note 2 to the financial statements in the Form 10-K.  An increase of $131 million in pension contributions and the decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed to the decrease in operating cash flow.  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 increased by $401 million for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 primarily due to:

·  
the purchase of the Acadia Power Plant by Entergy Louisiana for approximately $300 million in April 2011;
·  
the investment in 2010 of a total of $290 million in Entergy Gulf States Louisiana's and Entergy Louisiana's storm reserve escrow accounts as a result of their Act 55 storm cost financings, which are discussed in Note 2 to the financial statements in the Form 10-K;
·  
an increase in nuclear fuel purchases, as more plants were preparing for refueling outages in 2011 than in 2010;
·  
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 $114 million in net deposits from Entergy Wholesale Commodities’ counterparties during 2010 and returned net deposits of $58 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.  Entergy’s construction spending plans for 2011 through 2013 are discussed in the Form 10-K.  April 2011 storms that caused damage to transmission and distribution lines, equipment, poles, and other facilities, primarily in Arkansas, also contributed to the increase.  The capital cost of repairing that damage was approximately $55 million.

Financing Activities

Net cash used in financing activities decreased by $907 million for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 primarily due to the following:

·  
Entergy repurchased $235 million of its common stock in the nine months ended September 30, 2011 and repurchased $666 million of its common stock in the nine months ended September 30, 2010.  Entergy’s share repurchase programs are discussed in the Form 10-K.
·  
Long-term debt activity provided approximately $588 million of cash in 2011 compared to $158 million of cash in 2010.  For details of Entergy's long-term debt activity in 2011 see Note 4 to the financial statements herein.
 
 
14
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


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

See the Form 10-K for a discussion of federal regulatory proceedings.  Following are updates to that discussion.
 
System Agreement and Independent Coordinator of Transmission (ICT)

As discussed in the Form 10-K, in November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures.  In addition, in December 2010 the FERC issued an order that granted the Entergy Regional State Committee (E-RSC) additional authority over transmission upgrades and cost allocation.  The E-RSC, comprised of one representative from each of the Utility operating company retail regulators, was formed in 2009 to consider several of the issues related to the Entergy transmission system.  The Utility operating companies expect that the E-RSC will review the cost-benefit analysis, discussed below, that the Utility operating companies submitted in May 2011 to each of their respective retail regulators comparing the ICT arrangement to joining the SPP RTO or the Midwest Independent Transmission System Operator (MISO).

Also as discussed in the Form 10-K, in February 2010 the APSC issued a show cause order opening an inquiry to conduct an investigation regarding the prudence of Entergy Arkansas’s entering a successor pooling agreement with the other Entergy Utility operating companies, as opposed to becoming a standalone entity upon exit from the System Agreement in December 2013, and whether Entergy Arkansas, as a standalone utility, should join the SPP RTO.  The APSC subsequently added evaluation of Entergy Arkansas joining MISO on a standalone basis as an alternative to be considered.  In August 2010, the APSC directed Entergy Arkansas and all parties to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of MISO.

On April 25, 2011, Entergy announced that each of the Utility operating companies propose joining MISO, which is expected to provide long-term benefits for the customers of each of the Utility operating companies.  MISO is a regional transmission organization that operates in 12 U.S. states (Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, Ohio, South Dakota, and Wisconsin) and also in Canada.  The Utility operating companies provided analysis in May 2011 to their retail regulators supporting this decision.  The APSC received additional information from Entergy, MISO, and other parties and held an evidentiary hearing in September 2011.  The APSC issued an order in the proceeding in October 2011 finding that it is prudent for Entergy Arkansas to join an RTO but deferred a decision on Entergy Arkansas’s plan to join MISO until Entergy Arkansas files an application to transfer control of its transmission assets to MISO.  Entergy Arkansas plans to file that application by November 28, 2011, which is the deadline set in the APSC order.

Entergy’s May 2011 filings estimate that the transition and implementation costs of joining MISO could be up to $105 million if all of the Utility operating companies join MISO, most of which will be spent in late 2012 and 2013.  Maintaining the viability of the alternatives of Entergy Arkansas joining MISO alone or standing alone within an ICT arrangement is expected to result in an additional cost of approximately $35 million, for a total cost of up to $140 million.  This amount could increase with extended litigation in various
 
 
15
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


regulatory proceedings.  It is expected that costs will be incurred to obtain regulatory approvals, to revise or implement commercial and legal agreements, to integrate transmission and generation facilities, to develop back-office accounting and settlement systems, and to build out communications infrastructure.  The Utility operating companies also expect to make filings later in 2011 with their retail regulators regarding the transfer of control of their transmission assets to MISO.  As discussed below, Entergy Louisiana and Entergy Gulf States Louisiana made their filing on October 31, 2011.  The target implementation date for joining MISO is December 2013.

On Oct. 31, 2011, Entergy Louisiana and Entergy Gulf States Louisiana filed with the LPSC a joint application seeking to join MISO and transfer control of the companies’ transmission assets to MISO.  The joint application to join MISO seeks a finding from the LPSC that membership in MISO is in the public interest.  As MISO members, Entergy Louisiana and Entergy Gulf States Louisiana will retain ownership of their generation and transmission facilities, along with responsibility for maintaining these facilities.  Once Entergy Louisiana and Entergy Gulf States Louisiana are fully integrated as members, however, MISO will assume control of transmission planning, the commitment and dispatch of generation that is bid into MISO’s markets, and congestion management.  As part of the joint application, Entergy Louisiana and Entergy Gulf States Louisiana also requested an accounting order authorizing them to defer costs associated with integrating into MISO.  Entergy Louisiana expects to incur costs up to $26 million in order to complete the transition activities and Entergy Gulf States Louisiana expects to incur up to $19 million.  Of these expected costs, Entergy Louisiana expects to request deferral of the expected expense portion of $19 million and Entergy Gulf States Louisiana expects to request deferral of the expected expense portion of $14 million as regulatory assets.

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.  Several parties intervened in the proceeding, including Entergy, the APSC, the LPSC, and the City Council, and some of the parties also filed comments or protests.  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 announced that it intends to “work with its stakeholders to quickly craft the appropriate changes to its tariff that will accomplish the same objectives sought in the waiver.”

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy Wholesale Commodities, unless otherwise contracted, is subject to the fluctuation of market power prices.  In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area.  Following is an updated summary of the amount of Entergy Wholesale Commodities nuclear power plants’ planned energy output and installed capacity that is sold forward under physical or financial contracts (2011 represents the remainder of the year):
 
 
16
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Energy
                        
   
2011
  
2012
  
2013
  
2014
  
2015
  
2016
                         
Percent of planned generation sold forward:
                        
     Unit-contingent
  
80%
  
61%
  
38%
  
14%
  
12%
  
12%
     Unit-contingent with guarantee of availability (1)
  
14%
  
14%
  
16%
  
 13%
  
 13%
  
 13%
     Firm LD
  
3%
  
24%
  
24%
  
8%
  
-%
  
-%
                 Offsetting positions
  
(3)%
  
(10)%
  
-%
  
-%
  
-%
  
-%
     Total energy sold forward
  
94%
  
89%
  
78%
  
35%
  
25%
  
25%
Planned generation (TWh) (2) (3)
  
10
  
41
  
40
  
41
  
41
  
40
Average revenue under contract per MWh (4) (5)
  
$52
  
$49
  
$45-51
  
$49-55
  
$49-57
  
$50-59
 
 
Capacity
                          
   
2011
  
2012
  
2013
  
2014
  
2015
    
2016
                           
Percent of capacity sold forward:
                          
Bundled capacity and energy contracts
  
26%
  
18%
  
16%
  
16%
  
16%
    
16%
Capacity contracts
  
45%
  
32%
  
26%
  
25%
  
 11%
    
 0%
Total capacity sold forward
  
71%
  
50%
  
42%
  
41%
  
27%
    
16%
Planned net MW in operation (3)
  
4,998
  
4,998
  
4,998
  
4,998
  
4,998
    
4,998
Average revenue under contract per kW per month
(applies to capacity contracts only) (4) (5)
  
$1.8
  
$2.8
  
$3.2
  
$3.1
  
$2.9
    
$-
 
Blended Capacity and Energy Recap (based on revenues)
                          
% of planned generation and capacity sold forward
  
95%
  
89%
  
76%
  
37%
  
26%
    
25%
Blended revenue under contract per MWh
  
$53
  
$50
  
$49
  
$54
  
$55
    
$55

(1)
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.
 (2)
Amount of output expected to be generated by Entergy Wholesale Commodities nuclear units considering plant operating characteristics, outage schedules, and expected market conditions which impact dispatch.
(3)
Assumes NRC license renewal for plants whose current licenses expire within five years and the continued operation of all six 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).  See also Note 11 to the financial statements for a discussion regarding the continued operation of Vermont Yankee.
(4)
The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant through March 21, 2012.  The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far.
(5)
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.
 
 
17
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


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 September 30, 2011 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $6 million in 2011.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ nuclear 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 September 30, 2011, based on power prices at that time, Entergy had liquidity exposure of $55 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commodities segment) transactions, $20 million of guarantees that support letters of credit, and $6 million of posted cash collateral to the ISOs.  As of September 30, 2011, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $134 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 September 30, 2011, Entergy would have been required to provide approximately $47 million of additional cash or letters of credit under some of the agreements.

As of September 30, 2011, the counterparties or their guarantors for 99.9% of the planned energy output under contract for Entergy Wholesale Commodities through 2016 have public investment grade credit ratings and 0.1% is with load-serving entities without public 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 has made recommendations, which are currently being evaluated by the NRC.  The lessons learned from the events in Japan and the NRC recommendations may affect future operations of U.S. nuclear facilities, including Entergy's, and could, among other things, result in increased costs and capital requirements associated with operating Entergy's nuclear plants.

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.  Following is an update to that discussion.  For updates of the impairment of long-lived assets discussion regarding Vermont Yankee see Note 11 to the financial statements herein.

Nuclear Decommissioning Costs

In the first quarter 2011, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study.  The revised estimate resulted in a $38.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset. 

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.
 
 
18
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


In May 2011 the FASB issued ASU No. 2011-4, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” which states that the ASU explains how to measure fair value.  The ASU states that:  1) the amendments in the ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards; 2) consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements; 3) for many of the requirements, the FASB does not intend for the ASU to result in a change in the application of the requirements of current U.S. GAAP; 4) some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements; and 5) other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  ASU No. 2011-4 is effective for Entergy for the first quarter 2012.  Entergy does not expect ASU No. 2011-4 to affect materially its results of operations, financial position, or cash flows.

In June 2011 the FASB issued ASU No. 2011-5, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.”  The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  ASU No. 2011-5 is effective for Entergy for the first quarter 2012.  ASU No. 2011-5 will have no effect on Entergy’s results of operations, financial position, or cash flows.

In September 2011 the FASB issued ASU No. 2011-8, “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.”  The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment assessment.  ASU No. 2011-8 is effective for Entergy for the first quarter 2012.  ASU No. 2011-8 will have no effect on Entergy’s results of operations, financial position, or cash flows.
 
 
 
 
 
 
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CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
                         
   
Three Months Ended
    
Nine Months Ended
  
   
2011
    
2010
    
2011
    
2010
  
    (In Thousands, Except Share Data)  
                         
OPERATING REVENUES
                        
Electric
   $ 2,733,601     $ 2,638,752     $ 6,811,538     $ 6,859,791  
Natural gas
     26,439       27,263       126,453       154,426  
Competitive businesses
     635,513       666,161       1,802,050       1,940,256  
TOTAL
     3,395,553       3,332,176       8,740,041       8,954,473  
                                 
OPERATING EXPENSES
                                
Operating and Maintenance:
                                
   Fuel, fuel-related expenses, and
                                
     gas purchased for resale
     849,982       748,863       1,921,007       1,939,077  
   Purchased power
     475,335       484,694       1,289,180       1,376,055  
   Nuclear refueling outage expenses
     64,566       64,885       191,517       191,395  
   Other operation and maintenance
     708,821       808,688       2,077,066       2,211,382  
Decommissioning
     56,467       53,380       167,229       157,423  
Taxes other than income taxes
     152,044       138,217       406,493       400,597  
Depreciation and amortization
     283,581       264,621       812,672       789,392  
Other regulatory charges (credits) - net
     203,848       (1,814 )     204,338       15,555  
TOTAL
     2,794,644       2,561,534       7,069,502       7,080,876  
                                 
OPERATING INCOME
     600,909       770,642       1,670,539       1,873,597  
                                 
OTHER INCOME
                                
Allowance for equity funds used during construction
     21,516       15,064       59,558       45,990  
Interest and investment income
     33,238       38,705       95,906       121,869  
Miscellaneous - net
     (14,137 )     (14,748 )     (40,498 )     (32,050 )
TOTAL
     40,617       39,021       114,966       135,809  
                                 
INTEREST EXPENSE
                                
Interest expense
     137,301       136,075       409,484       463,454  
Allowance for borrowed funds used during construction
     (9,713 )     (8,949 )     (27,397 )     (27,274 )
TOTAL
     127,588       127,126       382,087       436,180  
                                 
INCOME BEFORE INCOME TAXES
     513,938       682,537       1,403,418       1,573,226  
                                 
Income taxes (benefit)
     (119,131 )     184,636       196,072       536,227  
                                 
CONSOLIDATED NET INCOME
     633,069       497,901       1,207,346       1,036,999  
                                 
Preferred dividend requirements of subsidiaries
     5,015       5,015       15,046       15,048  
                                 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
   $ 628,054     $ 492,886     $ 1,192,300     $ 1,021,951  
                                 
                                 
Earnings per average common share:
                                
    Basic
   $ 3.55     $ 2.65     $ 6.70     $ 5.44  
    Diluted
   $ 3.53     $ 2.62     $ 6.67     $ 5.38  
Dividends declared per common share
   $ 0.83     $ 0.83     $ 2.49     $ 2.41  
                                 
Basic average number of common shares outstanding
     176,950,469       185,962,431       177,857,667       187,968,582  
Diluted average number of common shares outstanding
     177,723,020       187,777,172       178,805,215       189,914,439  
                                 
See Notes to Financial Statements.
                                



CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2011 and 2010
(Unaudited)
   
2011
    
2010
  
   
(In Thousands)
  
             
OPERATING ACTIVITIES
            
Consolidated net income
   $ 1,207,346     $ 1,036,999  
Adjustments to reconcile consolidated net income to net cash flow
                
 provided by operating activities:
                
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
     1,315,730       1,259,543  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
     (5,979 )     524,359  
  Changes in assets and liabilities:
                
     Receivables
     (213,524 )     (243,326 )
     Fuel inventory
     12,677       3,328  
     Accounts payable
     (238,879 )     44,348  
     Prepaid taxes and taxes accrued
     245,242       45,198  
     Interest accrued
     (53,307 )     (10,982 )
     Deferred fuel
     (119,481 )     (65,655 )
     Other working capital accounts
     (31,319 )     (162,284 )
     Provisions for estimated losses
     (4,608 )     258,962  
     Other regulatory assets
     250,747       482,960  
     Pension and other postretirement liabilities
     (275,690 )     (142,420 )
     Other assets and liabilities
     40,801       134,059  
Net cash flow provided by operating activities
     2,129,756       3,165,089  
                 
  INVESTING ACTIVITIES
                
Construction/capital expenditures
     (1,460,668 )     (1,410,708 )
Allowance for equity funds used during construction
     61,096       45,990  
Nuclear fuel purchases
     (475,418 )     (315,780 )
Payment for purchase of plant
     (299,590 )     -  
Proceeds from sale of assets and businesses
     6,531       9,675  
Insurance proceeds received for property damages
     -       7,894  
Changes in securitization account
     (443 )     (23,182 )
NYPA value sharing payment
     (72,000 )     (72,000 )
Payments to storm reserve escrow account
     (5,043 )     (294,901 )
Receipts from storm reserve escrow account
     -       9,925  
Decrease (increase) in other investments
     (60,693 )     117,696  
Proceeds from nuclear decommissioning trust fund sales
     1,053,089       1,974,008  
Investment in nuclear decommissioning trust funds
     (1,142,364 )     (2,043,361 )
Net cash flow used in investing activities
     (2,395,503 )     (1,994,744 )
                 
See Notes to Financial Statements.
                
                 
                 
                 
                 
                 
                 
 
 
 
 
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2011 and 2010
(Unaudited)
      2011       2010  
   
(In Thousands)
  
                 
FINANCING ACTIVITIES
                
Proceeds from the issuance of:
                
  Long-term debt
     1,535,634       2,272,224  
  Common stock and treasury stock
     32,889       45,763  
Retirement of long-term debt
     (947,401 )     (2,113,927 )
Repurchase of common stock
     (234,632 )     (665,624 )
Changes in credit borrowings - net
     30,036       (18,932 )
Dividends paid:
                
  Common stock
     (443,290 )     (453,683 )
  Preferred stock
     (15,046 )     (15,048 )
Net cash flow used in financing activities
     (41,810 )     (949,227 )
                 
Effect of exchange rates on cash and cash equivalents
     225       250  
                 
Net increase (decrease) in cash and cash equivalents
     (307,332 )     221,368  
                 
Cash and cash equivalents at beginning of period
     1,294,472       1,709,551  
                 
Cash and cash equivalents at end of period
   $ 987,140     $ 1,930,919  
                 
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
  Cash paid/(received) during the period for:
                
    Interest - net of amount capitalized
   $ 413,525     $ 400,124  
    Income taxes
   $ (11 )   $ 32,964  
                 
                 
See Notes to Financial Statements.
                




CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2011 and December 31, 2010
(Unaudited)
             
   
2011
    
2010
  
   
(In Thousands)
  
             
CURRENT ASSETS
            
Cash and cash equivalents:
            
  Cash
   $ 135,673     $ 76,290  
  Temporary cash investments
     851,467       1,218,182  
     Total cash and cash equivalents
     987,140       1,294,472  
Securitization recovery trust account
     43,487       43,044  
Accounts receivable:
                
  Customer
     790,355       602,796  
  Allowance for doubtful accounts
     (32,139 )     (31,777 )
  Other
     161,062       161,662  
  Accrued unbilled revenues
     329,095       302,901  
     Total accounts receivable
     1,248,373       1,035,582  
Deferred fuel costs
     87,297       64,659  
Accumulated deferred income taxes
     5,292       8,472  
Fuel inventory - at average cost
     194,848       207,520  
Materials and supplies - at average cost
     880,619       866,908  
Deferred nuclear refueling outage costs
     232,852       218,423  
System agreement cost equalization
     190,174       52,160  
Prepaid taxes
     56,565       301,807  
Prepayments and other
     227,851       246,036  
TOTAL
     4,154,498       4,339,083  
                 
OTHER PROPERTY AND INVESTMENTS
                
Investment in affiliates - at equity
     43,934       40,697  
Decommissioning trust funds
     3,566,111       3,595,716  
Non-utility property - at cost (less accumulated depreciation)
     258,967       257,847  
Other
     413,686       405,946  
TOTAL
     4,282,698       4,300,206  
                 
PROPERTY, PLANT AND EQUIPMENT
                
Electric
     38,484,712       37,153,061  
Property under capital lease
     789,898       800,078  
Natural gas
     339,923       330,608  
Construction work in progress
     1,904,313       1,661,560  
Nuclear fuel
     1,403,982       1,377,962  
TOTAL PROPERTY, PLANT AND EQUIPMENT
     42,922,828       41,323,269  
Less - accumulated depreciation and amortization
     18,123,801       17,474,914  
PROPERTY, PLANT AND EQUIPMENT - NET
     24,799,027       23,848,355  
                 
DEFERRED DEBITS AND OTHER ASSETS
                
Regulatory assets:
                
  Regulatory asset for income taxes - net
     737,475       845,725  
  Other regulatory assets (includes securitization property of
                
     $1,029,433 as of September 30, 2011 and $882,346 as of
     3,700,902       3,838,237  
     December 31, 2010)                
  Deferred fuel costs
     172,202       172,202  
Goodwill
     377,172       377,172  
Accumulated deferred income taxes
     58,001       54,523  
Other
     879,523       909,773  
TOTAL
     5,925,275       6,197,632  
                 
TOTAL ASSETS
   $ 39,161,498     $ 38,685,276  
                 
See Notes to Financial Statements.
                
 
 
 
 
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2011 and December 31, 2010
(Unaudited)
                 
      2011       2010  
   
(In Thousands)
  
                 
CURRENT LIABILITIES
                
Currently maturing long-term debt
   $ 2,022,410     $ 299,548  
Notes payable
     144,871       154,135  
Accounts payable
     882,651       1,181,099  
Customer deposits
     347,185       335,058  
Accumulated deferred income taxes
     64,821       49,307  
Interest accrued
     164,378       217,685  
Deferred fuel costs
     69,566       166,409  
Obligations under capital leases
     3,578       3,388  
Pension and other postretirement liabilities
     40,570       39,862  
System agreement cost equalization
     190,190       52,160  
Other
     231,123       277,598  
TOTAL
     4,161,343       2,776,249  
                 
NON-CURRENT LIABILITIES
                
Accumulated deferred income taxes and taxes accrued
     8,403,453       8,573,646  
Accumulated deferred investment tax credits
     281,112       292,330  
Obligations under capital leases
     39,341       42,078  
Other regulatory liabilities
     645,843       539,026  
Decommissioning and asset retirement cost liabilities
     3,274,479       3,148,479  
Accumulated provisions
     391,712       395,250  
Pension and other postretirement liabilities
     1,898,966       2,175,364  
Long-term debt (includes securitization bonds of $1,086,277 as of
          
   September 30, 2011 and $931,131 as of December 31, 2010)
     10,241,993       11,317,157  
Other
     547,146       618,559  
TOTAL
     25,724,045       27,101,889  
                 
Commitments and Contingencies
                
                 
Subsidiaries' preferred stock without sinking fund
     216,748       216,738  
                 
EQUITY
                
Common Shareholders' Equity:
                
Common stock, $.01 par value, authorized 500,000,000 shares;
                
  issued 254,752,788 shares in 2011 and in 2010
     2,548       2,548  
Paid-in capital
     5,362,959       5,367,474  
Retained earnings
     9,439,000       8,689,401  
Accumulated other comprehensive loss
     (138,337 )     (38,212 )
Less - treasury stock, at cost (78,677,119 shares in 2011 and
                
  76,006,920 shares in 2010)
     5,700,808       5,524,811  
Total common shareholders' equity
     8,965,362       8,496,400  
Subsidiaries' preferred stock without sinking fund
     94,000       94,000  
TOTAL
     9,059,362       8,590,400  
                 
TOTAL LIABILITIES AND EQUITY
   $ 39,161,498     $ 38,685,276  
                 
See Notes to Financial Statements.
                

 


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME
For the Nine Months Ended September 30, 2011 and 2010
(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, 2009
   $ 94,000   $ 2,548   $ (4,727,167 ) $ 5,370,042   $ 8,043,122   $ (75,185 ) $ 8,707,360  
                                             
Consolidated net income (a)
     15,048     -     -     -     1,021,951     -     1,036,999  
Other comprehensive income:
                                            
    Cash flow hedges net unrealized gain (net of tax expense of  $69,053)
     -     -     -     -     -     112,911     112,911  
    Pension and other postretirement liabilities (net of tax expense of $4,777)
     -     -     -