ML012840387

Part 7 - Vermont Yankee Nuclear Power Corp, Transfer of Facility Operating License and Proposed License Amendments

ML012840387
Person / Time
Site:	Vermont Yankee File:NorthStar Vermont Yankee icon.png
Issue date:	10/05/2001
From:	Entergy Nuclear Operations, Entergy Nuclear Vermont Yankee, Vermont Yankee
To:	Office of Nuclear Reactor Regulation
References
-RFPFR, FOIA/PA-2007-0068
Download: ML012840387 (210)

Text

The annual long-term debt maturities (excluding lease obligations) and annual cash sinking fund requirements for debt outstanding as of December 3 1, 1997, for the next five years are as follows:

Entergy Entergy Entergy Entergy System Entergy Enterg'r(a) Arkansas(h) Gulf States(c) L Mississippi Ener2y London (In Thousands) 1998 $ 390,674 $ 60,650 S 190,890 $ 35,300 $ 20 $ 70,000 $ 33,814 1999 232,538 365 71,915 238 20 160.000 2000 1,029,047 220 945 100,225 20 75,000 2001 277,710 35 123,725 18,925 25 135,000 2002 1,946,328 110,135 151,010 217.484 65,025 70.000 1,332.774 (a) Not included are other sinking fund requirements of approximately $15.8 million annually, which may be satisfied by cash or by certification of property additions at the rate of 167% of such requirements.

(b) Not included are other sinking fund requirements of approximately $0.79 million annually, which may be satisfied by cash or by certification of property additions at the rate of 167% of such requirements.

(c) Not included are other sinking fund requirements of approximately $11.6 million annually, which may be satisfied by cash or by certification of property additions at the rate of 167% of such requirements.

(d) Not included are other sinking fund requirements of approximately $3.41 million annually, which may be satisfied by cash or by certification of property additions at the rate of 167% of such requirements.

Entergy Gulf States has two outstanding series of pollution control bonds collateralized by irrevocable letters of credit, which are scheduled to expire before the scheduled maturity of the bonds. The letter of credit collateralizing the $28.4 million variable-rate series, due December 1, 2015, expires in September 1999 and the letter of credit collateralizing the $20 million variable-rate series, due April 1, 2016, expires in February 1999.

Entergy's subsidiary, CitiPower, established a variable rate revolving credit facility in the aggregate amount of 1.2 billion Australian dollars ($780 million) on January 5, 1996. The facility is fully collateralized by all of CitiPower's assets and is non-recourse to Entergy. Borrowings have maturities of 30 to 185 days, and are continuously renewable for 30 to 185 day periods at CitiPower's option until the facility matures on June 30, 2000.

As of December 31, 1997, the facility was drawn down to 1.1 billion Australian dollars ($715.3 million) at an average interest rate of 5.30%. Credit support is provided to facility banks in the form of a subordinated letter of credit supplied by the Commonwealth Bank of Australia. The letter of credit matures on January 21, 1999, and is for an amount of 70 million Australian dollars ($45.5 million). The letter of credit is fully collateralized by a second ranking security interest in all of CitiPower's assets and is non-recourse to Entergy.

CitiPower entered into several interest rate swaps to reduce the impact of interest rate changes on the borrowings under its variable rate line of credit. The interest rate swap agreements which hedge this debt involve the exchange of fixed and floating rate interest payments periodically over the life of the agreements. Interest is recognized currently based on the fixed rate of interest resulting from use of these swap agreements. Market risks arise from the movements in interest rates. If the counterparties to an interest rate swap agreement were to default on contractual payments, the subsidiary could be exposed to increased costs related to replacing the original agreement.

However, CitiPower does not anticipate nonperformance by any counterparty to any interest rate swap in effect as of December 31, 1997. As of December 31, 1997, CitiPower was a party to interest rate swaps having a notional amount of 900 million Australian dollars with maturity dates ranging from February 1999 to December 2000. which effectively fixed the rate of interest on the CitiPower credit line at 7.70%. CitiPower is also a party to an additional swap with a notional amount of 32 million Australian dollars and a maturity date of December 2009. The estimated fair value of the interest rate swaps, which represents the estimated amount CitiPower would pay to terminate the

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swaps at Dcccmber 31. 1997. based on quoted interest rates, is a net liability of $28 million. See Note I for a discussion of Entcrgy accounting policies regarding interest rate swaps.

Entergy London executed a credit facility with several banks on December 17, 1996, to obtain credit facilities in the aggregate amount of approximately BPS 1.25 billion ($2.1 billion). Proceeds of this facility, which

\%cr2 in three tranchcs. vcorc used. togethcr with 5392 million of cash provided by Entcrgy. to fund the acquisition of.

and to provide working capital for. London Electricity. The facilities were refinanced in November 1997. New or restated borrowing facilities were negotiated and Cumulative Quarterly Income Preferred Securities were issued (see Note 6 for more information) to partially replace one of the tranches. The restated credit facility is non-recourse to Entergy and is collateralized by certain assets of Entergy London, consisting of 65% of the shares of London Electricity. The maturity dates of the various tranches of the credit facility range from December 17, 2001, to October 31, 2002. The interest rate on these facilities is the London Interbank Offered Rate plus up to 1.00%,

depending on the capitalization ratio of Entergy London and its subsidiaries.

A portion of the amended and restated facility ($1.3 billion), and related interest rate swaps, are now obligations of Entergy UK Limited, an indirect, wholly-owned subsidiary of Entergy Corporation. These obligations are still reflected in the financial statements of Entergy London, however, because the facility is guaranteed by Entergy London, Entergy UK Limited's indirect, wholly-owned subsidiary. Entergy London recognizes the interest expense associated with this debt in its financial statements, with a credit to shareholder's equity for the same amount. This credit to shareholder's equity offsets dividends as they are declared from Entergy London to Entergy UK Limited. These dividends are the funding mechanism for Entergy UK Limited to service this debt. Management intends to declare future dividends from Entergy London to enable Entergy UK Limited to continue to service this debt.

Entergy London entered into interest rate swaps to reduce the impact of interest rate changes on its debt related to the London Electricity acquisition. The interest rate swap agreements involve the exchange of floating rate interest payments for fixed rate interest payments over the life of the agreements. Entergy London recognizes interest expense currently based on the fixed rate of interest resulting from use of these swap agreements. If the counterparties to an interest rate swap agreement were to default on contractual payments, Entergy London could be exposed to increased costs related to replacing the original agreement. However, management does not anticipate nonperformance by any counterparty to any interest rate swap in effect as of December 3 1, 1997. As of December 31, 1997, Entergy London was party to interest rate swaps having a notional amount of BPS600 million with maturity dates ranging from March 1999 to September 2001, which effectively fixed the rate of interest at 7.48%.

The estimated fair value of the interest rate swaps, which represents the estimated amount Entergy London would pay to terminate the swaps as of December 31, 1997, based on quoted interest rates, is a net liability of $11 million. See Note I for a discussion of Entergy's accounting policies regarding interest rate swaps.

In August 1997, EPDC entered into a BPS50 million ($82.5 million) credit facility to finance the acquisition of the Damhead Creek project. In December 1997, EPDC amended the credit facility and increased the amount of the revolver to BPS 100 million ($165 million). As of December 31, 1997, approximately BPS97.4 million ($160.2 million) was outstanding under this facility. The interest rate on the outstanding borrowings was 7.84% as of December 31, 1997.

In December 1997, Saltend Cogeneration Company ("SCC"), an indirect wholly-owned subsidiary of EPDC, entered into a BPS646 million ($1.07 billion) non-recourse senior credit facility (Senior Credit Facility) to finance the construction of a 1200 MW gas-fired power plant in Hull, England. Borrowings under the Senior Credit Facility are payable after completion of construction over a 15-year period beginning December 31, 2000. SCC also entered into a BPS72 million ($118 million) Subordinated Credit Facility that provides funding upon the earlier of completion of construction or July 31, 2000. The proceeds of borrowings under this facility will be used to repay a portion of the Senior Credit Facility. The Subordinated Credit Facility is payable over a 10-year period beginning December 3 1.

2000.

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The Senior Credit Facility is collateralized by all of the assets of SCC. Furthermore, the credit facilities require SCC to enter into are interest rate hedges for a significant portion of the project debt. Certain cash balances, primarily related to SCC. restricted from being used to make loans and advances or to pay dividends to EPDC by the amount required for debt payments, letter of credit expenses, and permitted project costs. The total restricted cash was $2.6 million as of December 31, 1997.

On January 16, 1998, Entergy Arkansas redeemed, in full at par, prior to its maturity, $45.5 million of its 1977 6 1/8% Series Jefferson County pollution control revenue bonds due October 1, 2007, with proceeds of 5.6%

pollution control revenue bonds, due October 1, 2017, issued in December 1997.

NOTE 8. DIVIDEND RESTRICTIONS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London)

Provisions within the Articles of Incorporation or pertinent indentures and various other agreements relating of cash to the long-term debt and preferred stock of certain of Entergy Corporation's subsidiaries restrict the payment prohibits Entergy dividends or other distributions on their common and preferred stock. Additionally, PUHCA the restricted Corporation's subsidiaries from making loans or advances to Entergy Corporation. Detailed below are retained earnings unavailable for distribution to Entergy Corporation by subsidiary.

Restricted Earnines (in millions)

Entergy Arkansas $ 291.3 Entergy Mississippi 15.8 In During 1997, cash dividends paid to Entergy Corporation by its subsidiaries totaled $550.2 million.

totaling $103.9 February 1998, Entergy Corporation received common stock dividend payments from its subsidiaries million.

NOTE 9. COMMITMENTS AND CONTINGENCIES Caoun - River Bend Litigation (Entergy Corporation and Entergy Gulf States)

River Bend Entergy Gulf States and Cajun, respectively, owned 70% and 30% undivided interests in 3 (operated by (operated by Entergy Gulf States), and own 42% and 58% undivided interests in Big Cajun 2, Unit disputes and claims between the parties. An Cajun). These relationships spawned a number of long-standing by Entergy Gulf States, the Cajun agreement setting forth terms for the resolution of all such disputes was reached for the Middle District of bankruptcy trustee, and the RUS, and was approved by the United States District Court on Louisiana (District Court) on August 26, 1996 (Cajun Settlement). The Cajun Settlement was consummated December 23, 1997.

in River The Cajun Settlement includes, but is not limited to, the following elements: (i) Cajun's 30% interest States; (ii) Cajun Bend was transferred, at the behest of the RUS, by Cajun's Trustee in Bankruptcy to Entergy Gulf (iii) Cajun set aside in trust a total of $132 million for its share of the decommissioning costs of River Bend; States settled transferred certain transmission assets to Entergy Gulf States; (iv) Cajun and Entergy Gulf under transmission arrangements; (v) all transmission disputes and released each other from claims for payment totaled over $102 million on funds paid by Entergy Gulf States into the registry of the District Court, which past, present, and December 23, 1997, were returned to Entergy Gulf States; (vi) Cajun was released from its unpaid between future liability to Entergy Gulf States for River Bend costs and expenses; and (vii) all remaining litigation on the District Court's approval of the Cajun Settlement, a Cajun and Entergy Gulf States was dismissed. Based

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litigation accrual established in 1994 for possible losses associated with the Cajun-River Bend litigation was reversed in September 1996. The consummation of the Cajun Settlement resulted in an addition to net income for Entergy Gulf States of$ 146 million in 1997.

Proponents of all of the plans of reorganization submitted to the Bankruptcy Court in the Cajun bankruptcy case have incorporated the Cajun Settlement as an integral condition to the effectiveness of their plans. The Bankruptcy Court has approved proposals by three groups seeking to acquire the non-nuclear assets of Cajun and has signed an order that establishes rules for how Cajun's creditors will vote on the three plans. On December 16, 1996, the Bankruptcy Court began hearings on the balloting and the plan that will be adopted. Additional hearings arc scheduled for 1998.

Caeun - Coal Contracts (Entergy Corporation and Entergy Gulf States)

On January 13. 1997, Entergy Gulf States filed a declaratory judgment action in the U.S. Bankruptcy Court in which the Cajun bankruptcy is pending, seeking a ruling that Entergy Gulf States would not be liable for damages to certain coal suppliers for Big Cajun 2, Unit 3, if the Cajun bankruptcy trustee were to reject their coal contracts as a part of a plan of reorganization in the bankruptcy proceeding. In its pleading, Entergy Gulf States took the position that it was not a party to. and had no liability under, those coal contracts. On February 12, 1997, the coal suppliers and the Cajun bankruptcy trustee filed a response in the declaratory judgment action and made certain counterclaims and crossclaims. The coal suppliers contended that Entergy Gulf States' declaratory judgment action should be dismissed and, in the alternative, argued that Cajun was Entergy Gulf States' agent in the procurement of coal for Big Cajun 2, Unit 3, and that Entergy Gulf States was a party to and had liability under the coal supply contracts.

On September 4, 1997, the U.S. Bankruptcy Court ruled that Entergy Gulf States was not liable for the Cajun coal contracts. The coal suppliers have subsequently appealed this decision to the District Court, and oral argument on the appeal is set for April 1998.

Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy London, and System Energy)

Construction expenditures (excluding nuclear fuel) for the domestic utility companies, System Energy, and Entergy London for the years 1998, 1999, and 2000 are estimated to total $734 million, $644 million, and $680 million, respectively. Entergy will also require $1.887 billion during the period 1998-2000 to meet long-term debt and preferred stock maturities and cash sinking fund requirements. Entergy plans to meet these requirements primarily with internally generated funds and cash on hand, supplemented by proceeds of the issuance of debt and company-obligated mandatorily redeemable preferred securities and from outstanding credit facilities. Certain domestic utility companies and System Energy may also continue with the acquisition or refinancing of all or a portion of certain outstanding series of preferred stock and long-term debt. See Notes 5, 6. and 7 for further information.

Grand Gulf 1-Related Aereements Capital Funds Agreement (Entergy Corporation and System Energy)

Entergy Corporation has agreed to supply System Energy with sufficient capital to (i) maintain System Energy's equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt), and (ii) permit the continued commercial operation of Grand Gulf 1 and pay in full all indebtedness for borrowed money of System Energy when due. In addition, under supplements to the Capital Funds Agreement assigning System Energy's rights as security for specific debt of System Energy, Entergy Corporation has agreed to make cash capital contributions to enable System Energy to make payments on such debt when due.

System Energy has entered into agreements with Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby they are obligated to purchase their respective entitlements of capacity and energy

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from System Energy's 90% ownership and leasehold interest in Grand Gulf 1, and to make payments that. together with other available funds, are adequate to cover System Energy's operating expenses. System Energy would have to secure funds from other sources, including Entergy Corporation's obligations under the Capital Funds Agreement, to cover any shortfalls from payments received from Entergy Arkansas. Entergy Louisiana, Entergy Mississippi and Entergy New Orleans under these agreements.

Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

System Energy has agreed to sell all of its 90% owned and leased share of capacity and energy from Grand Gulf 1 to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans in accordance with specified percentages (Entergy Arkansas-36%, Entergy Louisiana-14%, Entergy Mississippi-33%, and Entergy New Orleans-17%) as ordered by FERC. Charges under this agreement are paid in consideration for the purchasing companies' respective entitlement to receive capacity and energy and are payable irrespective of the quantity of energy delivered so long as the unit remains in commercial operation. The agreement will remain in effect until terminated by the parties and approved by FERC, most likely upon Grand Gulf l's retirement from service. Monthly obligations for payments, including the rate increase that was placed into effect in December 1995, subject to refund, under the agreement are approximately $21 million, $8 million, $19 million, and $10 million for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, respectively.

Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are individually obligated to make payments or subordinated advances to System Energy in accordance with stated percentages (Entergy Arkansas-17. 1%, Entergy Louisiana-26.9%, Entergy Mississippi-31.3%, and Entergy New Orleans-24.7%)

in amounts that, when added to amounts received under the Unit Power Sales Agreement or otherwise, are adequate to cover all of System Energy's operating expenses as defined, including an amount sufficient to amortize the cost of Grand Gulf 2 over 27 years. (See Reallocation Agreement terms below.) System Energy has assigned its rights to payments and advances to certain creditors as security for certain obligations. Since commercial operation of Grand Gulf 1, payments under the Unit Power Sales Agreement have exceeded the amounts payable under the Availability Agreement. Accordingly, no payments under the Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments.

Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans entered into the Reallocation Agreement relating to the sale of capacity and energy from Grand Gulf and the related costs, in which Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans agreed to assume all of Entergy Arkansas' responsibilities and obligations with respect to Grand Gulf under the Availability Agreement. FERC's decision allocating a portion of Grand Gulf I capacity and energy to Entergy Arkansas supersedes the Reallocation Agreement as it relates to Grand Gulf 1. Responsibility for any Grand Gulf 2 amortization amounts has been individually allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and Entergy New Orleans-29.80%)

under the terms of the Reallocation Agreement. However, the Reallocation Agreement does not affect Entergy Arkansas' obligation to System Energy's lenders under the assignments referred to in the preceding paragraph.

Entergy Arkansas would be liable for its share of such amounts if Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans were unable to meet their contractual obligations. No payments of any amortization amounts

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will be required so long as amounts paid to System Energy under the Unit Power Sales Agreement. including other funds available to System Energy, exceed amounts required under the Availability Agreement, which is expected to be the case for the foreseeable future.

Reimbursement Agreement (System Energy)

In December 1988, System Energy entered into two entirely separate, but identical, arrangements for the sale and leaseback of an approximate aggregate 11.5% ownership interest in Grand Gulf 1 (see Note 10). In connection with the equity funding of the sale and leaseback arrangements, letters of credit are required to be maintained to secure certain amounts payable for the benefit of the equity investors by System Energy under the leases. The current letters of credit are effective until January 15, 2000.

Under the provisions of a bank letter of credit reimbursement agreement, System Energy has agreed to a number of covenants relating to the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the reimbursement agreement, to maintain its equity at not less than 33% of its adjusted capitalization (defined in the reimbursement agreement to include certain amounts not included in capitalization for financial statement purposes). In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the reimbursement agreement, a ratio of adjusted net income to interest expense (calculated, in each case, as specified in the reimbursement agreement) of at least 1.60 times earnings. As of December 31, 1997, System Energy's equity approximated 34.80% of its adjusted capitalization, and its fixed charge coverage ratio was 2.43.

Fuel Purchase Agreements (Entergy Arkansas and Entergy Mississippi)

Entergy Arkansas has long-term contracts with mines in the State of Wyoming for the supply of low-sulfur coal for White Bluff and Independence (which is 25% owned by Entergy Mississippi). These contracts, which expire in 2002 and 2011, provide for approximately 85% of Entergy Arkansas' expected annual coal requirements.

Additional requirements are satisfied by spot market purchases.

(Entergy Gulf States)

Entergy Gulf States has a contract for a supply of low-sulfur Wyoming coal for Nelson Unit 6, which should be sufficient to satisfy the fuel requirements at Nelson Unit 6 through 2010. Cajun has advised Entergy Gulf States that Cajun has contracts that should provide an adequate supply of coal until 1999 for the operation of Big Cajun 2, Unit 3.

Entergy Gulf States has long-term gas contracts which will satisfy approximately 21% of its annual requirements, which is the minimum volume Entergy Gulf States is required to purchase under the contracts.

Additional gas requirements are satisfied under less expensive short-term contracts. Entergy Gulf States has a transportation service agreement with a gas supplier that provides flexible natural gas service to the Sabine and Lewis Creek generating stations. This service is provided by the supplier's pipeline and salt dome gas storage facility, which has a present capacity of 12.7 billion cubic feet.

(Entergy Louisiana)

In June 1992, Entergy Louisiana agreed to a renegotiated 20-year natural gas supply contract. Entergy Louisiana agreed to purchase natural gas in annual amounts equal to approximately one-third of its projected annual fuel requirements for certain generating units. Annual demand charges associated with this contract are estimated to be $8.6 million through 1997, and a total of $116.6 million for the years 1998 through 2012. Entergy Louisian' recovers the cost of fuel consumed during the generation of electricity through its fuel adjustment clause.

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Sales Agreements/Power Purchases (Entergy Gulf States)

In 1988, Entergy Gulf States entered into a joint venture with a primary term of 20 years with Conoco, Inc.,

Citgo Petroleum Corporation, and Vista Chemical Company (collectively the Industrial Participants), whereby Entergy Gulf States' Nelson Units I and 2 were sold to a partnership (NISCO) consisting of the Industrial Participants and Entergy Gulf States. The Industrial Participants supply the fuel for the units, while Entergy Gulf States operates the units at the discretion of the Industrial Participants and purchases the electricity produced by the units. Entergy Gulf States is continuing to sell electricity to the Industrial Participants. For the years ended December 31, 1997, 1996, and 1995, the purchases by Entergy Gulf States of electricity from the joint venture totaled $70.7 million, $62.0 million, and $58.5 million, respectively.

(Entergy Louisiana)

Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a hydroelectric facility. During 1997, 1996, and 1995, Entergy Louisiana made payments under the contract of approximately $64.6 million, $56.3 million, and $55.7 million, respectively. If the maximum percentage (94%) of the energy is made available to Entergy Louisiana, current production projections would require estimated payments of approximately $61.0 million in 1998, and a total of $3.7 billion for the years 1999 through 2031. Entergy Louisiana recovers the costs of purchased energy through its fuel adjustment clause.

(Entergy London)

London Electricity uses CFDs and power purchase contracts with certain UK generators to fix the price of electricity for a contracted quantity over a specific period of time. As of December 31, 1997, London Electricity has outstanding CFDs and power purchase contracts for approximately 40,000 GWH of electricity. These include a long term power purchase contract with an affiliate which is based on 27.5% of the affiliate's capacity from its 1000 MW facility through the year 2010. London Electricity's sales volume was approximately 18,000 GWH in the year ended 1997. Management's estimate of the fair value of London Electricity's CFDs outstanding as of December 31, 1997, is that fair value approximates contract value.

(Entergy Corporation)

In accordance with the debt covenants included in the financing provisions of the CitiPower acquisition, CitiPower must hedge at least 80% of its energy purchases. CitiPower's current strategy is to hedge approximately 100% of its forecasted energy purchases through energy trading swaps entered into with certain generators. As of December 31, 1997, CitiPower had outstanding energy trading swaps totaling a notional amount of 38,372 MW of average daily load of electricity. These contracts mature through the year 2000. Management's estimate of the fair value of such swaps outstanding at December 31, 1997, is a net liability of approximately $86.1 million.

System Fuels (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans have interests in System Fuels of 35%, 33%, 19%, and 13%, respectively. The parent companies of System Fuels have agreed to make loans to System Fuels to finance its fuel procurement, delivery, and storage activities. As of December 3 1, 1997, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans had, respectively, approximately $11 million, $14.2 million, $5.5 million, and $3.3 million in loans outstanding to System Fuels, which loans mature in 2008.

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Nuclear Insurance (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

The Price-Anderson Act limits public liability for a single nuclear incident to approximately $8.92 billion.

Protection for this liability is provided through a combination of private insurance (currently $200 million each For Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy) and an industry assessment program. Under the assessment program, the maximum payment requirement for each nuclear incident would be

$79.3 million per reactor, payable at a rate of $10 million per licensed reactor per incident per year. Entergy has five licensed reactors. As a co-licensee of Grand Gulf I with System Energy, SMEPA would share 10% of this obligation. In addition, each owner/licensee of Entergy's five nuclear units participates in a private insurance program that provides coverage for worker tort claims filed for bodily injury caused by radiation exposure. The program provides for a maximum assessment of approximately $16 million for the five nuclear units in the event losses exceed accumulated reserve funds.

Entergy Arkansas. Entergy Gulf States, Entergy Louisiana, and System Energy are also members of certain insurance programs that provide coverage for property damage, including decontamination and premature decommissioning expense, to members' nuclear generating plants. As of December 31, 1997, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy each was insured against such losses up to $2.3 billion.

In addition, Entergy Arkansas, Entergy Gulf States, Entergv Louisiana, Entergy Mississippi, and Entergy New Orleans are members of an insurance program that covers certain replacement power and business interruption costs incurred due to prolonged nuclear unit outages. Under the property damage and replacement power/business interruption insurance programs, these Entergy subsidiaries could be subject to assessments if losses. exceed the accumulated funds available to the insurers. As of December 31, 1997, the maximum amounts of such possible assessments were: Entergy Arkansas - $25.3 million; Entergy Gulf States - $8.8 million; Entergy Louisiana

$19.9 million: Entergy Mississippi - $1.0 million; Entergy New Orleans - $0.5 million; and System Energy - $17.0 million. Under its agreement with System Energy, SMEPA would share in System Energy's obligation.

The amount of property insurance maintained for each Entergy nuclear unit exceeds the NRC's minimum requirement for nuclear power plant licensees of $1.06 billion per site. NRC regulations provide that the proceeds of this insurance must be used, first, to place and maintain the reactor in a safe and stable condition and, second, to complete decontamination operations. Only after proceeds are dedicated for such use and regulatory approval is secured would any remaining proceeds be made available for the benefit of plant owners or their creditors.

Spent Nuclear Fuel and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy provide for estimated future disposal costs for spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE will furnish disposal service at a cost of one mill per net KWH generated and sold after April 7, 1983, plus a one time fee for generation prior to that date. Entergy Arkansas, the only Entergy company that generated electricity with nuclear fuel prior to that date, elected to pay the one-time fee plus accrued interest, no earlier than 1998, and has recorded a liability as of December 31, 1997, of approximately $122 million for generation prior to 1983. The fees payable to the DOE may be adjusted in the future to assure full recovery. Entergy considers all costs incurred or to be incurred, except accrued interest, for the disposal of spent nuclear fuel to be proper components of nuclear fuel expense, and provisions to recover such costs have been or will be made in applications to regulatory authorities.

Delays have occurred in the DOE's program for the acceptance and disposal of spent nuclear fuel at a permanent repository. In a statement released February 17, 1993, the DOE asserted that it did not have a legal obligation to accept spent nuclear fuel without an operational repository for which it has not yet arranged. Entergy Operations and System Fuels joined in lawsuits against the DOE, seeking clarification of the DOE's responsibility t.

receive spent nuclear fuel beginning in 1998. The original suits, filed June 20, 1994, asked for a ruling stating tI'

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the Nuclear Waste Policy Act requires the DOE to begin taking title to the spent fuel and to start removing it from nuclear powcr plants in 1998, a mandate for the DOE's nuclear waste management program to begin accepting fuel in 1998 and for court monitoring of the program, and the potential for escrow of payments to a nuclear waste fund instead of directly to the DOE. Argument in the case before a three-judge panel of the U.S. Court of Appeals was made on January 17, 1996. On July 23, 1996, the court reversed the DOE's interpretation of the 1998 obligation and unanimouslv ruled that the Nuclear Waste Policy. Act creates an unconditional obligation to begin acceptance of spent fuel by 1998, but did not make a ruling on the remedies.

On December 17, 1996, the DOE notified contract holders that it anticipated it would not be able to begin such acceptance until after that date. Subsequently, on January 31, 1997, Entergy Operations and a coalition of 36 electric utilities and 46 state agencies filed lawsuits to suspend payments to the Nuclear Waste Fund. The lawsuits ask the court to (i) find that the December 17, 1996, DOE letter demonstrates breach of contract on the part of the DOE, (ii) order utilities to place the Nuclear Waste Fund payments in an escrow account and not provide the funds to the DOE until it fulfills its obligation, (iii) prevent the DOE from taking adverse action against utilities that withhold payments; and (iv) order the DOE to submit a plan to the court describing how the agency intends to fulfill its obligation on an ongoing basis. On November 14, 1997, the court reaffirmed the DOE's unconditional obligation to begin accepting spent fuel by January 31, 1998, and ordered the DOE to proceed with contractual remedies consistent with the DOE's unconditional obligation. Nevertheless, the ruling did not address the plaintiffs' request for authority to withhold payments to the DOE. Therefore, on December 11, 1997, Entergy Operations and a coalition of 27 utilities petitioned the DOE to suspend and escrow future payments to the DOE's waste fund beginning February 1, 1998. On January 12, 1998, the DOE rejected the coalition's petition. On February 19, 1998, Entergy Operations and the coalition of 36 electric utilities filed a motion with the court seeking enforcement of its November 14, 1997 order and other relief.

In the meantime, all Entergy companies are responsible for their spent fuel storage. Current on-site spent fuel storage capacity at River Bend, Waterford 3, and Grand Gulf 1 is estimated to be sufficient until 2003, 2000, and 2004, respectively. Thereafter, the affected companies will provide additional storage. Current on-site spent fuel storage capacity at ANO is estimated to be sufficient until 2000. An ANO storage facility using dry casks began operation in 1996. This facility may be expanded further as required. The initial cost of providing the additional on-site spent fuel storage capability required at ANO, River Bend, Waterford 3, and Grand Gulf 1 is expected to be approximately $5 million to $10 million per unit. In addition, about $3 million to $5 million per unit will be required every two to three years subsequent to 2000 for ANO and every four to five years subsequent to 2003, 2000, and 2004 for River Bend, Waterford 3, and Grand Gulf 1, respectively, until the DOE's repository or storage facility begins accepting such units' spent fuel.

Total decommissioning costs as of December 31, 1997, for the Entergy nuclear power plants, excluding co owner shares, have been estimated as follows:

Total Estimated Decommissioning Costs (In Millions)

ANO 1 and ANO 2 (based on a 1994 interim update to the 1992 cost study) 806.3 River Bend (based on a 1996 cost study reflecting 1996 dollars) 419.0 Waterford 3 (based on a 1994 updated study in 1993 dollars) 320.1 Grand Gulf 1 (based on a 1994 cost study using 1993 dollars) 365.9 1,911.3 The estimate for River Bend includes the decommissioning costs related to the 30% share of River Bend formerly owned by Cajun. The 30% share was acquired by Entergy Gulf States in connection with the Cajun Settlement. As a part of the Cajun Settlement, Cajun placed in trust a total of $132 million for its share of the

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decommissioning costs of River Bend. See "Cajun - River Bend Litigation" above for further discussion regarding the Cajun Settlement.

Entergy Arkansas and Entergy Louisiana are authorized to recover in rates amounts that, when added to estimated investment income, should be sufficient to meet the above estimated decommissioning costs for ANO and Waterford 3, respectively. In the Texas retail jurisdiction, Entergy Gulf States is recovering in rates River Bend decommissioning costs (based on the 1991 cost study that totaled $267.8 million) that, with adjustments, total $204.9 million. Entergy Gulf States included decommissioning costs based on the 1996 study in the PUCT rate review filed in November 1996. That review is ongoing. In the Louisiana retail jurisdiction, Entergy Gulf States is currently recovering in rates decommissioning costs (based on a 1985 cost study) which total $141 million. Entergy Gulf States included decommissioning costs (based on the 1991 study) in the LPSC rate review filed in May 1995.

In October 1996, the LPSC approved Entergy Gulf States rates that include decommissioning costs based on the 1991 study. The October 1996 LPSC order has been appealed and the decommissioning costs based on the 1991 study have not yet been implemented. Entergy Gulf States included decommissioning costs, based on the 1996 study, in the LPSC rate review filed in May 1996. The LPSC's review is ongoing. However, in June of 1996, a rate decrease was implemented that included decommissioning revenue requirements based on the 1996 study. System Energy was previously recovering in rates amounts sufficient to fund $198 million (in 1989 dollars) of its Grand Gulf I

decommissioning costs. System Energy included decommissioning costs (based on the 1994 study) in its rate increase filing with FERC. Rates requested in this proceeding were placed into effect in December 1995, subject to refund. FERC has not yet issued an order in the System Energy rate case.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy periodically review and update estimated decommissioning costs. Although Entergy is presently underrecovering for Grand Gulf and River Bend based on the above estimates, applications have been and will continue to be made to the appropriate regulatory authorities to reflect in rates any future change in projected decommissioning costs. The amounts recovered in rates are deposited in trust funds and reported at market value as quoted on nationally traded markets or as determined by widely used pricing services. These trust fund assets largely offset the accumulated decommissioning liability that is recorded as accumulated depreciation for Entergy Arkansas, Entergy Gulf States, and Entergy Louisiana, and as other deferred credits for System Energy and the trust funds received with the transfer of Cajun's 30% share of River Bend.

The cumulative liabilities and actual decommissioning expenses recorded in 1997 by Entergy were as follows:

Cumulative 1997 Cumulative Liabilities as of 1997 Trust Decommissioning Liabilities as of December 31, 1996 Earnings Expenses Other December 31, 1997 (In Millions)

ANO I and ANO 2 $ 200.6 $ 9.1 $ 17.3 $ $ 227.0 River Bend 39.2 2.0 7.5 132.0 $ 180.7 Waterford 3 49.0 2.4 8.8 - $ 60.2 Grand Gulf 1 60.7 3.5 19.0 $ 83.2

$ 349.5 $ 17.0 $ 52.6 $ 132.0 $ 551.1 In 1996 and 1995, ANO's decommissioning expense was $20.1 million and $17.7 million, respectively; River Bend's decommissioning expense was $6.0 million and $8.1 million, respectively; Waterford 3's decommissioning expense was $8.8 million 'and $7.5 million, respectively; and Grand Gulf l's decommissioning expense was $19.0 million and $5.4 million, respectively. The actual decommissioning costs may vary from th estimates because of regulatory requirements, changes in technology, and increased costs of labor, materials, ar

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equipment. Management believes that actual decommissioning costs arc likely to be highcr than the estimated amounts presented above.

The SEC has questioned certain of the financial accounting practices of the electric utility industry regarding the recognition. measurement, and classification of decommissioning costs for nuclear plants in the financial statements of electric utilities- In response to these questions, the FASB has been reviewing the accounting for of decommissioning and has expanded the scope of its review to include liabilities related to the closure and removal all long-lived assets. If current electric utility industry accounting practices with respect to nuclear decommissioning and other closure costs are changed, annual provisions for such costs could increase, the estimated cost for fund decommissioning and closure could be recorded as a liability rather than as accumulated depreciation, and trust be reported as investment income rather than as a reduction to income from decommissioning trusts could decommissioning expense.

The EPAct has a provision that assesses domestic nuclear utilities with fees for the decontamination and decommissioning decommissioning of the DOE's past uranium enrichment operations. The decontamination and which contributions from utilities and the federal government will be assessments are being used to set up a fund into and System Energy's annual assessments, which placed. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, million, $1.4 million, and $1.5 million (in will be adjusted annually for inflation, are approximately $3.7 million, $0.9 Arkansas, Entergy Gulf 1997 dollars), respectively, for approximately 15 years. As of December 31, 1997, Entergy States, Entergy Louisiana, and System Energy had recorded liabilities of $33.4 million, $5.8 million, $12.7 million, and other and $12.5 million, respectively, for decontamination and decommissioning fees in other current liabilities in the consolidated financial statements by regulatory assets.

noncurrent liabilities, and these liabilities were offset fuel as they are amortized and recover these costs FERC requires that utilities treat these assessments as costs of through rates in the same manner as other fuel costs.

ANO Matters (Entergy Corporation and Entergy Arkansas) in March Cracks in certain steam generator tubes at ANO 2 were discovered and repaired during an outage outages, including the 1992. Further inspections and repairs were conducted at subsequent refueling and mid-cycle to restore most of the most recent refueling outage in May 1997. Turbine modifications were installed in May 1997 the current limit for the output lost due to steam generator fouling and tube plugging. The unit may be approaching unit in operation. If the established limit is reached number of steam generator tubes that can be plugged with the sleeves in steam generator tubes during a future outage, it could become necessary for Entergy Operations to insert authorized Entergy that were previously plugged. On October 25, 1996, Entergy Corporation's Board of Directors steam generators Arkansas and Entergy Operations to negotiate a contract for the fabrication and replacement of the and replacement of the steam generators to be approximately at ANO 2. Entergy estimates the cost of fabrication certain cancellation provisions, for the design and

$150 million. Entergy Operations has entered into a contract, with issued for the installation of the replacement fabrication of replacement steam generators. A letter of intent has been a planned refueling outage in steam generators. It is anticipated that the steam generators will be installed during of the steam 2000. Entergy Operations periodically meets with the NRC to discuss the results of inspections generator tubes, as well as the timing of future inspections.

Environmental Issues (Entergy Gulf States) disposal sites.

Entergy Gulf States has been designated as a PRP for the clean-up of certain hazardous waste regarding the clean-up of these sites.

Entergy Gulf States is currently negotiating with the EPA and state authorities from Entergy Gulf States Several class action and other suits have been filed in state and federal courts seeking relief disease allegedly resulting and others for damages caused by the disposal of hazardous waste and for asbestos-related and suits may be from exposure on Entergy Gulf States premises. While the amounts at issue in the clean-up efforts financial condition will not be materially substantial, Entergy Gulf States believes that its results of operations and

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adversely affected by the outcome of the suits. As of December 31, 1997, a remaining recorded provision of $23.8 million existed relating to the clean-up of seven sites at which Entergy Gulf States has been designated a PRP.

(Entergy Louisiana)

During 1993, the LDEQ issued new rules for solid waste regulation, including regulation impoundments. Entergy Louisiana has determined that certain of its power plant of waste water waste water impoundments were affected bv these regulations and has chosen to upgrade or close them. As a result, a remaining recorded liability in the amount of $6.7 million existed as of December 3 1, 1997, for waste water upgrades and closures. Completion of this work is pending LDEQ approval. Cumulative expenditures relating to the upgrades and closures of waste water impoundments are $7. million as of December 31, 1997.

City Franchise Ordinances (Entergy New Orleans)

Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to City franchise ordinances that state, among other things, the City has a continuing option to purchase Entergy New Orleans' electric and gas utility properties.

Waterford 3 Lease Obligations (Entergy Louisiana)

On September 28, 1989, Entergy Louisiana entered into three identical transactions leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3. for the sale and In July 1997, Entergy Louisiana caused the lessors to issue $307,632,000 aggregate principal amount of Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017, to refinance the outstanding bonds originally issued to finance the purchase of the undivided interests by the lessors. The lease payments will be reduced to reflect the lower interest costs. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from the lease transactions, and Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee to finance, in part, its acquisition of the undivided interests in Waterford 3. See Note 10 for further information.

Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)

Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are defendants in numerous lawsuits described below that have been filed by former employees asserting that they were wrongfully terminated and/or discriminated against due to age, race, and/or sex.

Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are vigorously defending these suits and deny any liability to the plaintiffs. However, no assurance can be given as to the outcome of these cases.

(Entergy Corporation, Entergy Louisiana, and Entergy New Orleans)

Entergy Corporation, Entergy Louisiana, and Entergy New Orleans are defendants in numerous lawsuits filed in Louisiana state court on behalf of approximately 147 plaintiffs who claim that they were illegally terminated from their jobs due to discrimination on the basis of age. The plaintiffs have requested that the court certify the matter as a class action. On August 13, 1997, the court certified the case as a class action. The court decision to certify a class action has been appealed to the Louisiana Fifth Circuit Court of Appeal.

No assurance can be given as to the timing or outcome of these proceedings.

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(Entergy Corporation and Entergy Arkansas)

Entergy Corporation and Entergy Arkansas are defendants in a number of lawsuits filed in federal court on behalf of a total of approximately 60 plaintiffs who claim they were illegally terminated from their jobs due to discrimination on the basis of age or race.

The first of these lawsuits, originally involving 29 plaintiffs, was tried before a jury beginning in April 1997.

Settlements were reached with two of the plaintiffs prior to the trial. In May 1997, the jury rendered findings as to 22 of the plaintiffs indicating that Entergy had no liability to them for discrimination. However, the jury also found that Entergy had intentionally discriminated against the remaining five plaintiffs on the basis of age. As a result, these five plaintiffs are entitled to damages equal to twice their back pay plus lost future wages, and they will be awarded attorneys' fees in an amount which has not yet been determined by the court.

A trial date for another suit involving 18 plaintiffs, originally scheduled for May 1997, has been continued until April 1998. A motion for summary judgment in favor of the defendants is pending in this suit. Another suit, involving a single plaintiff, which had been set for trial in February 1998, has been continued with no new trial date set. Another of the suits, involving a single plaintiff, was settled for an immaterial amount prior to trial in November 1997. Another of the suits, involving nine plaintiffs, has been set for trial in June 1998. The last of these suits is in the discovery stage and has been set for trial in July 1998.

(Entergy Corporation and Entergy Gulf States)

Entergy Corporation and Entergy Gulf States were defendants in a lawsuit involving approximately 176 plaintiffs filed in state court in Texas by former employees who claim that they lost their jobs as a result of the Merger. The plaintiffs in these cases asserted various claims, including discrimination on the basis of age, race, and/or sex. The court made a preliminary ruling that each plaintiffs claim should be tried separately. However, all of these claims were settled before reaching trial in June 1997.

(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)

Entergy Corporation, Entergy Gulf States, and Entergy Louisiana were defendants in a suit filed in federal court in Louisiana by approximately 57 plaintiffs who claimed, among other things, they were wrongfully discharged from their employment on the basis of their age. However, all of these claims were settled before reaching trial in September 1997.

Enterzy London Agreements and Contracts (Entergy London)

Entergy London is subject to an agreement whereby the UK government is entitled to a proportion of certain property gains realized by London Electricity as a result of disposals or events treated as disposals occurring after March 31, 1990, of properties held at that date. This commitment is effective until March 31, 2000.

Entergy London has recorded approximately $165 million in reserves as of December 31, 1997, related to unfavorable long-term contracts. These reserves will be amortized over the remaining lives of the contracts which range from 14 to 18 years. The reserves recorded are based on the excess of estimated fair market value of these contracts over the present value of the future cash flows under the contracts at the applicable discount rate and prices.

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NOTE 10. LEASES General As of December 31, 1997, Entergy had capital leases and noncancelable operating leases for equipment, buildings. vehicles, and fuel storage facilities (excluding nuclear fuel leases and the sale and leaseback transactions) with minimum lease payments as follow's:

Capital Leases Entergy Entergy Year Arkansas

- Enterzy Gulf States (In Thousands) 1998 S 27,369 S 10,953 $ 12,480 1999 27,343 10,953 12,480 2000 25,534 9,646 11,983 2001 23,452 9,646 11,628 2002 19,574 9,646 9,879 Years thereafter 80,512 42,211 38,101 Minimum lease payments 203,784 93,055 96,551 Less: Amount representing interest 68,074 37,311 29,073 Present value of net minimum lease payments S 135,710

$1570 $ 55,744 S 67478 Year Afkmsas Glf States L.&i. Lalon (In Thasands) 1998 $67,748 $17,946 $14,429 $5,108 $1Q780 1999 65,557 17,913 14,408 4,702 9,831 62,645 17,913 13,801 4,644 9,707 2001 56,473 17,995 11,546 1,178 9,707 2002 55,011 17,772 11,292 1,163 9,589 Years theriter 334,155 55,886 56,528 II MNninm lese payrms $ 641,589 $ 145,425 $ 122,0(4 568119956

$ 16,795 $ 169,570 Rental expense for Entergy's leases (excluding nuclear fuel leases and the sale and leaseback transactions) amounted to approximately $70.7 million, $62.1 million, and $61.1 million in 1997, 1996, and 1995, respectively. These amounts include $19.7 million, $26.0 million, and

$26.0 million, respectively, for Entergy Arkansas; $17.6 million, $11.8 million, and $13.0 million, respectively, for Entergy Gulf States; $12.8 million, $13.7 million, and $13.6 million, respectively, for Entergy Louisiana; and $11.4 million in 1997 for Entergy London.

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Nuclear Fuel Leases (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, System Energy)

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy each has arrangements to lease nuclear fuel in an aggregate amount up to $140 million, $70 million, $80 million, and $90 million respectively.

As of December 31, 1997, the unrecovered cost base of Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's. and System Energy's nuclear fuel leases amounted to approximately $92.6 million, $54.4 million, $57.8 million, and $64.2 million, respectively. The lessors finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes. These agreements are subject to annual renewal with, in Entergy Louisiana's and Entergy Gulf States' case, the consent of the lenders. The credit agreements for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy have been extended and now have termination dates of December 2000, December 2000, January 2001, and February 2001, respectively. The debt securities issued pursuant to these fuel lease arrangements have varying maturities through December 15, 2000. It is expected that the credit agreements will be extended or alternative financing will be secured by each lessor upon the maturity of the current arrangements. If extensions or alternative financing cannot be arranged, the lessee in each case must purchase sufficient nuclear fuel to allow the lessor to retire such borrowings.

Lease payments are based on nuclear fuel use. Nuclear fuel lease expense charged to operations by the domestic utility companies in 1997, 1996, and 1995 was $149.7 million (including interest of $18.7 million), $158.5 million (including interest of $21.7 million), and $153.5 million (including interest of $22.1 million), respectively.

Specifically, in 1997, 1996, and 1995, Entergy Arkansas' expense was $53.7 million, $53.9 million, and $46.8 million (including interest of $6.4 million, $7.1 million, and $6.7 million), respectively; Entergy Gulf States' expense was $25.5 million, $27.1 million, and $41.4 million (including interest of $3.2 million, $4.2 million, and $6.0 million), respectively; Entergy Louisiana's expense was $29.4 million, $39.8 million, and $30.8 million (including interest of $3.7 million, $4.9 million, and $3.7 million), respectively; System Energy's expense was $41.1 million,

$37.7 million, and $34.5 million (including interest of $5.4 million, $5.5 million, and $5.7 million), respectively.

Sale and Leaseback Transactions Waterford 3 Lease Obligations (Entergy Louisiana)

Entergy Louisiana is the lessee of three separate undivided interests in Waterford 3 under three separate, but substantially identical, long-term net leases. The lessors under such leases acquired the undivided interests (aggregating approximately 9.3%) in Waterford 3 from Entergy Louisiana in three separate sale-leaseback transactions that occurred in 1989. Entergy Louisiana is leasing back the interests on a net lease basis over an approximate 28-year basic lease term. Approximately 87.7% of the aggregate consideration paid by the lessors for their respective undivided interests was provided to the lessors from the issuance of Waterford 3 Secured Lease Obligation Bonds (Initial Series Bonds) in 1989. Interests were acquired from Entergy Louisiana with funds obtained from the issuance and sale by the purchasers of intermediate-term and long-term secured lease obligation bonds. The lease payments to be made by Entergy Louisiana will be sufficient to service such debt.

Entergy Louisiana did not exercise its option to repurchase the undivided interests in Waterford 3 in September 1994. As a result, Entergy Louisiana was required to provide collateral for the equity portion of certain amounts payable by Entergy Louisiana under the leases. Such collateral was in the form of a new series of non interest-bearing first mortgage bonds in the aggregate principal amount of $208.2 million issued by Entergy Louisiana in September 1994.

In July 1997, Entergy Louisiana caused the Waterford 3 lessors to issue $307,632,000 aggregate principal amount of Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017, to refinance the outstanding bonds originally issued to finance the purchase of the undivided interests by the lessors. The lease payments have been reduced to reflect the lower interest costs.

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Upon the occurrence of certain events (including lease events of default. events of loss, deemed loss events or certain adverse "Financial Events" with respect to Entergy Louisiana), Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from the lease transactions, and Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee to finance, in part, its acquisition of the undivided interests in Waterford 3. "Financial Events" include, among other things, failure by Entergy Louisiana, following the expiration of any applicable grace or cure periods, to maintain (1) as of the end of any fiscal quarter, total equity capital (including preferred stock) at least equal to 30% of adjusted capitalization, or (2) in respect of the 12-month period ending on the last day of any fiscal quarter, a fixed charge coverage ratio of at least 1.50. As of December 31, 1997, Entergy Louisiana's total equity capital (including preferred stock) was 46.8% of adjusted capitalization and its fixed charge coverage ratio was 2.79.

As of December 31, 1997, Entergy Louisiana had future minimum lease payments (reflecting an overall implicit rate of 7.45%) in connection with the Waterford 3 sale and leaseback transactions, which are recorded as long-term debt, as follows (in thousands):

1998 $ 23,850 1999 49,108 2000 42,573 2001 40,909 2002 39,246 Years thereafter 532,137 Total 727,823 Less: Amount representing interest 374,223 Present value of net minimum lease payments $ 353,600 Grand Gulf 1 Lease Obligations (System Energy)

On December 28, 1988, System Energy entered into two arrangements for the sale and leaseback of an aggregate 11.5% undivided ownership interest in Grand Gulf 1 for an aggregate cash consideration of $500 million.

System Energy is leasing back the undivided interest on a net lease basis over a 26 1/2-year basic lease term. System Energy has options to terminate the leases and to repurchase the undivided interest in Grand Gulf 1 at certain intervals during the basic lease term. Further, at the end of the basic lease term, System Energy has an option to renew the leases or to repurchase the undivided interest in Grand Gulf 1. See Note 9 with respect to certain other terms of the transactions.

In accordance with SFAS 98, "Accounting for Leases," due to "continuing involvement" by System Energy, the sale and leaseback arrangements of the undivided portions of Grand Gulf 1, as described above, are required to be reflected for financial reporting purposes as financing transactions in System Energy's financial statements. The amounts charged to expense for financial reporting purposes include the interest portion of the lease obligations and depreciation of the plant. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as sales and leasebacks for rate-making purposes. The total of interest and depreciation expense exceeds the corresponding revenues realized during the early part of the lease term. Consistent with a recommendation contained in a FERC audit report, System Energy recorded as a deferred asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and is recording such difference as a deferred asset on an ongoing basis. The amount of this deferred asset was $84.0 million and

$93.2 million as of December 31, 1997, and 1996, respectively.

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As of December 31, 1997, System Energy had future minimum lease payments (reflecting an implicit rate of 7.02%), which are recorded as long-term debt as follows (in thousands):

1998 $ 42,753 1999 42,753 2000 42,753 2001 46,803 2002 53,827 Years thereafter 659,437 Total 888,326 Less: Amount representing interest 399,164 Present value of net minimum lease payments $ 489,162 NOTE 11. POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London)

Pension Plans Entergy has two postretirement benefit plans, "Entergy Corporation Retirement Plan for Non-Bargaining Employees" and "Entergy Corporation Retirement Plan for Bargaining Employees", covering substantially all of its domestic employees. The pension plans are noncontributory and provide pension benefits that are based on employees' credited service and compensation during the final years before retirement. Entergy Corporation and its subsidiaries fund pension costs in accordance with contribution guidelines established by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended. The assets of the plans include common and preferred stocks, fixed income securities, interest in a money market fund, and insurance contracts.

Entergy London participates in a defined benefit pension plan, which provides pension and other related defined benefits, based on final pensionable pay, to substantially all employees throughout the electricity supply industry in the UK. Entergy London uses the projected unit credit actuarial method for funding purposes. Amounts funded to the pension are primarily invested in equity and fixed income securities.

Total 1997, 1996, and 1995 pension cost of Entergy Corporation and its subsidiaries, including amounts capitalized, included the following components (in thousands):

1997 Enrt E F Nntergy Systen Entergy Energ Laikon A3=ansas CiGf States Louisiana Nssissippi New r1eanis Service cost - benefits eaned during the period $48,908 $6,937 $5,365 $3,762 $1,893 $763 $2,389 $16,615 Interest cost on projected b~afit obligation 193,930 26,472 23,684 15,778 10,011 2,783 2,942 99,358 Actual return on plan assets (306,613) (46,065) (53,729) (49,438) (19,577) (1,914) (6,052) (118,465)

Net anxtizaton and deferml 86.486 16,906 23,657 27,200 7,549 63 2,055 Ne pension cost (income) $22,711 $4,250 ($1,023) ($2,698) ($124) $1,695 $1,334 ($2,492)

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1996 Entergy Entergy Entergy Entergy Entergy System Enter*

Aransa .GulfStates Louisiana Mississippi New Orleans Energ-v Service cost - benefits earned during the period $31,584 1 $7.605 $5,852 $4,684 $2,157 $1,147 $2,658 Interest cost on projected benefit obligation 84,303 24,540 20,952 15,735 9,462 2,973 2,645 Actual return on plan assets (163,520) (41,183) (47,416) (41,219) (17,767) (1,826) (4,146)

Net amortization and deferral 71,260 14,015 18,732 20,313 6,382 88 Net pension cost (income) 526

$23,627 $4,977 ($1,880) ($487) $234 $2,382 $1,683 1995 Entergy Entergy Entergy Entergy Entergy System Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Service cost - benefits earned $29,282 $7,786 $6,686 $4,143 $2,152 $1,158 $2,260 during the period Interest cost on projected 80,794 1 24,372 21,098 15,111 9,240 2,680 2,230 benefit obligation Actual return on plan assets (261,864) (71,807) (82,624) (53,348) (30,443) (1,614) (8,827)

Net amortization and deferral 178,345 47,766 53,921 34,902 20,081 64 5,510 Net pension cost (income) $26,557

$8,117 ($919) $808 $1,030 $2,288

$26,557 $1,173 The funded status of Entergy's various pension plans as of December31, 1997, and 1996 was (in thousands):

1997 Erntagy atew Ertw aergy Emrft ystan EntrWo G~ulfst Laciisaa Effew Ena Laxkn Aumal l-eerva1 alue Cf wimrnlatedrion plan dgatic vested S,189,915 $333,343 $294,552 $201,454 $126,882 $34,616 $31,774 $1,026,071 kAammaated Nnefit cbligatiori 9,882 3,295 883 2,318 682 357 543 2,199,797 336,638 295,435 203,772 127,564 34,973 32,317 1,026,071 Plan ases at fair vale 3,144,498 427,175 454,912 328,381 174,651 23,043 53,105 1,537,297 Pnlexta iet obligatian 2,496,86 381,581 327,842 226,254 140,317 40,568 46,433 1,134,174 Plan assets in css Cf 648,412 45,594 127,070 102,127 34,334 (17,525) 6,672 403,123 (ess than) ped benefit cbligaion Urerxzericr gmce cott 35,500 13,656 12,649 5,353 4,414 1,706 1,021 Ur~gized trarntion asset (32,151) (9,343) (7,162) (11,230) (5,001) (572) (4,694)

Ur rr lco (gain) nxpzed (431,178) (69,076) (179,742) (96,391) (34,699) 7,209 (7,211) (161,907)

$2=0,583 ($19,169) ($47,185) ($141) ($952) ($9,182) ($4,212) 241,216

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1996 Entergy Enttxgy Entergy Entergy Entergy SVstcm Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Fierw Actuarial presnt value of accurnulated pension plan obligation:

Vested $1,027,307 $296,181 $287,201 $193,183 $117,142 $34,466 $25,195 Nonvested 4,775 1,345 748 697 154 29 655 Accumulated benefit obligation 1,032,082 297,526 287,949 193,880 117,296 34,495 25,850 Plan assets at fair value 1,359,614 374,849 397,749 282,470 150,616 22,017 43,943 Projected benefit obligation 1,196,925 338,307 315,781 217,711 129,578 41,511 38,401 Plan assets in ecess of 162,689 36,542 81,968 64,759 21,038 (19,494) 5,542 (less than) projected benefit obligation Unrecognized prior seace cos't 36,131 14,882 11,964 5,911 4,894 1,965 1,100 Unrecognized transition asset (39,504) (11,679) (9,550) (14,037) (6,252) (767) (5,291)

Utnrecognized net loss (gain) (180,525) (55,536) (132,832) (61,130) (23,769) 9,897 (4,502)

Accrued pension liability ($21,209) ($15,791) ($48,450) ($4,497) ($4,089) ($8,399) ($3,151)

The significant actuarial assumptions used in computing the information above for the domestic utility companies and System Energy for 1997, 1996, and 1995 were as follows: weighted-average discount rate, 7.25%

for 1997, 7.75% for 1996, and 7.5% for 1995, weighted-average rate of increase in future compensation levels, 4.6%

for 1997, 1996, and 1995; and expected long-term rate of return on plan assets, 9.0% for 1997 and 1996, and 8.5%

for 1995. Transition assets of Entergy are being amortized over the greater of the remaining service period of active participants or 15 years.

The significant actuarial assumptions used in computing the information above for Entergy London for 1997 were as follows: weighted-average discount rate of 9.0%, weighted-average rate of increase in future compensation levels of 6.5%, and expected long-term rate of return on plan assets of 9.0%.

Other Postretirement Benefits Entergy also provides certain health care and life insurance benefits for retired employees. Substantially all domestic employees may become eligible for these benefits if they reach retirement age while still working for Entergy.

Effective January 1, 1993, Entergy adopted SFAS 106 which required a change from a cash method to an accrual method of accounting for postretirement benefits other than pensions. The domestic utility companies have sought approval, in their respective regulatory jurisdictions, to implement the appropriate accounting requirements related to SFAS 106 for ratemaking purposes. Entergy Arkansas received an order permitting deferral, as a regulatory asset, of the difference between its annual cash expenditures for postretirement benefits other than pensions and the SFAS 106 accrual, for a five-year period that began January 1, 1993. In December 1997, the APSC issued an order allowing the 15 year amortization of this regulatory asset. Beginning in 1998, Entergy Arkansas will be allowed to recover its SFAS 106 expenses in rates. Entergy Mississippi is expensing its SFAS 106 costs, which are reflected in rates pursuant to an order from the MPSC in connection with Entergy Mississippi's formulary incentive rate plan. Entergy New Orleans is expensing its SFAS 106 costs. Pursuant to the PUCT's May 26, 1995, amended order, Entergy Gulf States is currently collecting the Texas portion of its SFAS 106 costs in rates. The LPSC ordered Entergy Gulf States and Entergy Louisiana to continue the use of the pay-as-you-go method for ratemaking purposes for postretirement benefits other than pensions, but the LPSC retains the flexibility to examine individual companies' accounting for postretirement benefits to determine if special exceptions to this order are warranted.

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In December 1997, Entergy Arkansas was allowed to begin funding 1998 Pursuant to regulatory directives. Entergv Mississippi, Entergy New its SFAS 106 costs commencing in States rcgulated by the PUCT. and System Energy, Orleans, the portion of Entergy Gulf fund postretirement benefit obligations collected Energy is funding on behalf of Entergy Operations in rates. System postretirement benefits associated with Grand Louisiana and Entergy Gulf States continue to Gulf 1. Entergy fund a portion of these benefits regulated by the a pay-as-you-go basis. The assets of the various LPSC and FERC on postretirement benefit plans other than pensions stocks, fixed-income securities, and a money include common market fund. At January 1, 1993, the actuarially accumulated postretirement benefit obligation determined (APBO) earned by retirees and active employees approximately $241.4 million and $128 million was estimated to be for Entergy (other than Entergy Gulf States)

States, respectively. Such obligations are being and for Entergy Gulf amortized over a 20-year period beginning in 1993.

Total 1997, 1996, and 1995 postretirement benefit cost of Entergy Corporation and its including amounts capitalized and deferred, included subsidiaries, the following components (in thousands):

1997 Entergy Entergy Entergy Entergy Entergy System Arkansas Gulf States Louisiana Mississippi New Orleans Energy Service cost - benefits earned during the period $3,204 $3,227 $2,081 $1,092 Interest cost on APBO $618 $939 6,232 9,466 4,490 2,278 Actual return on plan assets 3,106 648 (1,637) (695) (840)

Net amortization and deferral (214) 6,519 Net postretirement benefit cost 1996 Entergy Entergy Entergy Entergy Entergy System Entergy Arkansas Gulf States Louisi___. Missip New Orleans Service cost - benefits earned during the period $14,351 $3,128 $3,476 $2,155 $1,081 $661 $890 Interest cost on APBO 26,133 5,580 8,164 4,283 2,171 3,085 Actual return on plan assets 512 (1,654) - (388)

Net amortization and deferral - (479) (681) (106) 14,214 3,397 5,370 2,694 .1,458 Net postretirement benefit cost 1,977 209

$53,044 $12,105 $16,622 $9,132 $4,231 $5,042 $1,505 1995 Entergy Entergy Entergy Entergy Entergy System Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Ener Service cost - benefits earned $10,797 $2,777 $1,864 $2,047 $909 during the period $650 $687 Interest cost on APBO 25,629 5,398 8,526 4,215 1,969 3,258 Actual return on plan assets 603 (759) - - (245)

Net amortization and deferral (514) 11,023 2,702 4,477 2,121 988 Net postretirement benefit cost 1,876 262

$46,690 $10,877 $14,867 $8,383 $3,621 $5,270 $1,552

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Thc fundcd status of Enterg 's postretirement plans as of December 3 1, 1997, and 1996, was (in thousands):

1997 r_*fergs aSticrg nt?'lrg system EMtrg TLWOr A rial paw -aluee orfamdated xtreimmt lxrrfit obhictn Retirees $313,243 $66,79 $112,150 $47,774 S23,062 $37,897 $3,264 OJ-if full cfigblc p 1,9174 32,530 6,151 6,203 4,713 3,543 1,936 82,189 18,667 17,875 1;1411 Aomrulat Lfit ncd obf*iman 427,962 91,097 136,228 65,385 33,273 43,833 10,464 Plan assts at far value 63,930 - 28,390 - 12,140 18,565 4,835 Plan assets less tlhn APBO (364,032) (91,M97) (107,838) (65,385) (21,133) (25,268) (5,629)

Urmagize transmon clgation 172,085 59,298 87,050 44,575 22,529 40,183 3,932 Umwgi =eloss (gmyctirr 21,819 (4,104) (3,886) (4,338) (3,038) (12,737) (559)

Acmx-d p xtsrent bet ass ia y) ($170,128) ($35,903) ($24,674) ($25,148) ($1,642) $2,178 ($2,256)

Fiterg Earteg Btag* y Fa tergy Energy System FErwgy Arkus CiffStates Lai,;iaa, MS$sy IL-w eans Enr~ry Acmrial premt xak cfacwiilaied Retires $263,504 $56,945 $90,450 $44,083 $21,639 $36,613 $1,401 OQxr fully digible 'ciants 28,507 5,599 5,728 4,063 2,753 -1,694 1,861 Odxr acmepafciart 73,188 15,505 16,623 11,553 5,837 3,630 4,587 Axamulated benefit cboblgni 365,199 78,049 112,801 59,699 30,229 41,937 7,849 Plan assets at fair value 37,970 - 15,528 - 7,517 12,647 2,278 Plan asss les dt* APBO (327,22) (7049) (7,273) (59,699) (22,712) (29,290) (5,571)

Urmogized =&m obigAtcn 183,557 63,252 92,853 47,546 24,031 42,861 4,194 Lh o e rM km 4n)/cai (5,032) (13,414) (13,859) (7,726) (3,221) (11,704) (i,476)

Ahud mtrfixt*m,-, hmft asset (iabilit)

($148,704 ($2A211) ($18279) ($19,8M) ($1,902) $1,867 ($2,853)

The assumed health care cost trend rate used in measuring the APBO of Entergy was 6.8% for 1998, gradually decreasing each successive year until it reaches 5.0% in 2005. A one percentage-point increase in the assumed health care cost trend rate for each year would have increased the APBO of Entergy, as of December 31, 1997, by 11.3% (Entergy Arkansas-i1.5%, Entergy Gulf States-10.3%, Entergy Louisiana- 11.4%, Entergy Mississippi-I 1.9%, Entergy New Orleans-10.0%, and System Energy-15.4%), and the sum of the service cost and interest cost by approximately 14.7% (Entergy Arkansas-14.7%, Entergy Gulf States-13.9%, Entergy Louisiana 14.2%, Entergy Mississippi-14.9%, Entergy New Orleans-i1.5%, and System Energy-18.9%). The assumed discount rate and rate of increase in future compensation used in determining the APBO were 7.25% for 1997, 7.75% for 1996, and 7.5% for 1995, and 4.6% for 1997, 1996, and 1995, respectively. The expected long-term rate of return on plan assets was 9.0% for 1997 and 1996, and 8.5% for 1995.

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NOTE 12. RESTRUCTURING CHARGES (Entergy London)

In 1995 and 1996. London Electricity implemented a restructuring program to reduce the number of employees in the Network Services. Customer Services, Corporate and Information Technology groups. An initial plan %%as approved by the Board of Directors in September 1994 and was based on a business plan developed subsequent to the 1994 Regulatory Review of Distribution (the Distribution Review).

Following the reopening of the Distribution Review during 1995, a further plan was proposed leading to further reduction of employees in the same areas. This plan was approved by the Board of Directors in May 1996.

The balance as of December 3 1, 1997, for restructuring charges is shown below along with the actual termination benefits paid under the restructuring plan for the year ended December 31, 1997 (in millions).

Provision for restructuring as of January 31, 1997 (date of acquisition) $ 41.7 Adjustenrts to restructuring provision in 1997 13.3 Payments rmade in 1997 (29.7)

Cunilative translation adjustnvnt 1.0 Balane Deeb 31, 1997 $ 26.3 The restructuring charges shown above primarily included employee severance costs related to the expected termination of approximately 1,372 employees in various groups. As of December 31, 1997, 895 employees had either been terminated or accepted voluntary separation packages under the restructuring plan.

NOTE 13. ACQUISITIONS (Entergy Corporation and Entergy London)

On December 18, 1996, Entergy Corporation, through its wholly-owned subsidiary Entergy London, made a formal cash offer to acquire London Electricity for $2.1 billion. London Electricity is a regional electric company serving approximately two million customers in the metropolitan area of London, England. The offer was approved by authorities in the UK, and, as of February 7, 1997, the offer was made unconditional. Entergy Corporation, through Entergy London, now controls 100% of the common shares of London Electricity. Entergy has included the results of operations of London Electricity in its results of operations beginning February 1, 1997, based on management's determination that effective control was achieved on that date. The acquisition was financed by Entergy London with $1.7 billion of debt, which is non-recourse to Entergy Corporation, and $392 million of equity provided by Entergy Corporation from available cash and borrowings under Entergy Corporation's $300 million line of credit. The debt has since been refinanced (see Note 7).

The cost of the London Electricity license is being amortized on a straight-line basis over a 40-year period beginning February 1, 1997. As of December 31, 1997, the unamortized balance of the license was approximately

$1.3 billion.

In accordance with the purchase method of accounting, the results of operations for Entergy Corporation reported in its Statements of Consolidated Income and Cash Flows do not reflect London Electricity's results of operations for any period prior to February 1, 1997. The pro forma combined revenues, net income, and earnings per common share of Entergy Corporation presented below give effect to the acquisition as if it had occurred on January 1, 1997 and 1996, respectively. This pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been consummated for the period for which it is being given effect.

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For the Twelve Months Ending:

December 31, 19 9 7(a) December 31, 1996(b)

(In Millions of U.S. Dollars, Except Share Data)

Operating revenues $ 9,783 $ 9,288 Net income $ 304 $ 488 Earnings per average common share Basic and diluted $ 1.04 $ 1.82 (a) On July 31, 1997, the British government enacted into law a one-time windfall profits tax on privatized industries, including regional electric utilities such as London Electricity.

London Electricity's liability for this tax is approximately BPS140 million (approximately $234 million),

which will not be deductible for UK corporation tax purposes. Payment of the tax is required in two equal installments, the first was paid on December 1, 1997, and the second of which is due one year later. The government also decreased the corporate income tax rate in the UK from 33% to 31%, effective as of April 1, 1997. In accordance with SFAS 109, "Accounting for Income Taxes," this reduction in UK corporate tax rates resulted in a one-time reduction in income tax expense for London Electricity of approximately

$65 million during the quarter ended September 30, 1997.

(b) Net Income in 1996 includes the $174 million net of tax write-off of River Bend rate deferrals pursuant to SFAS 12 1.

NOTE 14. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London)

The various domestic utility companies purchase electricity from and/or sell electricity to other domestic utility companies, System Energy, and Entergy Power (in the case of Entergy Arkansas) under rate schedules filed with FERC. In addition, the domestic utility companies and System Energy purchase fuel from System Fuels; receive management, technical, advisory, operating, and administrative services from Entergy Services; and receive management, technical, and operating services from Entergy Operations. Entergy London receives technical, advisory, and administrative services from Entergy Services and Entergy Enterprises.

As described in Note 1, all of System Energy's operating revenues consist of billings to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.

The tables below contain the various affiliate transactions among the domestic utility companies and System Entergy (in millions).

Intercompany Revenues Entergy Entergy Entergy Entergy Entergy System Arkansas Gulf States Louisiana Mississippi New Orleans Enerzy 1997 $229.7 $ 14.6 $ 2.0 $ 84.9 $ 10.8 $ 633.7 1996 $282.7 $ 21.2 $ 5.6 $ 65.9 $ 2.6 $ 623.6 1995 $195.5 $ 62.7 $ 1.6 $ 43.3 $ 3.2 $ 605.6

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I-Intercompany Operating Expenses Entergy Entergy Entergy Entergy Entergy System Entergy Arkansas(l) Gulf States Louisiana Mississippi New Orleans Energy London 1997 $ 335.0 $ 416.4 $ 326.7 $ 316.1 $ 177.1 $ 36.5 $ 5.3 1996 $ 346.7 $ 395.7 $ 331.3 $ 294.6 $ 185.9 $ 8.6 1995 $ 316.0 $ 266.5 $ 335.5 $ 262.6 $ 164.4 $ 6.5 (1) Includes $16.5 million in 1997, $38.8 million in 1996, and $31.0 million in 1995 for power purchased from Entergy Power.

OperatinE Expenses Paid or Reimbursed to Enterfy Operations Entergy Entergy Entergy System Arkansas Gulf States Louisiana Energy 1997 $ 162.1 $ 135.7 $ 133.3 $ 64.7 1996 $ 163.3 $ 133.7 $ 97.7 $ 98.1 1995 $ 189.8 $ 129.1 $ 122.6 $ 116.9 In addition, certain materials and services required for fabrication of nuclear fuel are acquired and financed by System Fuels and then sold to System Energy as needed. Charges for these materials and services, which represent additions to nuclear fuel, amounted to approximately $16.5 million in 1997, $44.7 million in 1996, and

$51.5 million in 1995.

NOTE 15. BUSINESS SEGMENT INFORMATION (Entergy New Orleans and Entergy London)

Entergy New Orleans supplies electric and natural gas services in the City. Entergy New Orleans' segment information follows:

1997 1996 1995 Electric Gas Electric Gas Electric Gas (In Thousands)

Operating revenues $410,131 $ 94,691 $403,254 $101,023 $390,002 $80,276 Revenue from sales to unaffiliated customers (1) 399,789 94,691 400,605 101,023 386,785 80,276 Operating income before income taxes 38,752 3,539 51,937 5,641 61,092 9,638 Net utility plant 212,648 62,144 214,106 63,865 204,407 65,236 Depreciation expense 17,157 3,638 16,525 3,342 15,858 3,290 Construction expenditures 14,988 1,149 23,411 4,545 21,729 6,107 (1) Entergy New Orleans' intersegment transactions are not material (less than 1% of sales to unaffiliated customers).

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Entcrgy London is engaged in two electric industry segments: distribution, which involves the transfer and delivery of electricity across its network to its customers, and supply, which involves bulk purchases of electricity from the Electricity Pool for delivery to the distribution networks. Other consists principally of Entergy London's investment in private distribution networks, electricity contracting services, and investments in generating assets.

Information about Entergy London's operations in these individual segments for the year ended December 31, 1997 is as follows (in thousands):

Distribution Other Eliminations Consolidated Operating revenues $ 498,801 $1,689,034 $ 102,550 $ (443,343) $ 1,847,042 Operating income 140,713 15,095 37,082 (6,080) 186,810 Depreciation and amortization 111,028 7,219 3,118 - 121,365 Total assets employed at period end 3,628,954 537,973 236,698 - 4,403,625 Capital expenditures 143,936 16,069 21,160 - 181,165 NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London)

The business of the domestic utility companies, System Energy, and Entergy London is subject to seasonal fluctuations with the peak periods occurring during the third quarter for the domestic utility companies and System Energy and occurring during the first quarter for Entergy London. Operating results for the four quarters of 1997 and 1996 were:

Operating Revenue Entergy Entergy Entergy Entergy Entergy System Entergy Enter*-v Arkansas Gulf States Louisiana Mississippi New Orleans Ener2y London (In Thousands) 1997:

First Quarter S 2,045,753 S 374,731 S 481,328 $ 433,983 $ 200,328 S 124,956 S 155,662 $379,519 Second Quarter 2,178,090 423,619 476,421 412,263 212,892 109,803 161,021 450,405 Third Quarter 2,797,587 545,849 599,974 554,486 294,983 139,940 160,573 443,975 Fourth Quarter 2,540,291 371,515 590,106 402,540 229,192 130,123 156,442 573,143 1996:

First Quarter $ 1,598,992 S 383,081 S 456,631 $ 417,767 $ 203,902 $ 127,280 $ 156,424 N/A Second Quarter 1,853,677 467,990 525,567 457,847 247,479 127,829 160,369 N/A Third Quarter 2,148,332 529,276 592,130 549,295 297,118 150,937 154,467 N/A Fourth Quarter 1,576,656 363,086 444,853 403,958 209,931 98,231 152,360 N/A Ooeratinz Income (Loss)

Entergy Entergy Entergy Entergy Entergy System Entergy Enteri Arkansas Gulf States Louisiana Mississippi New Orleans Ener-y London (In Thousands) 1997:

First Quarter $ 372,218 S 30,890 S 93,014 S 77,880 $ 22,694 S 8,755 $ 74,316 S 37,135 Second Quarter 433,887 80,873 75,643 87,911 40,395 9,400 73,568 47,704 Third Quarter 672,617 148,688 158,365 147,976 52,832 18,096 72,813 58,673 Fourth Quarter 378,436 6,424 203,524 53,813 20,827 6,040 72,496 43,298 1996:

First Quarter $ 342,403 $ 41,955 77,058 $ 95,166 $ 30,470 $ 15,752 $ 82,938 N/A Second Quarter 501,169 105,237 118,420 119,736 57,283 19,608 82,894 N/A Third Quarter 609,763 131,319 152,022 155,755 54,696 28,319 75,270 N/A Fourth Quarter 239,517 31,639 64,398 65,789 22,147 (6,101) 75,937 N/A

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Net Income (Loss)

Entergy Entergy Entergy Entergy Entergy System Enterv Arkansas Gulf States Entergy

_Louisiana Mississippi New Orleans Energy London (In Thousands) 1997:

First Quarter S 126,485 S 9,848 S 32,535 S 26,172 S 8,352 S 2,818 S 24,345 S 15,639 Second Quarter 158,579 38,085 27,028 32,607 19,399 3,038 24,093 9,320 Third Quarter 93,321 78,251 70,740 70,681 27,335 8,590 24,449 (172,268)

Fourth Quarter (77,486) 1,793 (70,327) 12,297 11,575 1,005 29,408 (26) 1996:

First Quarter $ (68.990) $ 19.268 $ (152,257) $ 40,530 $ 12,924 $ 8,035 $ 23,530 N/A Second Quarter 206,701 55,712 47,140 55,385 29,818 10,360 23,382 N/A Third Quarter 299,166 70,791 90,965 77,302 28,205 15,221 24,749 N/A Fourth Quarter 53,686 12,027 10,265 17,545 8,264 (6,840) 27,007 N/A Earnin2s (Loss) per Average Common Share (Entergy Corporation) 1997 1996 Basic Diluted Basic Diluted First Quarter $ 0.47 $ 0.47 $ (0.38) $ (0.38)

Second Quarter $ 0.61 $ 0.61 $ 0.83 $ 0.83 Third Quarter $ 0.33 $ 0.33 $ 1.22 $ 1.22 Fourth Quarter S(0.36) $ (0.36) $ 0.16 $ 0.16

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REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of London Electricity plc We have audited the accompanying consolidated balance sheet of London Electricity plc as of March 31, 1996 and the related consolidated statements of operations, cash flows and changes in shareholders' equity for the period from April 1, 1996 to January 31, 1997, and the year ended March 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of London Electricity plc as of March 31, 1996 and the results of its operations and its cash flows for the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996 in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana July 31, 1997

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LONDON ELECTRICITY PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Predecessor Company The following discussion of results of operations for London Electricity relates to periods prior to its acquisition by Entergy London. Such periods do not include acquisition adjustments described under "Accounting for the Acquisition"in "ENTERGY LONDON INVESTMENTS plc AND SUBSIDIARY - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

This analysis is included based on London Electricity constituting a predecessor of Entergy London. Entergy London's results of operations do not include results for London Electricity prior to February 1, 1997.

National Grid Group Transactions During the fiscal year ended March 31, 1996, London Electricity, as well as each of the other 11 REC businesses in the UK, reorganized their interests in the National Grid Group (NGG). London Electricity distributed the majority of its shares in NGG to its shareholders. As part of this distribution, London Electricity revalued these shares to fair market value and recognized a gain of approximately $417 million and received special dividends of

$205 million and rights dividends of $4.7 million from NGG which were also recognized as income. Additionally, London Electricity received approximately $109.8 million as a result of NGG's sale of its pumped storage business which was also recognized as a gain in fiscal year 1996. London Electricity has retained shares of NGG for the purpose of establishing an employee stock ownership plan ("ESOP") for its employees who were participants in London Electricity stock option and sharesave plans to compensate them for any dimunition in value in London Electricity shares as a result of NGG distributions. The cost of such ESOP shares has been reflected as expense of

$27.1 million in the fiscal year 1996 results of operations. As a result of all of the above, London Electricity recognized a total nonrecurring gain of $709 million ($573 million after tax effect) in the fiscal year ended March 31, 1996 results of operations. As part of the agreement among the shareholders of NGG, each of the RECs agreed to provide a discount to each of their respective Franchise Supply Customers which, together with the associated reduction in the Fossil Fuel Levy (a reimbursement to non-fossil fuel generators for the extra cost of such generation), produced a credit on each Franchise Supply Customer's bill of just over $78. The cost to London Electricity of providing this discount amounted to $130 million (net of the reduction in the Fossil Fuel Levy of $13 million) which was credited to customers in the last quarter of the fiscal year ended March 31, 1996. The effect of the refund was to reduce operating revenues, cost of sales, gross profit, and net income by $143 million, $13 million,

$130 million, and $88 million, respectively. The net dividends received from NGG and the net after tax proceeds from the sale of NGG's pumped storage business were sufficient to offset the after tax cash cost of providing the $78 per customer discount to its Franchise Supply Customers and taxation cost of distributing its NGG investment to its shareholders.

Income from Operations Income from operations was $169 million for the ten-month period from April 1, 1996 to January 31, 1997, an increase of $10 million from the fiscal year which ended March 31, 1996. The increase was due principally to lower selling, general and administrative expenses and lower other operation and maintenance costs in the latter period due to there being only ten months in that period. Revenues were lower by $95 million (including the impact of the NGG refund) in the period from April 1, 1996 to January 31, 1997, when compared to the revenues in fiscal year 1996 of $1,860 million. Largely offsetting this decrease was a $92 million decrease in cost of sales from the

$1,307 million incurred in fiscal year 1996. Both decreases were principally due to the shorter time period from April 1, 1996 to January 31, 1997.

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LONDON ELECTRICITY PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Income (loss) from operations by segments for the ten-month period ended January 31, 1997, was $159 million, $(1) million, and $11 million for the distribution, supply, and other segments, respectively. Income (loss) from those segments in fiscal year 1996 was $247 million, $(110) million, and $22 million, respectively.

The decrease in distribution operating income of $88 million was principally due to: (i) reductions in distribution revenue from an 11% allowed distribution revenues reduction announced by the Regulator effective at the beginning of fiscal year 1997 and a decrease of 15% in distribution sales volume due to the shorter time period and (ii) an increase in distribution operating expenses due to restructuring charges during the ten-month period ended January 31, 1997.

The reduction in supply operating loss of $109 million was principally due to the $130 million customer refund (net of the Fossil Fuel Levy reduction) in 1996 from the NGG transactions. Such increase was partially offset by a 5% decrease in number of electricity units supplied.

Net Income Net income decreased by $48 million, from $146 million in fiscal year 1996 (excluding the after tax effect of NGG transactions of $573 million) to $98 million in the ten-month period ended January 31, 1997. This decrease was primarily due to the reduction in distribution operating revenues due to the factors discussed below in "Revenues."

Revenues Operating revenues, excluding the impact of the NGG refund, decreased by $238 million (12%) from $2,003 million in fiscal year 1996 to $1,765 million in the ten-month period ended January 31, 1997, as follows:

Operating Revenues Increase (Decrease) from Fiscal Year 1996 to the ten-month Period ended January 31. 1997 (In millions)

Electricity distribution $ (124)

Electricity supply (199)

Other 14 Intra-business 71 Total operating revenues $ (238)

The factors affecting distribution revenues are the same as those described in "ENTERGY LONDON INVESTMENTS pic AND SUBSIDIARY - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" comparing the year ended December 31, 1997 with the ten-month period ended January 31, 1997 above.

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LONDON ELECTRICITY PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenues from the distribution business decreased by $124 million (22%) from $559 million for fiscal year 1996 to $435 million for the ten-month period ended January 31, 1997, principally due to two additional months of operation in the earlier time period. An additional factor contributing to the decrease was a reduction in the maximum allowable average price of units distributed as a result of the application of the revised Distribution Price Control Formula.

Two principal factors determine the amount of revenues produced by the supply business: the unit price of electricity supplied (which, in the case of franchise supply customers, is controlled by the Supply Price Control Formula) and the number of electricity units supplied. London Electricity is expected to have the exclusive right to supply all franchise supply customers in its Franchise Area until at least April 1, 1998.

Franchise supply customers, who are generally residential and small commercial customers, comprised 54%

of total sales volume in the ten-month period ended January 31, 1997. The volume of unit sales of electricity for franchise supply customers is influenced largely by the number of customers in London Electricity's Franchise Area, weather conditions and prevailing economic conditions. Unit sales to non-franchise supply customers, who are typically large commercial and industrial businesses, constituted 46% of total sales volume during the ten-month period ended January 31, 1997. Volume in this segment is determined primarily by the success of the supply business in contracting to supply customers with electricity who are located both inside and outside London Electricity's Franchise Area.

During the ten-month period. ended January 31, 1997, the number of electricity units supplied decreased by 5% while total revenues produced by the supply business decreased by $199 million (11%), to $1,663 million from

$1,862 million (excluding the impact of the NGG refund of $143 million) for fiscal year 1996. Units supplied to franchise supply customers decreased by 16%, while units supplied to non-franchise supply customers increased by 12%.

Other revenues for the ten-month period ended January 31, 1997 totaled $107 million, an increase of $14 million over fiscal year 1996. Such increase was primarily a result of increased electrical contracting services to the distribution segment by London Electricity Contracting Limited ("LEC"), the revenues for which were eliminated in intra-business eliminations. Intra-business eliminations decreased slightly from fiscal year 1996 to the ten-month period ended January 31, 1997, notwithstanding the LEC increase due principally to the reductions (due to a shorter time period) in electricity distribution revenues (the majority of which are charged to the supply segment) as discussed above.

Cost of Sales Cost of sales decreased by $105 million (8%) from $1,320 million (excluding the NGG-related Fossil Fuel Levy reduction of $13 million) in fiscal year 1996 to $1,215 million in the ten-month period ended January 31, 1997.

This decrease was principally due to two additional months results of operations in the earlier period.

Expenses Operating expenses decreased by $13 million (3%) from $394 million in fiscal year 1996 to $381 million for the ten-month period ended January 31, 1997. This decrease was primarily due to lower selling, general and administrative expenses and other operation and maintenance costs, partially offset by one-time restructuring charges of $19 million in the later period.

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LONDON ELECTRICITY PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Other Other Income (Expense)

Other income (expense) decreased by $733 million from $740 million in fiscal year 1996 to $7 million in the ten-month period ended January 3 1, 1997. This decrease was primarily attributable to other income of $709 million from the NGG transaction in fiscal year 1996. See "National Grid Group Transactions" above.

Interest Expense, Net Interest expense, net increased by $19 million from $8 million in fiscal year 1996 to $27 million in the ten month period ended January 31, 1997, principally as a result of the financing costs associated with the 8-5/8%,

BPS 100 million Eurobond issue in October 1995 which was outstanding for five months of fiscal year 1996 and the entire period from April 1, 1996 through January 31, 1997.

Income Taxes Entergy London's effective income tax rate of 19% in fiscal year 1996 increased to 34% for the ten-month period ended January 31, 1997. This increase was due principally to book/tax differences from the NGG transaction in fiscal year 1996.

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LONDON ELECTRICITY PLC CONSOLIDATED STATEMENTS OF OPERATIONS for the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996 (in thousands)

Period from April 1, 1996 to Year Ended January 31, 1997 March 31, 1996 Operating revenues $ 1,765,605 $ 1,859,938 Cost of sales 1,215,455 1,306,827 Gross profit 550,150 553,111 Depreciation and amortization 62,165 66,085 Property taxes 30,687 31,790 Restructuring charges 18,507 Selling, general and administrative 211,961 229,889 Other operation and maintenance costs 58,052 66,242 Income from operations 168,778 159,105 Other income:

National Grid Transaction Gain on revaluation of National Grid investment 416,869 Gain on sale of pumped storage business 109,777 Special dividends 205,146 Contribution to Employee Stock Ownership Plan (27,092)

Dividend income 6,011 38,837 Equity in eamings (loss) of affiliate 3,796 (3,445)

Other, net (2,531) 157 Total other income 7,276 740,249 Interest expense, net 27,049 7,673 Income before income taxes 149,005 891,681 Income taxes 50,776 172,260 Net income $ 98,229 $ 719,421 See Notes to Financial Statements.

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LONDON ELECTRICITY PLC CONSOLIDATED STATEMENTS OF CASH FLOWS for the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996 (in thousands)

Period from April 1, 1996 to Year Ended January 31. 1997 March 31, 19 Cash flows from operating activities:

Net income Adjustments to reconcile net income to net cash provided by $ 98,229 $ 719,421 operating activities:

Depreciation and amortization Deferred income taxes 62,165 66,085 Gain on revaluation of National Grid investment 22,778 27,248 Change in assets and liabilities: (416,869 Inventory Accounts receivable and unbilled revenue (3,164) (4,855 (21,354) (24,743 Income tax receivable 182,065 (124,184 Other receivables 4,904 (50,738 Prepayments and other Long-term receivables and other 3,164 (6,890 (9,491) (27,248 Accounts payable 41,127 8,456 Income taxes payable Deferred revenue and other current liabilities (200,098) 117,450 (17,242) 23,647 Other long-term liabilities Net cash provided by operating activities (2.215) (7,673 160.868 299,107 Cash flows from investing activities:

Capital expenditures Proceeds from sale of fixed assets (182,856) (173,201 Receipt of consumer contributions 791 1,879 Purchase of investments 26,574 23,334 Sales of investments (6,169) (37,114

_10,282 57,785 Net cash used in investing activities

.(151,378) (127,317 Cash flows from financing activities:

Proceeds from bond issue Proceeds from issuance of common stock 316 155,191 Net proceeds from available lines of credit 1,740 15,033 Dividends paid 103,669 57,785 Repurchase of common stock (108,215) (397,717 Net cash used in financing activities (1,253 (2,490) S(170.961 Effect of exchange rates on cash and cash equivalents _ 8_,880 Increase (decrease) in cash and cash equivalents (1 1,301 Beginning of period cash and cash equivalents 15,880 (10,472 19,.851 30,323.

End of period cash and cash equivalents $35,.731 19,851 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest Cash paid for income taxes $ 44,290 $ 19,418

$ 267,324 $ 120,582 See Notes to Financial Statements.

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LONDON ELECTRICITY PLC CONSOLIDATED BALANCE SHEET March 31, 1996 (in thousands, except share and per share amounts)

ASSETS Current assets:

Cash and cash equivalents 19,851 Accounts receivable:

Customer receivable net of reserve of $13.3 million 173,315 Unbilled revenue 117,884 Deferred income tax asset 24,127 Income tax receivable 191,028 Other receivables 82,304 Prepayments and other 12,369 Inventory 11,300 Investments 25,501 Total current assets 657,679 Property, plant and equipment, net of accumulated depreciation of $710.5 million 1,070,885 Construction work in progress 125,672 Goodwill, net of accumulated amortization of $3.4 million 63,065 Investments, long-term 16,186 Long-term receivables 15,270 Prepaid pension asset 111,624 Total assets $ 2,060,381 See Notes to Financial Statements.

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LONDON ELECTRICITY PLC CONSOLIDATED BALANCE SHEET March 31, 1996 (in thousands, except share and per share amounts)

LIABILITIES AND SHAREHOLDERS' EOUITY Current liabilities:

Notes payable $ 146,745 Accounts payable 179,423 Income taxes payable 236,838 Deferred revenue 30,693 Other liabilities 74,058 Total current liabilities 667,757 Long-term debt 301,888 Deferred income tax liability 317,769 Other 89,634 Total liabilities 1,377,048 Commitments and Contingencies Shareholders' equity:

Common stock, BPS .583 par value per share, 257,142,857 shares authorized, 174,290,836 shares issued and outstanding 203,153 Additional paid-in capital 14,960 Retained earnings 499,536 Cumulative translation adjustment (34,316)

Total shareholders' equity 683,333 Total liabilities and shareholders' equity $ 2,060,381 See Notes to Financial Statements.

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LONDON ELECTRICITY PLC CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY for the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996 (in thousands, except share amounts)

Additional Cumulative Common Stock Paid-In Retained Translation Shareholders' Shares Amount Capital Earnin?,s Adjustment Equity 197,695,699 $198,612 $ 4,468 $ 722,724 $ 30,719 $ 956,523 Balance, March 31, 1995 4,956,992 4,541 10,492 - 15,033 Common stock issued Reduction in shares from reverse stock split (27,522,282)

(839,573) -- (1,253) -- (1,253)

Treasury shares acquired Revaluation of National Grid investment 274,254 Realized gain on distribution of National Grid investment - (274,254)

- 719,421 - 719,421 Net income Dividends declared:

- (402,686) -- (402,686)

Cash dividends

- (538,670) -- (538,670)

National Grid Distribution Cumulative translation adjustment (65,035) (65,035) 174,290,836 203,153 14,960 499,536 (34,316) 683,333 Balance, March 31, 1996 390,712 158 - 1,582 1,740 Common stock issued 98,229

-- 98,229 Net income

-- (113,833) (113,833)

Dividends declared Cumulative translation adjustment 32,178 32,178 174-681,548 $203,311 $14.960 $ 485,514 S (2,138) $ 701,647 Balance, January 31, 1997 See Notes to Financial Statements.

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LONDON ELECTRICITY PLC SELECTED FINANCIAL DATA - FOUR-YEAR COMPARISON Period from April 1, 1996 to Year Ended March 31, January 31, 1997 1996 1995 1994 (1)

(In Thousands)

Operating revenues $ 1,765,605 $ 1,859,938 $1,898,976 $1,970,830 Net income $ 98,229 $ 719,421 $ 189,269 $ 213,795 Total assets N/A $ 2,060,381 $2,007,417 $1,813,448 Long-term obligations (2) N/A $ 301,888 $ 159,879 $ 281,960 (1) Amounts as of and for the year ended March 31, 1994 are derived from financial statements prepared in accordance with UK generally accepted accounting principles (GAAP).

The principal differences between US GAAP and UK GAAP financial statements relate to the treatment of goodwill, pension costs, deferred income taxes, timing of recognition of restructuring accruals, and timing of recognition of dividends.

(2) Includes long-term debt (excluding currently maturing debt).

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LONDON ELECTRICITY PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS:

London Electricity plc ("London Electricity") is one of the twelve regional electricity companies ("RECs") in England and Wales licensed to supply, distribute, and, to a limited extent, generate electricity. The RECs were created as a result of the privatization of the United Kingdom ("UK") electric industry in 1990 after the state-owned low voltage distribution networks were allocated to the then existing twelve regional boards. London Electricity's the main business, the distribution and supply of electricity to customers in London, England, is regulated under terms of London Electricity's PES license by the Office of Electricity Regulation (the "Regulator").

NOTE 2.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation in accordance with SFAS 52, "Foreign Currency Translation", all assets and liabilities of London Electricity are are translated into U.S. dollars at the exchange rate in effect at the end of the period, and revenues and expenses are reflected translated at average exchange rates prevailing during the period. The resulting translation adjustments of future in a separate component of shareholders' equity. Current exchange rates are used for U.S. dollar disclosure currency denominated amounts have been, could have been or obligations. No representation is made that the foreign could be converted into U.S. dollars at the rates indicated or at any other rates.

The financial statements of London Electricity are presented in conformity with accounting principles the accounts of generally accepted in the United States ("US GAAP"). The consolidated financial statements include from records London Electricity and its wholly-owned and majority-owned subsidiaries and have been prepared accounts and transactions have been maintained by London Electricity in the UK. All significant intercompany rather, is subject to price cap eliminated in consolidation. London Electricity is not subject to rate regulation, but 7 1, "Accounting for the regulation and, therefore, the provisions of Statement of Financial Accounting Standards No.

Effects of Certain Types of Regulation" ("SFAS 71") do not apply.

London Electricity was acquired by Entergy London Investments plc, formerly Entergy Power UK pic, through effective February 1, 1997. The financial statements include'the results of operations of London Electricity the date of acquisition.

Use of Estimates in the Preparation of Financial Statements The preparation of London Electricity's financial statements, in conformity with generally accepted of accounting principles, requires management to make estimates and assumptions that affect the reported amounts and assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues amounts of assets and liabilities may be necessary expenses during the reporting period. Adjustments to the reported in the future to the extent that future estimates or actual results are different from the estimates used in the financial statements.

Revenue Recognition the London Electricity distributes electricity to commercial, residential and industrial customers within services London area. London Electricity records revenue net of value added tax ("VAT") and accrues revenue for provided but unbilled at the end of each reporting period. London Electricity purchases power primarily from the demand wholesale trading market for electricity in England and Wales (the "Pool"). The Pool monitors supply and

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between generators and suppliers, sets prices for generation and provides centralized settlement of amounts due between generators and suppliers.

Cash and Cash Equivalents London Electricity considers all short-term investments with an original maturity of three months or less to be cash and cash equivalents.

Property, Plant and Equipment Property, plant and equipment is stated at original cost and includes materials, labor and appropriate overhead costs. London Electricity is entitled, under certain conditions, to collect cash contributions from consumers to fund improvements to London Electricity's distribution networks. These consumer contributions are credited against the historical cost of the asset.

Depreciation is computed by the straight-line method at rates based on the estimated service lives of each of the various classes of property. Consumer contributions are amortized into income at a rate of 2.5%. Depreciation rates on average depreciable property are shown below:

Distribution network assets 2.5%

Buildings 1.7%

Vehicles and mobile plant 10%-20%

Furniture and equipment, including computer hardware and software 20%-33%

Income Taxes London Electricity accounts for income taxes in accordance with Statement of Financial- Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This standard requires that deferred income taxes be recorded for all temporary differences between the financial statement basis and tax basis of assets and liabilities and loss carryforwards, and that deferred tax balances be based on enacted tax laws at rates that are expected to be in effect when the temporary differences reverse.

Goodwill Goodwill represents the excess of cost over the fair value of net assets acquired and is being amortized over forty years using the straight-line method.

Financial Instruments London Electricity enters into interest rate swaps as a part of its overall risk management strategy and does not hold or issue material amounts of derivative financial instruments for trading purposes. London Electricity accounts for its interest rate swaps in accordance with the concepts established in Statement of Financial Accounting Standards No. 80, "Accounting for Futures Contracts" ("SFAS 80") and various Emerging Issue Task Force pronouncements. If the interest rate swaps were to be sold or terminated, any gain or loss would be deferred and amortized over the remaining life of the debt instrument being hedged by the interest rate swap. If the debt instrument being hedged by the interest rate swaps were to be extinguished, any gain or loss attributable to the swap would be recognized in the period of the transaction.

London Electricity considers the carrying amounts of financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

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Price Control Charges for distribution of electricity and supply to customers with a maximum demand under 100kW are subject to a price control formula set out in London Electricity's PES license xwhich allows a maximum charge per unit of electricity.

Differences in the charges, or in the purchase cost of electricity, can result in the under or overrecovery of revenues in a particular year.

Where there is an overrecovery of supply of distribution business revenues against the regulated maximum allowable amount, revenues are deferred in an amount equivalent to the overrecovered amount. The deferred amount is deducted from operating revenues and included in other liabilities. Where there is an underrecoverv, no anticipation of any potential future recovery is made.

London Electricity enters into contracts for differences ("CFDs") primarily to hedge its supply business against the price risk of electricity purchases from the Pool. Use of these CFDs is carried out within the framework of London Electricity's purchasing strategy and hedging guidelines. Risk of loss is monitored through establishment of approved counterparties and maximum counterparty limits and minimum credit ratings. London Electricity recognizes gains (losses) on CFDs when settlement is made. Gains (losses) on CFDs are recognized as a decrease (increase) to cost of sales based upon the difference between fixed prices in the CFD compared to variable prices paid to the Pool for the period. Gains (losses) based upon the difference between fixed prices in the CFD compared to variable prices paid to the Pool for future electricity purchases are not recognized until the period of such settlements.

Pursuant to Statement of Financial Accounting Standards No. 12 1, "Accounting for the Impairment of Long Lived Assets and for Long-Lived Assets to Be Disposed of" ("SFAS 121") London Electricity periodically reviews its long-lived assets whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such assets. Projected undiscounted net cash flows depend on the future operating costs associated with the assets and future market prices over the remaining life of the assets. Based on current estimates of future undiscounted cash flows as prescribed under SFAS 121, management anticipates that future revenues from such assets will fully recover all related costs.

NOTE 3. REGULATORY MATTERS:

The distribution business of London Electricity is regulated under its PES license, pursuant to which revenue of the distribution business is controlled by the Distribution Price Control Formula (DPCF). The DPCF determines the maximum average price per unit of electricity (expressed in kilowatt hours, a "unit") that a REC may charge.

The elements used in the DPCF are established for a five-year period and are subject to review by the Regulator at the end of each five-year period and at other times at the discretion of the Regulator. At each review the Regulator can adjust the value of certain elements in the DPCF. Following a review by the Regulator in August 1994, a 14%

price reduction was set for London Electricity, effective April 1, 1995. In July 1995, a further review of distribution prices was concluded by the Regulator for fiscal years 1997 to 2000. As a result of this further review, London Electricity's distribution prices were reduced an additional 11%, effective April 1, 1996, 3% effective April 1, 1997 and will be reduced by a further 3% on both April 1, 1998 and 1999.

The supply business of London Electricity is also regulated by the Regulator and prices are established based upon the Supply Price Control Formula which is similar to the DPCF; however, it allows full pass through for all properly incurred costs and is set for a four-year period by the Regulator.

The non-franchise supply market, which typically includes larger commercial and industrial customers was opened to competition for all customers with usage above IMW upon privatization of the industry in 1990. The non franchise supply markets of 100 kW or more were opened to full competition starting in April 1994.

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Currently London Electricity, under its PES license, has the exclusive right to supply industrial and commercial customers within its franchise area. residential and small It is anticipated that the supply market will be fully competitive over a six month period starting in April 1998.

NOTE 4. INVESTMENTS:

London Electricity accounts for investments whose fair market value is readily determinable with Statement of Financial Accounting Standards No. 115, in accordance "Accounting for Investments for Certain Debt and Equity Securities" ("SFAS 115"). These securities are considered available-for-sale securities under SFAS 115 and their fair values approximate cost. Other securities whose fair market values are not readily determinable and in which London Electricity does not have a significant interest are recorded at cost.

Investments in companies in which London Electricity's ownership interests range from 20% to 50% and investments in which London Electricity's ownership is less than 20% but over which London Electricity exercises significant influence over operating and financial policies are accounted for using the equity method. The following are London Electricity's equity method investments as of March 3 1, 1996:

Investment Percentage Ownership London Total Gas Ltd 50%

Combined Power Systems Ltd 32% combined ownership in common and preferred shares Thames Valley Power Ltd 50%

London Total Energy Ltd 50%

Barking Power Ltd 13.5%

NOTE 5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, at cost, consists of the following (in thousands):

March 31, 1996 Distribution network assets

$ 1,769,946 Land and buildings 117,579 Vehicles and mobile plant Furniture, fixtures and equipment, including computer hardware and software 24,279 181,407 Consumer contributions to construction (311,813)

Less accumulated depreciation and amortization 1,781,398 (7 10,5 13)

$ 1,070,885

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NOTE 6. INCOME TAXES:

London Electricity's income tax expense for the period from April 1, 1996 to January 31, 1997, and the year ended March 3 1. 1996. consists of the following (in thousands):

Period from April 1, 1996 to Year ended January 31, 1997 March 31, 1996 Current $ 27,998 $ 64,206 Deferred 22,778 27,248 Current taxes on National Grid transactions:

Tax on special dividend 35,705 Tax on distribution in kind 93,490 Tax on ESOP contribution (5,637)

Tax reduction related to customer discount (42,752)

Total 50,776 $ 172.260 London Electricity's total income taxes differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences in the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996 are (in thousands):

Period from April 1, 1996 to Year ended January 31, 1997 March 31, 1996 Pre-tax income $ 149,005 $ 891,681 Income taxes computed at statutory rate 49,194 294,252 National Grid transactions:

Revaluation of investment excluded from taxable income (44,005)

Gain on sale of pumped storage business excluded from taxable income (36,175)

Tax credit on contribution to ESOP (5,638)

Special dividends not taxable (10,805)

Effect of difference between statutory rate (33%) and rate on dividends received (20%) (791) (31,163)

Amortization of goodwill 475 626 Other 1.898 5,168 Total income tax expense 50,776 $ 172,260 Significant components of London Electricity's net deferred tax liability as of March 31, 1996 are as follows (in thousands):

Deferred tax liability Property-related basis differences $ (280,968)

Prepaid pension asset (36,801)

Total (317,769)

Deferred tax asset Restructuring and other provisions 24,127 Net deferred tax liability $ (293,642)

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As a result of Parliamentary elections held on May 1, 1997, the Labour Party gained control of the Government. On July 31, 1997 legislation establishing a windfall profits tax, which affects UK regulated companies privatized since 1979 including London Electricity, was enacted. In accordance with SFAS 109 under US GAAP, London Electricity will record a charge to income for the windfall profits tax during the quarter ending September 30, 1997. A change in the UK statutory rate from 33% to 31 % was also included in the legislation.

The impact of such changes will be recognition in the quarter ending September 30, 1997 of the $224 million expense for the windfall profits tax and approximately $61 million of income tax benefit as a result of the change in the UK statutory income tax rate in London Electricity's results of operations.

The tax years since fiscal year 1990 are currently under review by the Inland Revenue in the UK. London Electricity believes that there is no additional liability related to the tax years under review.

NOTE 7. LONG-TERM DEBT:

The long-term debt of London Electricity as of March 31, 1996 consists of the following (in thousands):

8% Eurobonds repayable March 28, 2003 $ 151,020 8 5/8% Eurobonds repayable October 26, 2005 150,868 Total $ 301-888 The 8% and 8 5/8% Eurobonds may become due prior to their stated maturity only upon the occurrence of certain events including default, liquidation or bankruptcy of London Electricity. London Electricity does not anticipate default under the agreements.

London Electricity entered into an interest rate swap agreement to reduce the impact of interest rate changes on its outstanding debt. The interest rate swap agreement involves the exchange of a fixed interest rate for a floating interest rate periodically over the life of the agreement. If the counterparty to the interest rate swap was to. default on contractual payments, London Electricity could be exposed to increased cost related to replacing the original agreement. However, London Electricity does not anticipate non-performance. At March 31, 1996, London Electricity was party to a notional amount of $12 million for an interest rate swap agreement with a maturity date of May 6, 2003.

NOTE 8. COMMON STOCK:

During 1996, London Electricity effected a reverse stock split of six for every seven shares of common stock held. This reduced, by approximately 28 million, the number of common shares outstanding and increased the par value of the stock from BPSO.50 to BPSO.583 per share.

NOTE 9. NOTES PAYABLE:

Other facilities available to London Electricity are short-term unsecured, uncommitted facilities of BPS228 million and a BPS 150 million Sterling Commercial Paper Program ("Sterling Program").

Uncommitted facilities are unsecured facilities which are available at London Electricity's request, however there is no obligation by the bank counterparty to make funds available to London Electricity. The Sterling Program is a negotiable promissory note with short term maturities (up to 364 days) issued at a discount to face value.

London Electricity had an outstanding balance of $146.7 million on all of these facilities as of March 31, 1996.

The weighted average interest rate incurred on these borrowings was 6.3% and 6.1% for the period from April 1, 1996 to January 31, 1997 and for the year ended March 31, 1996, respectively.

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NOTE 10. COMMITMENTS AND CONTINGENCIES:

London Electricity has entered into operating lease agreements for the use of buildings and vehicles.

Minimum future rental payments under all operating leases as of March 3 1, 1996 are as follows (in thousands):

1997 $ 10,842 1998 10,536 1999 10,078 2000 10,078 2001 9,773 Thereafter 127,810 Total $ 179,117 Rental expense incurred under these lease agreements was $10.6 million and $12.4 million for the period from April 1, 1996 to January 31, 1997 and for the year ended March 31, 1996, respectively.

London Electricity is subject to an agreement whereby the UK government is entitled to a proportion of certain property gains accruing to London Electricity as a result of disposals or events treated as disposals occurring after March 3 1, 1990 of properties held at that date. This commitment is effective until March 31, 2000.

London Electricity has utilized a portion of the pension plan surplus to increase benefits to members and reduce employer and employee contributions. A recent court ruling in the UK upheld such uses of pension surpluses.

However, should the decision be reversed on appeal, London Electricity could be required to repay pension surpluses utilized. Management is unable to predict the likely outcome of this matter at this time.

The UK Environmental Protection Act 1990 addresses waste management issues and imposes certain obligations on companies which handle and dispose of waste. Some of London Electricity's distribution activities produce waste but London Electricity believes that it has taken and continues to take measures to comply with the applicable laws and governmental regulations for the protection of the environment. There are no material legal or administrative proceedings pending against London Electricity with respect to any environmental matter.

London Electricity is required to file five-year projections with the Regulator for capital expenditures related to its regulated distribution network and updates of such projections annually. The most recent updated projection was for the five-year period ended March 31, 2000 and was filed in July 1997. This filing indicated London Electricity's current projection of approximately $772.3 million for the five-year period. Approximately $294.2 million has already been spent in fiscal years 1996 and 1997 related to this five-year projection.

London Electricity uses CFDs and power purchase contracts with certain UK generators to fix the price of electricity for a contracted quantity over a specific period of time. At March 31, 1996, London Electricity has outstanding CFDs and power purchase contracts for approximately 52,000 GWH of electricity. These include a long term power purchase contract with an affiliate which is based on 27.5% of the affiliate's capacity from its 1000 MW facility through the year 2010. London Electricity's sales volumes were approximately 17,000 GWH and 18,000 GWH in the period from April 1, 1996 to January 31, 1997, and the year ended March 31, 1996, respectively.

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NOTE 11. PENSION BENEFITS:

London Electricity participates in a defined benefit pension plan, which provides pension and other related defined benefits, based on final pensionable pay, to substantially all employees throughout the electric supply industry in the UK. Contributions to the plan by London Electricity on behalf of its employees were $16.0 million for the year ended March 31, 1996. London Electricity made no contributions to the plan during the period April 1, 1996 to January 31, 1997.

London Electricity uses the projected unit credit actuarial method for funding purposes. Amounts funded to the pension are primarily invested in equity and fixed income securities.

Statement of Financial Accounting Standards No. 87 "Employees Accounting for Pensions" ("SFAS 87")

was issued in 1988 and is effective for fiscal years beginning after December 15, 1988. The provisions of SFAS 87 were initially adopted by London Electricity on April 1, 1994. Accordingly, the unrecognized net transition asset at the date of initial application of SFAS 87 is being amortized over 15 years beginning April 1, 1989. The amount of the unrecognized net transition asset credited to equity on April 1, 1994 was $42.9 million.

The following table sets forth the plan's funded status and amounts recognized in London Electricity's balance sheet at March 31, 1996 (in thousands):

Accumulated benefit obligation:

Vested $ 900,625 Projected benefit obligation 1,029,962 Plan assets at fair value 1,231,831 Assets in excess of projected benefit obligation 201,869 Unrecognized net gain (18,782)

Unrecognized net transition asset (71,463)

Prepaid pension asset $ 111.624 The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation, and the expected long-term rate of return on assets was 9%, 6.5% and 9%, respectively, for the period from April 1, 1996 to January 31, 1997 and for the year ended March 31, 1996.

The components of the plan's net pension income during the periods are shown below (in thousands):

Period from April 1, 1996 to Year ended January 31, 1997 March 31, 1996 Service cost (benefits earned during the period) $ 10,440 $ 13,311 Interest cost on projected benefit obligations 70,232 85,347 Actual return on plan assets (92,377) (227,227)

Net amortization and deferral 3,955 115,258 Net pension benefit $ (7750) $ (13,311)

NOTE 12. DISTRIBUTION OF NATIONAL GRID INVESTMENT:

In December 1995, each of the RECs distributed their investments in the National Grid Holding Company plc ("National Grid"). London Electricity distributed its ownership shares in National Grid to its shareholders. Prior to the distribution, the National Grid shares were listed on the London Stock Exchange and revalued to reflect the

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market value of the common stock of National Grid, whose shares had not previously been publicly traded and for which there was no readily determinable fair market value. London Electricity recorded a gain on the revaluation of

$416.9 million in the Statement of Operations for the year ended March 3 1, 1996. National Grid also effected a rights issue at $3.12 per share to raise additional equity capital. London Electricity invested an additional $27.5 million in National Grid as a result of the rights issue. Approximately 96% of the total National Grid shares owned by London Electricity were then distributed in kind to the shareholders of London Electricitv.

The remaining shares owned by London Electricity were retained to establish an Employee Stock Ownership Plan ("ESOP") to compensate participants of the Employee and Executive Sharesave Plans (employee stock option plans) for any diminution in value of London Electricity shares as a result of the demerger. Approximately 5.1 million shares of National Grid were reserved for contributions to the ESOP. The actual shares will be contributed to the ESOP upon exercise of options under the employee stock option plans. The contributed shares related to the establishment of the ESOP plus expenses and cash contributions due to the ESOP to compensate the participants for taxes payable related to this distribution were charged to expense during the fiscal year ended March 31, 1996. The difference between actual National Grid shares contributed and the total amount charged to expense is included in other liabilities in London Electricity's balance sheet as of March 31, 1996.

National Grid also distributed to London Electricity its ownership shares in PSB Holding Limited ("PSB"),

the holding company of First Hydro Limited which had been transferred to National Grid in 1990. As part of the demerger, PSB was sold to Mission Energy and London Electricity recorded a $109.8 million gain on the sale.

Finally, as part of the demerger, the Regulator ordered a $78 refund to each of London Electricity's supply customers which was offset by a reduction in the fossil fuel levy charged to London Electricity. The effect of the refund, which was recorded in the year ended March 31, 1996, was to reduce operating revenues, cost of sales and gross profit by $142.3 million , $13.0 million and $129.4 million, respectively.

The investment in National Grid has been accounted for by London Electricity as a cost method investment.

The consolidated results of operations of London Electricity therefore do not include any of the results of operations of National Grid.

NOTE 13. EMPLOYEE OPTIONS:

London Electricity was acquired by Entergy London Investments plc, formerly Entergy Power UK plc, effective February 1, 1997. In conjunction with the purchase of London Electricity, the holders of any outstanding options under the employee option plans were given the opportunity to exercise their options and sell their shares to Entergy London Investments plc at a price of BPS7.05 per share which then entitled the owner of the shares to the interim dividend of BPS. 179 per share. If the holders of the options did not exercise their options, such options were cash canceled and the holders were paid BPS7.05 per share.

Under the Employee Sharesave Plan, London. Electricity was authorized to issue shares of common stock pursuant to stock options granted to officers, key employees and directors. Under the Executive Sharesave Plan, London Electricity was authorized to issue shares of common stock pursuant to stock options granted to directors.

The stock options had an exercise price equal to the fair market value of the common stock on the date of grant and a contractual term of 10 years. The stock options became exercisable on the third anniversary of the date of grant under the Executive Sharesave Plan.

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A summary of the status of London Electricity's stock options for the period from April 1, 1996 to January 3 1. 1997 and for the year ended March 3 1, 1996 and the changes during the years ended on such dates is presented below:

Period from April 1, 1996 to January 31. 1997 Years ended March 31, 1996

1. Shares of # Shares of Underlying Exercise Underlying Exercise Options Prices Options Prices Outstanding at beginning of year 1,873,505 BPS 3.56 6,985,705 BPS 2.26 Granted 3,625,911 4.82 89,628 5.94 Exercised (390,712) 3.33 (4,956,992) 1.89 Forfeited (244,836) 2.09 Expired Outstanding at end of year 5,108,704 1L873,505 NOTE 14. RESTRUCTURING CHARGES:

In 1995 and 1996, London Electricity implemented a restructuring program to reduce the number of employees in the Network Services, Customer Services, Corporate and Information Technology groups. An initial plan was approved by the Board of Directors of London Electricity in September 1994 and was based on a business plan developed subsequent to the 1994 Regulatory Review of Distribution (the "Distribution Review").

Following the reopening of the Distribution Review during 1995, a further plan was proposed leading to a further reduction of employees in the same areas. This plan was approved by the Board of Directors in May 1996, and approximately $18.5 million in restructuring charges was recorded for the period from April 1, 1996 to January 31, 1997. The balances for restructuring charges and the actual termination benefits paid under the program for the period from April 1, 1996 to January 31,. 1997 and the year ended March 31, 1996 are as follows (in thousands):

Provision for restructuring as of March 31, 1995 $ 30,322 Restructuring charges in 1996 Payments made in 1996 Translation adjustment (1,767)

Balance March 31, 1996 28,555 Restructuring charges in 1997 18,507 Payments made in 1997 (16,609)

Translation adjustment 1,433 Provision for restructuring as of January 31, 1997 $3L,886 The number of employees terminated under these plans was 250 and 308 for the period from April 1, 1996 to January 3 1, 1997 and the year ended March 31, 1996, respectively.

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NOTE 15. SEGMENT INFORMATION:

London Electricity is engaged in two electric industry segments: distribution, which involves the transfer and deliver- of electricity across London Electricity's network to its customers, and supply, which involves bulk purchases of electricity from the Pool for delivery of supply to the distribution networks. Other consists principally of London Electricity's investment in private distribution networks, electricity contracting services and investments in generating assets. Information about London Electricity's operations in these individual segments during the period from April 1, 1996 to January 31, 1997 and for the year ended March 31, 1996 is as follows (in thousands):

Period from April 1, 1996 to January 31, 1997 Distribution Supply Other Eliminations Consolidated Operating revenues $ 435,470 $ 1,662,788 $ 106,772 $ (439,425) $1,765,605 Operating income 159,129 (1,265) 10,914 168,778 Depreciation and amortization 51,092 6,485 4,588 62,165 Total assets employed at period end 1,363,077 446,560 287,453 2,097,090 Capital expenditures 153,118 15,027 14,711 182,856 Year Ended March 31, 1996 Distribution Supply Other Eliminations Consolidated Operating revenues $ 559,219 $ 1,719,468 (a) $ 92,550 $ (511,299) $ 1,859,938 Operating income 247,428 (110,246) (b) 24,272 (2,349) 159,105 Depreciation and amortization 54,967 3,915 7,203 66,085 Total assets employed at period end 1,211,827 376,710 471,844 2,060,381 Capital expenditures 151,590 7,047 14,564 173,201 (a) Includes $142.3 million refund to customers related to National Grid transaction.

(b) Includes net effect of $142.3 million refund and $13.0 reduction of fossil fuel levy related to National Grid "transaction. See Note 12.

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Item 9. Chanees In and Disagreements With Accountants On Accounting and Financial Disclosure.

No event that would be described in response to this item has occurred with respect to Entergy, System Energy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, or Entergy New Orleans.

PART III Item 10. Directors and Executive Officers of the Registrants (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London)

All officers and directors listed below held the specified positions with their respective companies as of the date of filing this report.

Name Ape Position Period ENTERGY ARKANSAS, INC.

Directors R. Drake Keith 62 President and Director of Entergy Arkansas 1989-Present Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers Michael R. Niggli 48 Senior Vice President - Customer Accounts of Entergy Arkansas, Entergy 1996-1998 Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Services Senior Vice President - Marketing of Entergy Arkansas, Entergy Gulf 1993-1996 States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Services Vice President.- Customer Services of Entergy Louisiana, Entergy New 1993-1993 Orleans, and Entergy Services C. Gary Clary 53 Vice President - Human Resources and Administration of Entergy 1997-Present Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Operations Vice President - Human Resources and Administration of Entergy 1996-Present Services Director-System Human Resources of Entergy Services 1993-1996 Cecil L. Alexander 62 Vice President - Governmental Affairs of Entergy Arkansas 1991-Present James S. Pilgrim 62 Vice President - Customer Service of Entergy Arkansas 1994-Present Director, Central Region, TDCS Customer Service 1993-1994 Central Division Manager of Mississippi 1991-1993 C. Hiram Walters 61 Vice President - Customer Service of Entergy Arkansas 1993-Present Vice President - Customer Service of Entergy Louisiana 1994-Present Vice President - Customer Service of Entergy Services 1997-Present Vice President - Customer Service, Central Region of Entergy Services 1993-1997 Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

R. Drake Keith See information under the Entergy Arkansas Directors above.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

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Name A2e Position Period Michael G. Thompson See information under the Entergy Corporation Officers Section in Part 1.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part 1.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part 1.

ENTERGY GULF STATES, INC.

Directors Karen R. Johnson 53 President - Texas 1997-Present Director of Entergy Gulf States 1996-Present State President - Texas 1996-1997 Vice President - Governmental Affairs of Entergy Gulf States - Texas 1994-1996 Executive Director of State Bar of Texas (state agency) 1990-1994 John J. Cordaro 64 President - Louisiana 1997-Present Director of Entergy Gulf States and Entergy Louisiana 1996-Present State President - Louisiana 1996-1997 President and Director of Entergy Louisiana and Entergy New Orleans 1992-1996 Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Edv,win Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L- Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers William E. Colston 62 Vice President - Customer Service of Entergy Gulf States 1994-Present Vice President - Customer Service of Entergy Louisiana 1993-Present Vice President - Customer Service of Southern Region of Entergy 1993-Present Services Regional Director of Entergy Louisiana 1992-1993 S. G. Cunningham, Jr. 57 Vice President - Regulatory and Governmental Affairs of Entergy 1996-Present Louisiana and Entergy Gulf States Vice President - State Regulatory Affairs of Entergy Services 1994-1996 Vice President - Entergy Corporation, Entergy Gulf States Transition, 1993-1994 and Regulatory Affairs of Entergy Services Vice President - Rates and Regulatory Affairs of Entergy Louisiana and 1991-1994 Entergy New Orleans Vice President - Regulatory Affairs of Entergy Services 1992-1993 J. Parker McCollough 47 Vice President - State Governmental Affairs of Entergy Gulf States 1996-Present Vice President - Governmental Affairs, Texas Association of Realtors 1993-1996 (trade association)

Member- Texas House of Representatives 1989-1993 Wright & Greenhill, PC (law firm) 1991-1993 Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

C. Gary Clary See information under the Entergy Arkansas Officers Section above.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Gerald D. Mclnvale See information under the Entergy Corporation Officers Section in Part I.

Michael G. Thompson See information under the Entergy Corporation Officers Section in Part I.

Michael R. Niggli See information under the Entergy Arkansas Officers Section above.

Karen Johnson See information under the Entergy Gulf States Directors Section above.

John J. Cordaro See information under the Entergy Gulf States Directors Section above.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

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Name Aye Position Period ENTERGY LOUISIANA, INC.

Directors Frank F- Gallaher See information under the Entergy Corporation Officers Section in Part I.

John J. Cordaro See information under the Entergy Gulf States Directors Section above.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Edwin Lupberger See information under the Entergy Corporation Officers Section m Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers James D. Bruno 58 Vice President - Customer Service of Entergy Louisiana and Entergy 1994-Present New Orleans Vice President - Metro Region of Entergy Services 1993-Present Region Director - Metro Region of Entergy Services 1991-1993 Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

John J. Cordaro See information under the Entergy Gulf States Directors Section above.

C. Gary Clary See information under the Entergy Arkansas Officers Section above.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Michael G. Thompson See information under the Entergy Corporation Officers Section in Part I.

Michael R. Niggli See information under the Entergy Arkansas Officers Section above.

William E. Colston See information under the Entergy Gulf States Officers Section above.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

C. Hiram Walters See information under the Entergy Arkansas Officers Section above.

S. G. Cunningham, Jr. See information under the Entergy Gulf States Officers Section above.

ENTERGY MISSISSIPPI, INC.

Directors Donald E. Meiners (a) 62 President and Director of Entergy Mississippi 1992-Present Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers Bill F. Cossar 59 Vice President - Governmental Affairs of Entergy Mississippi 1987-Present Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Donald E. Meiners See information under the Entergy Mississippi Directors Section above.

C. Gary Clary See information under the Entergy Arkansas Officers Section above.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

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Name AFC Position Period Michael G. Thompson See information under the Entergy Corporation Officers Section in Part I.

Michael R. Niggli See information under the Entergy Arkansas Officers Section above.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

ENTERGY NEW ORLEANS, INC.

Directors Daniel F. Packer 50 President and Director of Entergy New Orleans 1997-Present State President - City of New Orleans 1996-1997 Vice President - Regulatory and Governmental Affairs of Entergy New 1994-1996 Orleans General Manager - Plant Operations at Waterford 3 1991-1994 Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

C. Gary Clary See information under the Entergy Arkansas Officers Section above.

Jerry D. Jackson See information under the Entergy Corporation Officers Section in Part I.

Frank F. Gallaher See information under the Entergy Corporation Officers Section in Part I.

Gerald D. Mclnvale See information under the Entergy Corporation Officers Section in Part I.

Michael G. Thompson See information under the Entergy Corporation Officers Section in Part I.

Michael R. Niggli See information under the Entergy Arkansas Officers Section above.

Daniel F. Packer See information under the Entergy New Orleans Directors Section above.

James D. Bruno See information under the Entergy Louisiana Officers Section above.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

SYSTEM ENERGY RESOURCES, INC.

Directors Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Jerry L. Maulden See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

Officers Joseph L. Blount 51 Secretary of System Energy and Entergy Operations 1991-Present Vice President Legal and External Affairs of Entergy Operations 1990-1993 Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Donald C. Hintz See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

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Name Position Period ENTERGY LONDON INVESTMENTS PLC Directors Edwin Lupberger See information under the Entergy Corporation Officers Section in Part 1.

Michael B. Bemis See information under the Entergy Corporation Officers Section in Part I.

Officers Edwin Lupberger See information under the Entergy Corporation Officers Section in Part I.

Michael B. Bemis See information under the Entergy Corporation Officers Section in Part I.

Michael G. Thompson See information under the Entergy Corporation Officers Section in Part I.

William J. Regan, Jr. See information under the Entergy Corporation Officers Section in Part I.

Louis E. Buck, Jr. See information under the Entergy Corporation Officers Section in Part I.

Gerald D. McInvale See information under the Entergy Corporation Officers Section in Part I.

(a) Mr. Meiners is a director of Trustmark National Bank, Jackson, MS, and Trustmark Corporation, Jackson, MS.

Each director and officer of the applicable Entergy company is elected yearly to serve by the unanimous consent of the sole stockholder, Entergy Corporation, at its annual meeting.

Directorships shown in footnote (a) above are generally limited to entities subject to Section 12 or 15(d) of the Securities and Exchange Act of 1934 or to the Investment Company Act of 1940.

Section 16(a) Beneficial Ownership Reporting Compliance Information called for by this item concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders to be held on May 15, 1998, under the heading "Section 16(a) Beneficial Ownership Reporting Compliance", which information is incorporated herein by reference.

Item 11. Executive Compensation ENTERGY CORPORATION Information called for by this item concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement under the headings "Executive Compensation Tables", "General Information About Nominees", and "Director Compensation", which information is incorporated herein by reference.

ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, SYSTEM ENERGY AND ENTERGY LONDON Summary Compensation Table The following table includes the Chief Executive Officer and the four other most highly compensated executive officers in office as of December 31, 1997 at Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London, (collectively, the "Named Executive Officers") as well as Gerald D. Mclnvale who would have been included as one of the four most highly compensated officers but for the fact that he was not serving as an executive officer at the end of the fiscal year.

This determination was based on total annual base salary and bonuses from all Entergy sources earned by each

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officer for the year 1997. See Item 10, "Directors and Executive Officers of the Registrants," for information on the principal positions of the Named Executive Officers in the table below.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Entergy and Entergy London As shown in Item 10, most Named Executive Officers are employed by several Entergy companies.

Because it would be impracticable to allocate such officers' salaries among the various companies, the table below includes the aggregate compensation paid by all Entergy companies.

Lone-Term Compensation Annual Compensation Awards Pajouts Restricted Securities (b) (c)

Other Annual Stock Underlying LTIP All Other (a)

Year Salary Bonus Compensation Awards Options Pavouts Compensation Name 1997 $314,154 $ 0 S 734,368(f) (d) 5,000 shares S 0 S 11,736 Michael B. Bemis 1996 297,115 168,125 43,884 (d) 5,000 0 12,813 1995 290,000 216,909 22.844 (d) 27,500 294,282 12,063 Joseph L. Blount 1997 $126,288 $ 0 $ 291 (d) 0 shares $ 0 $ 3,789 1996 124,904 38,471 10,147 (d) 0 0 6,177 1995 119,185 43,645 15,842 (d) 0 0 15,705

$ 9,105 (d) 2,500 shares $ 0 $ 4,799 Louis E. Buck, Jr. 1997 $159,954 $ 29,882 1996 153,558 66,187 26,132 (d) 0 0 20,683 1995 49,039 21,280 9,151 (d) 0 0 7,529 1997 $327,385 $ 0 $ 11,132 (d) 5,000 shares $ 0 S 9,822 Frank F. Gallaher 1996 276,538 130,150 35,641 (d) 5,000 0 10,321 1995 240,000 198,360 61,360 (d) 27,500 324,398 7,638

$365,077 $ 0 $ 18,245 (d) 5,000 shares $ ~0 $10,952 Donald C. Hintz* 1997 1996 343,269 231,299 12,516 (d) 5,000 0 14,197 1995 325,000 265,049 13,394 (d) 30,000 409,414 9,750 1997 $342,077 $ 0 $ 56,359 (d) 5,000 shares $ 0 $10,262 Jerry D. Jackson 1996 332,115 209,489 37,928 (d) 5,000 0 13,862 1995 325,000 256,838 43,054 (d) 30,000 422,438 9,750 1997 $785,385 $ 0 $271,422 (d) 10,000 shares $ 0 $23,562 Edwin Lupberger*

1996 735,577 448,794 123,601 (d) 10,000 0 23,567 1995 700,000 568,400 89,163 (d) 60,000 781,337 21,000 Jerry L. Maulden 1997 $445,615 $ 0 $ 67,485 (d) 5,000 shares $ 0 $13,369 1996 435,000 260,3101 27,056 (d) 5,000 0 14,550 1995 435,000 353,2:20 26,248 (d) 30,000 422,438 13,050

$ 17,389 (d) 5,000 shares $ 0 $ 9,923 Gerald D. McInvale (e) 1997 $331,154 $ 0 1996 271,730 179,576 13,995 (d) 5,000 0 12,051 1995 255,481 186,739 12,525 (d) 27,500 294,282 7,664 1997 $195,379 $ 36,448 $ 13,740 (d) 2,500 shares $ 0 $ 5,861 William J. Regan, Jr.

1996 190,000 81,132 20,684 (d) 0 0 8,852 1995 120,577 54,727 21,141 (d) 2,000 0 7,821 1997 $259,315 $ 0 $ 12,856 (d) 5,000 shares $ 0 S 7,729 Michael G. Thompson 1996 245,960 132,620 20,640 (d) 5,000 0 11,278 236,546 163,612 57,600 (d) 2,500 211,219 7,096 1995

• Chief Executive Officer of System Energy.

• • Chief Executive Officer of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy London.

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(a) Includes bonuses earned pursuant to the Annual Incentive Plan.

(b) Amounts include the value of restricted shares that vested in 1997, 1996, and 1995 (see note (d) below) under Entergy's Equity Ownership Plan.

(c) Includes the following:

(1) 1997 benefit accruals under the Defined Contribution Restoration Plan as follows: Mr. Bemis

$4,625; Mr. Gallaher $5,022; Mr. Hintz $6,152; Mr. Jackson $5,462; Mr. Lupberger $18,762; Mr. Maulden $8,969; Mr. Mcinvale $5,123; Mr. Regan $1,061; and Mr. Thompson $2,979.

(2) 1997 employer contributions to the System Savings Plan as follows: Mr. Bemis $4,800: Mr.

Blount $3,789; Mr. Buck $4,799; Mr. Gallaher $4,800; Mr. Hintz $4,800; Vr. Jackson $4,800; Mr. Lupbb~rger $4,800; Mr. Maulden $4,400; Mr. Mclnvale $4,800; Mr. Regan $4,800; and Mr.

Thompson $4,750.

(3) 1997 reimbursements for moving expenses as follows: Mr. Bemis $2,311.

(d) There were no restricted stock awards in 1997 under the Equity Ownership Plan. At December 31, 1997, the number and value of the aggregate restricted stock holdings were as follows: Mr. Bemis 30,000 shares,

$898,125; Mr. Blount 2,250 shares, $67,359; Mr. Buck 4,500 shares, $134,719; Mr. Gallaher 30,000 shares, $898,125; Mr. Hintz 30,000 shares, $898,125; Mr. Jackson 30,000 shares, $898,125; Mr.

Lupberger 60,000 shares, $1,796,250; Mr. Maulden 37,500 shares, $1,122,656; Mr. McInvale 30,000 shares, $898,125; Mr. Regan 4,500 shares, $134,719; and Mr. Thompson 22,500 shares, $673,594.

Accumulated dividends are paid on restricted stock when vested. The value of stock for which restrictions were lifted in 1997, 1996, and 1995, and the applicable portion of accumulated cash dividends, are reported in the LTIP Payouts column in the above table. The value of restricted stock awards as of December 31, 1997 are determined by multiplying the total number of shares awarded by the closing market price of Entergy Corporation common stock on the New York Stock Exchange Composite Transactions on December 31, 1997 ($29.9375 per share).

(e) Gerald D. McInvale is a former officer of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London.

(f) Includes approximately $670,000 related to various overseas living expenses, including UK taxes and housing, associated with Mr. Bemis' overseas assignment in London.

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Option Grants in 1997 The following table summarizes option grants during 1997 to the Named Executive Officers. The absence, in the table below, of any Named Executive Officer indicates that no options were granted to such officer.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Entergy and Entergy London Individual Grants Potential Realizable

% of Total Value Number of Options at Assumed Annual Securities Granted to Exercise Rates of Stock Underlying Employees Price Price Appreciation

%- Options in (per Expiration fort'Option Term(b)

Name Granted (a) 1997 share) (a) Date 50/0 10%

Michael B. Bemis 5,000 2.0% $ 26.5 1/30/07 $ 83,329 S 211,171 Louis E. Buck, Jr. 2,500 1.0% 26.5 1/30/07 41,664 105,585 Frank F. Gallaher 5,000 2.0% 26.5 1/30/07 83,329 211,171 Donald C. Hintz 5,000 2.0% 26.5 1/30/07 83,329 211,171 Jerry D. Jackson 5,000 2.0% 26.5 1/30/07 83,329 211,171 Edwin Lupberger 10,000 3.9% 26.5 1/30/07 166,657 422,342 Jerry L. Maulden 5,000 2.0% 26.5 1/30/07 83,329 211,171 Gerald D. McInvale 5,000 2.0% 26.5 1/30/07 83,329 211,171 William J. Regan, Jr. 2,500 1.0% 26.5 1/30/07 41,664 105,585 Michael G. Thompson 5,000 2.0% 26.5 1/30/07 83,329 211,171 (a) Options were granted on January 30, 1997, pursuant to the Equity Ownership Plan. All options granted on this date have an exercise price equal to the closing price of Entergy Corporation common stock on the New York Stock Exchange Composite Transactions on January 30, 1997. These options became exercisable on July 30, 1997.

(b) Calculation based on the market price of the underlying securities assuming the market price increases over a ten-year option period and assuming annual compounding. The column presents estimates of potential values based on simple mathematical assumptions. The actual value, if any, a Named Executive Officer may realize is dependent upon the market price on the date of option exercise.

Aggregated Option Exercises in 1997 and December 31, 1997 Option Values The following table summarizes the number and value of all unexercised options held by the Named Executive Officers. The absence, in the table below, of any Named Executive Officer indicates that no options are held by such officer. In 1997, no options were exercised by any Named Executive Officer.

Number of Securities Value of Unexercised Underlying Unexercised Options In-the-Money Options as of December 31, 1997 as of December 31, 1997(a)

Name Exercisable Unexercisable Exercisable Unexercisable Michael B. Bemis 20,000 25,000 $37,188 $ 226,563 Louis E. Buck, Jr. 2,500 8,594 Frank F. Gallaher 17,500 25,000 36,406 226,563 Donald C. Hintz 27,500 25,000 53,594 226,563 Jerry D. Jackson 24,411 25,000 20,841 226,563 Edwin Lupberger 58,824 50,000 107,308 453,125 Jerry L. Maulden 30,000 25,000 54,375 226,563 Gerald D. McInvale 20,000 25,000 37,188 226,563 William J. Regan, Jr. 2,500 2,000 8,594 12,875 Michael G. Thompson 17,500 36,406 232 -

(a) Based on the difference between the closing price of Entergy Corporation's common stock on the New York Stock Exchange Composite Transactions on December 31, 1997, and the option exercise price.

Pension Plan Tables Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Retirement Income Plan Table Annual Covered Years of Service Compensation 15 20 25 30 35

$100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,000 200,000 45,000 60,000 75,000 90,000 105,000 300,000 67,500 90,000 112,500 135,000 157,500 400,000 90,000 120,000 150,000 180,000 210,000 500,000 112,500 150,000 187,500 225,000 262,500 650,000 146,250 195,000 243,750 292,500 341,250 950,000 213,750 285,000 356,250 427,500 498,750 All of the Named Executive Officers participate in a Retirement Income Plan, a defined benefit plan, that provides a benefit for employees at retirement from Entergy based upon (1) generally all years of service beginning at age 21 through termination, with a forty-year maximum, multiplied by (2) 1.5%, multiplied by (3) the final average compensation. Final average compensation is based on the highest consecutive 60 months of covered compensation in the last 120 months of service. The normal form of benefit for a single employee is a lifetime annuity and for a married employee is a 50% joint and survivor annuity. Other actuarially equivalent options are available to each retiree. Retirement benefits are not subject to any deduction for Social Security or other offset amounts. The amount of the Named Executive Officers' annual compensation covered by the plan as of December 31, 1997, is represented by the salary column in the Summary Compensation Table above.

The credited years of service under the Retirement Income Plan, as of December 31, 1997, for the Named Executive Officers is as follows: Mr. Bemis 15; Mr. Blount 13; Mr. Buck 2; Mr. Gallaher 28; Mr. Maulden 32; and Mr. Regan 2. The credited years of service under the respective Retirement Income Plan, as of December31, 1997 for the following Named Executive Officers, as a result of entering into supplemental retirement agreements, is as follows: Mr. Hintz 26; Mr. Jackson 18; Mr. Lupberger 34; Mr. McInvale 25; and Mr.

Thompson 21.

The maximum benefit under the Retirement Income Plan is limited by Sections 401 and 415 of the Internal Revenue Code of 1986, as amended; however, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy have elected to participate in the Pension Equalization Plan sponsored by Entergy Corporation. Under this plan, certain executives, including the Named Executive Officers, would receive an additional amount equal to the benefit that would have been payable under the Retirement Income Plan, except for the Sections 401 and 415 limitations discussed above.

In addition to the Retirement Income Plan discussed above, Entergy Arkansas, Louisiana, Mississippi, New Orleans, and System Energy participate in the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries and the Post-Retirement Plan of Entergy Corporation and Subsidiaries. Participation is limited to one of these two plans and is at the invitation of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy. The participant may receive from the appropriate Entergy company a monthly benefit payment not in excess of .025 (under the Supplemental Retirement Plan) or .0333 (under the Post Retirement Plan) times the participant's average basic annual salary (as defined in the plans) for a maximum of 120 months. Mr. Hintz has entered into a Supplemental Retirement Plan participation contract, and all of the other

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Named Executive Officers, (except for Mr. Blount, Mr. Buck, Mr. Mclnvale, Mr. Regan, and Mr. Thompson) have entered into Post-Retirement Plan participation contracts. Current estimates indicate that the annual payments to the Named Executive Officers under the above plans would be less than the payments to that officer under the System Executive Retirement Plan discussed below.

System Executive Retirement Plan Table (1)

Annual Covered Years of Service Compensation 15 20 25 30+

$ 200,000 $ 90,000 $ 100,000 $ 110,000 $ 120,000 300,000 135,000 150,000 165,000 j80,000 400,OOU 180,000 200,000 220,000 240,000 500,000 225,000 250,000 275,000 300,000 600,000 270,000 300,000 330,000 360,000 700,000 315,000 350,000 385,000 420,000 1,000,000 450,000 500,000 550,000 600,000 (1) Benefits shown are based on a target replacement ratio of 50% based on the years of service and covered compensation shown. The benefits for 10, 15, and 20 or more years of service at the 45% and 55%

replacement levels would decrease (in the case of 45%) or increase (in the case of 55%) by the following percentages: 3.0%, 4.5%, and 5.0%, respectively.

In 1993, Entergy Corporation adopted the System Executive-Retirement Plan (SERP). Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy are participating employers in the SERP. The SERP is an unfunded defined benefit plan offered at retirement to certain senior executives, which would currently include all the Named Executive Officers (except for Mr. Blount).

Participating executives choose, at retirement, between the retirement benefits paid under provisions of the SERP or those payable under the Supplemental Retirement Plan or the Post-Retirement Plan discussed above. Covered pay under the SERP includes final annual base salary (see the Summary Compensation Table above for the base salary covered by the SERP as of December 31, 1997) plus the Target Incentive Award (i.e., a percentage of final annual base salary) for the participant in effect at retirement. Benefits paid under the SERP are calculated by multiplying the covered pay times target pay replacement ratios (45%, 50%, or 55%, dependent on job rating at retirement) that are attained, according to plan design, at 20 years of credited service. The target ratios are increased by 1% for each year of service over 20 years, up to a maximum of 30 years of service. In accordance with the SERP formula, the target ratios are reduced for each year of service below 20 years. The credited years of service under this plan are identical to the years of service for Named Executive Officers (other than Mr. Bemis, Mr. Jackson, Mr.

McInvale, and Mr. Thompson) disclosed above in the section entitled "Pension Plan Tables-Retirement Income Plan Table". Mr. Bemis, Mr. Jackson, Mr. McInvale, and Mr. Thompson have 25 years, 24 years, 16 years, and 16 years, respectively, of credited service under this plan.

The normal form of benefit for a single employee is a lifetime annuity and for a married employee is a 50%

joint and survivor annuity. All SERP payments are guaranteed for ten years. Other actuarially equivalent options are available to each retiree. SERP benefits are offset by any and all defined benefit plan payments from Entergy and from prior employers. SERP benefits are not subject to Social Security offsets.

Eligibility for and receipt of benefits under any of the executive plans described above are contingent upon several factors. The participant must agree, without the specific consent of the Entergy company for which such participant was last employed, not to take employment after retirement with any entity that is in competition with, or similar in nature to, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy or any affiliate thereof. Eligibility for benefits is forfeitable for various reasons, including violation of an agreement with Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy

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Mississippi, Entergy New Orleans, and System Energy, resignation of employment, or termination of employment without Company permission.

In addition to the Retirement Income Plan discussed above, Entergy Gulf States provides, among other benefits to officers, an Executive Income Security Plan for key managerial personnel. The plan provides participants with certain retirement, disability, termination, and survivors' benefits. To the extent that such benefits are not funded by the employee benefit plans of Entergy Gulf States or by vested benefits payable by the participants' former employers, Entergy Gulf States is obligated to make supplemental payments to participants or their survivors. The plan provides that upon the death or disability of a participant during his employment, he or his designated survivors will receive (i) during the first year following his death or disability an amount not to exceed his annual base salary, and (ii) thereafter for a number of years until the participant attains or would have attained age 65, but not less than nine years, an amount equal to one-half of the participant's annual base salary.

The plan also provides supplemental retirement benefits for life for participants retiring after reaching age 65 equal to one-half of the participant's average final compensation rate, with one-half of such benefit upon the death of the participant being payable to a surviving spouse for life.

Entergy Gulf States amended and restated the plan effective March 1, 1991, to provide such benefits for life upon termination of employment of a participating officer or key managerial employee without cause (as defined in the plan) or if the participant separates from employment for good reason (as defined in the plan), with 1/2 of such benefits to be payable to a surviving spouse for life. Further, the plan was amended to provide medical benefits for a participant and his family when the participant separates from service. These medical benefits generally continue until the participant is eligible to receive medical benefits from a subsequent employer; but in the case of a participant who is over 50 at the time of separation and was participating in the plan on March 1, 1991, medical benefits continue for life. By virtue of the 1991 amendment and restatement, benefits for a participant under such plan cannot be modified once he becomes eligible to participate in the plan. None of the Named Executive Officers are participants in this plan.

Compensation of Directors For information regarding compensation of the directors of Entergy Corporation, see the Proxy Statement under the heading "Director Compensation", which information is incorporated herein by reference. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London currently have no non-employee directors, and none of the current directors is compensated for his responsibilities as director.

Retired non-employee directors of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans with a minimum of five years of service on the respective Boards of Directors are paid $200 a month for a term of years corresponding to the number of years of active service as directors. Retired non-employee directors with over ten years of service receive a lifetime benefit of $200 a month. Years of service as an advisory director are included in calculating this benefit. System Energy and Entergy London have no retired non-employee directors.

Retired non-employee directors of Entergy Gulf States receive retirement benefits under a plan in which all directors who served continuously for a period of years will receive a percentage of their retainer fee in effect at the time of their retirement for life. The retirement benefit is 30 percent of the retainer fee for service of not less than five nor more than nine years, 40 percent for service of not less than ten nor more than fourteen years, and 50 percent for fifteen or more years of service. For those directors who retired prior to the retirement age, their benefits are reduced. The plan also provides disability retirement and optional hospital and medical coverage if the director has served at least five years prior to the disability. The retired director pays one-third of the premium for such optional hospital and medical coverage and Entergy Gulf States pays the remaining two-thirds. Years of service as an advisory director are included in calculating this benefit.

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Employment Contracts and Termination of Employment and Change-in-Control Arrangements Entergy Gulf States As a result of the Merger, Entergy Gulf States is obligated to pay benefits under the Executive Income Security Plan to those persons who were participants at the time of the Merger and who later terminated their employment under circumstances described in the plan. For additional description of the benefits under the Executive Income Security Plan, see the "Pension Plan Tables-System Executive Retirement Plan Table" section noted above.

Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London In connection with the resignation of his position as Vice Chairman, Mr. Mclnvale entered into a contract under which he will provide services as required and remain as an employee of Entergy Services through May 3 1, 2001, subject to certain terms and conditions, at a monthly salary of approximately $33,300. In addition, such contract provides for the continuation of benefits under Mr. McInvale's continued participation in, or the providing of benefits comparable to those under, Entergy's Savings Plan, Retirement Plan, Supplemental Credited Service Agreement, System Executive Retirement Plan, Equity Ownership Plan, Executive Medical Plan and the applicable portion of any awards under the Executive Annual Incentive Plan and Long Term Incentive Program. In the event of Mr. Mclnvale's death prior to May 31, 2001, his surviving spouse or estate would receive a lump sum equal to the net present value of all base salary payments due from the date of death to May 31, 2001, together with the benefits lost, or the comparable value.

Personnel Committee Interlocks and Insider Participation The compensation of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London executive officers was set by the Personnel Committee of Entergy Corporation's Board of Directors, composed solely of Directors of Entergy Corporation. No current or former officers or employees of any Entergy company participated in deliberations concerning compensation during 1997.

Item 12. Security Ownership of Certain Beneficial Owners and Management Entergy Corporation owns 100% of the outstanding common stock of registrants Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London. The information with respect to persons known by Entergy Corporation to be beneficial owners of more than 5% of Entergy Corporation's outstanding common stock is included under the heading "Stockholders Who Own at Least Five Percent" in the Proxy Statement, which information is incorporated herein by reference.

The registrants know of no contractua, arrangements that may, at a subsequent date, result in a change in control of any of the registrants.

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As of December 31, 1997, the directors, the Named Executive Officers, and the directors and officers as a group for Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London, respectively, beneficially owned directly or indirectly common stock of Entergy Corporation as indicated:

Entergy Corporation Common Stock Amount and Nature of Beneficial Ownership(a)

Sole Voting and Other Investment Beneficial Name Power Ownership(b)_

Entergy Corporation W. Frank Blount* 5,034 John A. Cooper, Jr.* 7,534 Lucie J. Fjeldstad**** 3,984 Dr. Norman C. Francis* 1,200 Frank F. Gallaher** 19,641 17,500 Donald C. Hintz** 11,318 27,500 Jerry D. Jackson** 29,500 24,411 Robert v.d. Luft* 4,284 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden** 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 Adm. Kinnaird R. McKee* 3,067 Paul W. Murrill* 2,985 James R. Nichols* 6,065 Eugene H. Owen* 3,692 John N. Palmer, Sr.* 16,481 Robert D. Pugh* 8,300 6,500 (c)

Wm. Clifford Smith* 6,621 Bismark A. Steinhagen* 8,237 All directors and executive officers 262,891 244,235 Entergy Arkansas Frank F. Gallaher*** 19,641 17,500 Donald C. Hintz*** 11,318 27,500 Jerry D. Jackson*** 29,500 24,411 R. Drake Keith* 9,019 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden*** 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 All directors and executive officers 198,064 205,235

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Entergy Corporation Common Stock Amount and Nature of Beneficial Ownership(a)

Sole Voting and Other Investment Beneficial Name Power Ownership(b)

Entergy Gulf States John J. Cordaro

• 5,369 Frank F. Gallaher*** 19,641 17,500 Donald C. I-intz*** 11,318 27,500 Jerry D. Jackson*** 29,500 24,411 Karen R. Johnson

• 802 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden*** 27,165 30,000 Gerald D. Mclnvale (d) 10,901. 20,000 All directors and executive officers 192,465 205,235 Entergy Louisiana John J. Cordaro* 5,369 Frank F. Gallaher*** 19,641 17,500 Donald C. Hintz*** 11,318 27,500 Jerry D. Jackson*** 29,500 24,411 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden*** 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 All directors and executive officers 201,761... 205,235 Entergy Mississippi Frank F. Gallaher*** 19,641 17,500 Donald C. Hintz* 11,318 27,500 Jerry D. Jackson*** 29,500 24,411 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden*** 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 Donald E. Meiners* 10,521.

Michael G. Thompson** 13,462 17,500 All directors and executive officers 185,188 205,235

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Entergy Corporation Common Stock Amount and Nature of Beneficial Ownership(a)

Sole Voting and Other Investment Beneficial Name Power Ownership(b)

Entergy New Orleans Frank F. Gallaher** 19,641 17,500 Jerry D. Jackson*** 29,500 24,411 "EdwinLupberger*** 36,583 63,324 (c)

Jerry L. Maulden*** 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 Daniel F. Packer *** 3,854 Michael G. Thompson** 13,462 17,500 All directors and executive officers 168,482 177,735 System Energy Joseph L. Blount** 3,535 Louis E. Buck, Jr.** 2,996 2,500 Donald C. Hintz*** 11,318 27,500 Edwin Lupberger*** 36,583 63,324 (c)

Jerry L. Maulden* 27,165 30,000 Gerald D. Mclnvale (d) 10,901 20,000 William J. Regan, Jr.** 2,908. 2,500 All directors and executive officers 95,406 145,824 Entergy London Michael B. Bemis*** 24,646 20,000 Louis E. Buck, Jr.** 2,996 2,500 Edwin Lupberger*** 36,583 63,324 (c)

Gerald D. Mclnvale (d) 10,901 20,000 William J. Regan, Jr.** 2,908 2,500 Michael G. Thompson** 13,462 17,500 All directors and executive officers 80,585 125,824 Director of the respective Company

• • Named Executive Officer of the respective Company

• Director and Named Executive Officer of the respective Company

• • Mrs. Fjeldstad's term will expire at the Annual Meeting and she is not standing for re-election.

(a) Based on information furnished by the respective individuals. Except as noted, each individual has sole voting and investment power. The amount owned by each individual and by all directors and executive officers as a group does not exceed one percent of the outstanding securities of any class of security so owned.

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(b) Includes, for the Named Executive Officers, shares of Entergy Corporation common stock in the form of unexercised stock options awarded pursuant to the Equity Ownership Plan as follows: Louis E. Buck, Jr.,

2,500 shares; Michael B. Bemis, 20,000 shares; Frank F. Gallaher, 17,500 shares; Donald C. Hintz, 27,500 shares; Jerry D. Jackson, 24,411 shares; Edwin Lupberger, 58,824 shares; Jerry L. Maulden, 30,000 shares; Gerald D. McInvale, 20,000 shares; William J. Regan, Jr., 2,500 shares, and Michael G.

Thompson, 17,500 shares.

(c) Includes, for the Named Executive Officers, shares of Entergy Corporation common stock held by their spouses. The named persons disclaim beneficial ownership in these shares as follows: Edwin Lupberger, 2,500 shares; and Robert D. Pugh, 6,500 shares. In addition, Edwin Lupberger owns 2,000 shares in joint tenancy with his -mother for which he disclaims beneficial ownership.

(d) Gerald D. McInvale is a former officer of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy London.

Item 13. Certain Relationships and Related Transactions During 1997, T. Baker Smith & Son, Inc. performed land surveying services for, and received payments of approximately $81,000 from, Entergy Louisiana, Inc. Mr. Win. Clifford Smith, a director of Entergy Corporation, is President of T. Baker Smith & Son, Inc. Mr. Smith's children own 100% of the voting stock of T. Baker Smith

& Son, Inc.

See Item 10, "Directors and Executive Officers of the Registrants," for information on certain relationships and transactions required to be reported under this item.

Other than as provided under applicable corporate laws, Entergy does not have policies whereby transactions involving executive officers and directors are approved by a majority of disinterested directors.

However, pursuant to the Entergy Corporation Code of Conduct, transactions involving an Entergy company and its executive officers must have prior approval by the next higher reporting level of that individual, and transactions involving an Entergy company and its directors must be reported to the secretaiy of the appropriate Enterg, company.

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PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) 1. Financial Statements and Independent Auditors' Reports for Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, Entergy London, and London Electricity are listed in the Index to Financial Statements (see pages 45 and 46)

(a)2. Financial Statement Schedules Reports of Independent Accountants on Financial Statement Schedules (see page 251)

Financial Statement Schedules are listed in the Index to Financial Statement Schedules (see page S-1)

(a)3. Exhibits Exhibits for Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and Entergy London are listed in the Exhibit Index (see page E- 1).

Each management contract or compensatory plan or arrangement required to be filed as an exhibit hereto is identified as such by footnote in the Exhibit Index.

(b) Reports on Form 8-K Entermy Corporation A current report on Form 8-K, dated September 23, 1997, was filed with the SEC on October 1, 1997, reporting information under Item 5. "Other Events".

Entergy Corporation, Entergy Arkansas, and Entergy Gulf States A current report on Form 8-K, dated October 9, 1997, was filed with the SEC on October 10, 1997, reporting information under Item 5. "Other Events".

Entergy Corporation A current report on Form 8-K, dated November 19, 1997, was filed with the SEC on November 24, 1997, reporting information under Item 5. "Other Information".

EnteMr Corporation, Entergy Arkansas, Enteray Gulf States, and System Enery A current report on Form 8-K, dated December 12, 1997, was filed with the SEC on December 29, 1997, reporting information under Item 5. "Other Information".

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ENTERGY ARKANSAS, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

ENTERGY ARKANSAS, INC.

By /s/ Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and.in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Sienature Title Date

/s/ Louis E. Buck Louis E. Buck Vice President, Chief Accounting March 9, 1998 Officer and Assistant Secretary (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, R. Drake Keith, and Jerry L. Maulden (Directors).

By: Is/ Louis E. Buck March 9, 1998 (Louis E. Buck, Attomey-in-fact)

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ENTERGY GULF STATES, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

ENTERGY GULF STATES, INC.

By /s/ Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Sienature Title Date Is/ Louis E. Buck Louis E. Buck Vice President, Chief Accounting March 9, 1998 Officer and Assistant Secretary (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); John J. Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Karen R. Johnson, and Jerry L. Maulden (Directors).

By: /s/ Louis E- Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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ENTERGY LOUISIANA, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

ENTERGY LOUISIANA, INC.

By /s/ Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Si2nature Title Date Is! Louis E. Buck Louis E. Buck Vice President, Chief Accounting March 9, 1998 Officer. and Assistant Secretary (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, ,Chief Executive Officer and Director; Principal Executive Officer); John J. Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, and Jerry L. Maulden (Directors).

By: Is! Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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ENTERGY MISSISSIPPI, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof ENTERGY MISSISSIPPI, INC.

By /s/ Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature Title Date

/s/ Louis E. Buck Louis E. Buck Vice President, Chief Accounting *March 9, 1998 Officer and Assistant Secretary (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Jerry L. Maulden, and Donald E. Meiners (Directors).

By: Is! Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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ENTERGY NEW ORLEANS, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof ENTERGY NEW ORLEANS, INC.

By Is! Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Sipnature Title Date Is! Louis E. Buck Louis E. Buck Vice President, Chief Accounting March 9, 1998 Officer and Assistant Secretary (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Jerry D. Jackson, Jerry L. Maulden, and Daniel F. Packer (Directors).

By: Is! Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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SYSTEM ENERGY RESOURCES, INC.

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

SYSTEM ENERGY RESOURCES, INC.

By /s/ Louis E. Buck Louis E. Buck, Vice President, Chief Accounting Officer and Assistant Secretary Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature Title Date

/s/ Louis E. Buck Louis E. Buck Vice President, Chief Accounting March 9, 1998 Officer and Assistant Secretary (Principal Accounting Officer)

Donald C. Hintz (President, Chief Executive Officer and Director; Principal Executive Officer); Edwin Lupberger (Chairman of the Board), and Jerry L. Maulden (Directors).

By: /s/ Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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ENTERGY LONDON INVESTMENTS PLC SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

ENTERGY LONDON INVESTMENTS PLC By /s/ Louis E. Buck Louis E. Buck, Audit Controller Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof Signature Title Date Is! Louis E. Buck Louis E. Buck Audit Controller March 9, 1998 (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Michael B. Bemis (Director).

By: /s/ Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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ENTERGY LONDON INVESTMENTS PLC SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

ENTERGY LONDON INVESTMENTS PLC By /s/ Louis E. Buck Louis E. Buck, Audit Controller Date: March 9, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

SiLnature Title Date Is/ Louis E. Buck Louis E. Buck Audit Controller March 9, 1998 (Principal Accounting Officer)

Edwin Lupberger (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Michael B. Bemis (Director).

By: Is! Louis E. Buck March 9, 1998 (Louis E. Buck, Attorney-in-fact)

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I EXHIBIT 23(a)

CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Post-Effective Amendment Nos. 2. 3. 4A, and 5A on Form S-8 and the related Prospectuses to the registration statement of Entergy Corporation on Form S-4 (File Number 33 54298) and on Form S-3 (File Numbers 333-02503 and 333-22007) of our reports dated March 4. 1998. on our audits of the consolidated financial statements and financial statement schedules of Entergy Corporation as of December 3 1, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which reports include an explanatory paragraph related to changes in accounting methods for the impairment of long-lived assets and for long-lived assets to be disposed of and incremental nuclear plant outage maintenance costs by one of the Corporation's subsidiaries and are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of Entergy Arkansas, Inc. (foffnerly Arkansas Power & Light Company) on Form S-3 (File Numtlers 33-50289, 333 00103 and 333-05045) of our reports dated March 4, 1998, on our audits of the financial statements and financial statement schedule of Entergy Arkansas, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of Entergy Gulf States, Inc. (formerly Gulf States Utilities Company) on Form S-3 (File Numbers 33-49739 and 33 51181), Form S-8 (File Numbers 2-76551 and 2-9801 1) and on Form S-2 (File Number 333-17911), of our reports dated March 4, 1998, on our audits of the financial statements and financial statement schedule of Entergy Gulf States, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which reports include an explanatory paragraph related to a change in accounting for the impairment of long lived assets and long-lived assets to be disposed of and are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of Entergy Louisiana, Inc. (formerly Louisiana Power & Light Company) on Form S-3 (File Numbers 33-46085, 33 39221, 33-50937, 333-00105, 333-01329 and 333-03567) of our reports dated March 4, 1998, on our audits of the financial statements and financial statement schedule of Entergy Louisiana, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of Entergy Mississippi, Inc. (formerly Mississippi Power & Light Company) on Form S-3 (File Numbers 33-53004, 33-55826 and 33-50507) of our reports dated March 4, 1998, on our audits of the financial statements and financial statement schedule of Entergy Mississippi, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of Entergy New Orleans, Inc. (formerly New Orleans Public Service Inc.) on Form S-3 (File Numbers 33-57926 and 333-00255) of our reports dated March 4, 1998, on our audits of the financial statements and financial statement schedule of Entergy New Orleans, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which are included in this Annual Report on Form 10-K.

We consent to the incorporation by reference in the registration statements and the related Prospectuses of System Energy Resources, Inc. on Form S-3 (File Numbers 33-47662, 33-61189 and 333-06717) of our report dated March 4, 1998, on our audits of the financial statements of System Energy Resources, Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which report includes an explanatory paragraph related to the Company's 1996 change in its method of accounting for incremental nuclear plant outage maintenance costs and is included in this Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana March 9, 1998

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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors and Shareholders of Entergy Corporation We have audited the consolidated financial statements of Entergy Corporation and Subsidiaries and the financial statements of Entergy Arkansas, Inc. (formerly Arkansas Power & Light Company), Entergy Gulf States, Inc. (formerly Gulf States Utilities Company), Entergy Louisiana, Inc. (formerly Louisiana Power & Light Company), Entergy Mississippi, Inc. (formerly Mississippi Power & Light Company) and Fvtergy New Orleans, Inc. (formerly New Orleans Public Service Inc.) as of December 31, 1997 and 1996, and for each -ofthe three years in the period ended December 31, 1997, and the consolidated financial statements of Entergy London Investments plc and Subsidiary as of December 31, 1997 and for the year then ended, and have issued our reports thereon dated March 4, 1998, and have audited the consolidated financial statements of London Electricity plc as of March 31, 1996 and for the period from April 1, 1996 to January 31, 1997 and the year ended March 31, 1996, and have issued our report thereon dated July 31, 1997, which reports are included elsewhere in this Form 10-K, which reports as to Entergy Corporation and Entergy Gulf States, Inc. include an explanatory paragraph related to a change in accounting for the impairment of long-lived assets and long-lived assets to be disposed of, and which reports as to Entergy Corporation and System Energy Resources, Inc. include an explanatory paragraph related to changes in accounting for incremental nuclear plant outage maintenance expenses. In connection with our audits of such financial statements, we have also audited the related financial statement schedules included in Item 14(a)2 of this Form 10-K.

In our opinion the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana March 4, 1998

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INDEX TO FINANCIAL STATEMENT SCHEDULES Schedule Page I Financial Statements of Entergy Corporation:

Statements of Income - For the Years Ended December 31, 1997, 1996, and 1995 S-2 Statements of Cash Flows - For the Years Ended December 31, 1997, 1996, and 1995 S-3 Balance Sheets, December 31, 1997 and 1996 S-4 Statements of Retained Earnings and Paid-In Capital - For the Years Ended December 31, 1997, 1996, and 1995 S-5 if Valuation and Qualifying Accounts 1997, 1996 and 1995: 1.

Entergy Corporation and Subsidiaries S-6 Entergy Arkansas, Inc. S-7 Entergy Gulf States, Inc. S-8 Entergy Louisiana, Inc. S-9 Entergy Mississippi, Inc. S-10 Entergy New Orleans, Inc.. S-11 Entergy London Investments plc S-12 London Electricity plc S-13 Schedules other than those listed above are omitted because they are not required, not applicable or the required information is shown in the financial statements or notes thereto.

Columns have been omitted from schedules filed because the information is not applicable.

S-I

ENTERGY CORPORATION SCHEDULE I-FINANCIAL STATEMENTS OF ENTERGY CORPORATION STATEMENTS OF INCOME For the Years Ended December 31, 1997 1996 1995 (In Thousands)

Income:

$325,419 $459,350 $549,144 Equity in income of subsidiaries 5,086 4,840 .20.641 Interest on temporary investments 330,505 464,190 1--569,785 Total Expenses and Other Deductions: 62,250 34,402 53,872 Administrative and general expenses 3,438 (1,558) (5,383)

Income taxes (credit) 1,226 828 1,102 Taxes other than income 15,908 10,491 214 Interest 44,163 49.805 82,822 Total

$247,683 $420,027 $519,980 Net Income See Entergy Corporation and Subsidiaries Notes to Financial Statements in Part II, Item 8.

S-2

ENTERGY CORPORATION E I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION STATEMENTS OF CASH FLOWS For the Years Ended December 31.

1997 1996 1995 (In Thousands)

Operating Activities:

Net income S247,683 $420,027 S519,980 Noncash items included in net income:

Equity in earnings of subsidiaries (325,419) (459,350) (549,144)

Deferred income taxes 898 8,499 (2.024)

Depreciation 1,442 1,628 1.421 Changes in working capital:

Receivables (8,683) 3,232 2,161 Payables (3,690) 9.919 (3,776)

Other working capital accounts (400) (1,170) (1,701)

Common stock dividends received from subsidiaries 550,200 554,200 565,589 Other 43,479 (3.524) 8,652 Net cash flow provided by operating activities 505,510 533,461 541,158 Investing Activities:

Investment in subsidiaries (633,449) (266,681) (477,709)

Capital expenditures (23,079)

Advance to subsidiary 221,540 Net cash flow used in investing activities (656,528) (266,681) (256,169)

Financing Activities:

Changes in short-term borrowings 166,000 20,000 Common stock dividends paid (438,183) (405,346) (408,553)

Issuance of common stock 305,379 118,087 Net cash flow provided by (used in) financing activities 33,196 (267,259) (408,553)

Net decrease in cash and cash equivalents (117,822) (479) (123,564)

Cash and cash equivalents at beginning of'period 128,665 129,144 252,708 Cash and cash equivalents at end of period $10,843 $128,665 S129,144 See Entergy Corporation and Subsidiaries Notes to Financial Statements in Part II, Item 8.

S-3

ENTERGY CORPORATION SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION BALANCE SHEETS December 31, 1997 1996 (In Thousands)

ASSETS Current Assets:

Cash and cash equivalents:

Cash $23 Temporary cash investments -at cost, which approximates market:

Associated companies 2,947 57,986 7,896 70,656 Other 10,843 128,665 Total cash and cash equivalents Accounts receivable:

14,700 5,940 Associated companies 301 378 Interest receivable 20,345 20,389 Other 46,189 155,372 Total 6,832,590 6,531,729 Investment in Wholly-owned Subsidiaries 89,315 74,891 Deferred Debits and Other Assets

$6,968,094 $6,761,992 Total LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:

Notes payable $186,000 $20,000 Accounts payable:

4,331 11,613 Associated companies 1,884 22 Other 1,918 188 Interest accrued 8,827 15,638 Other current liabilities 202,960 47,461 Total 71,618 73,616 Deferred Credits and Noncurrent Liabilities Shareholders' Equity:

Common stock, $.01 par value, authorized 500,000,000 shares; issued 246,149,198 shares 2,345 in 1997 and 234,456,457 shares in 1996 2,461 4,613,572 4,320,591 Paid-in capital 2,157,912 2,341,703 Retained earnings (69,817) 21,725 Cumulative foreign currency translation adjustment Less cost of treasury stock (306,852 shares in 10,612 45,449 1997 and 1,496,118 shares in 1996) 6,693,516 6,640,915 Total common shareholders' equity Total $6,968,094 $6,761,992 See Entergy Corporation and Subsidiaries Notes to Financial Statements in Part II, Item 8.

S-4

ENTERGY CORPORATION SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION STATEMENTS OF RETAINED EARNINGS AND PAID-IN CAPITAL For the Years Ended December 31, 1997 1996 1995 (In Thousands)

Retained Earnings, January 1 $2,341,703 $2,335,579 $2,223,739 Add:

Net income 247,683 4J0,027 519,980 Deduct:

Dividends declared on common stock 432,268 412,250 409,801 Capital stock and other expenses (794) 1,653 (1,661)

Total 431,474 413,903 408,140 Retained Earnings, December 31 $2,157,912 $2,341,703 $2,335,579 Paid-in Capital, January 1 $4,320,591 $4,201,483 $4,202,134 Add:

Gain (loss) on reacquisition of subsidiaries' preferred stock 273 1,795 (26)

Common stock issuances related to stock plans 292,870 117,560 (3,002)

Total 293,143 119,355 (3,028)

Deduct:

Capital stock discounts and other expenses 162 247 (2,377)

Paid-in Capital, December 31 $4,613,572 $4,320,591 $4,201,483 See Entergy Corporation and Subsidiaries Notes to Consolidated Financial Statements in Part II, Item 8.

S-5

ENTERGY CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Period Income ([Note 1) of Period Year ended December 31, 1997 Accumulated Provisions Deducted from Assets

$7,822 $12,926 $14,359 $6,389 Doubtful Accounts Accumulated Provisions Not Deducted from Assets:

$35,026 $24,128 $35,732 $23,422 Property insurance 26,145 20,294 19,955 26,484 Injuries and damages (Note 2) 37,719 5,993 7,344 36,368 Environmental Total S98,890 S50,415 $63,031 $86,274 Year ended December 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts S7,109 $18,403 $17,690 S7,822 Other 12,337 - 12,337 Total $19,446 S18,403 S30,027 $7,822 Accumulated Provisions Not Deducted from Assets:

$36,733 $26,136 $27,843 $35,026 Property insurance 19,981 23,373 17,209 26,145 Injuries and damages (Note 2) 40,262 2,599 5,142 37,719 Environmental

$96,976 $52,108 $50,194 $98,890 Total Year ended December 31, 1995 Accumulated Provisions Deducted from Assets

$6,740 $14,586 $14,217 $7,109 Doubtful Accounts Other 12,337 - 12,337 S6,740 $26,923 $14,217 $19,446 Total Accumulated Provisions Not Deducted from Assets:

$32,871 $16,263 $12,401 S36,733 Property insurance 22,066 11,667 13,752 19,981 Injuries and damages (Note 2) 42,739 7,639 10,116 40,262 Environmental

$97,676 S35,569 $36,269 $96,976 Total Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the estimated cost of for injuries and damages.

S-6

ENTERGY ARKANSAS, INC.

SCHEDULE 1I - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Period Income (Note 1) of Period Year ended December 31, 1997 Accumulated Provisions Deducted from Assets Doubtful Accounts $2,326 $3.140 S3,667 $1,799 Accumulated Provisions Not Deducted from Assets:

Property insurance S14 $11,613 $10,769 $858 Injuries and damages (Note 2) 2,810 3,538 1,550 4,798 Environmental 5,163 1,320 1,730 4,753 Total $7,987 $16,471 $14,049 $10,409 Year ended December 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts $2,058 $5,341 $5,073 $2,326 Accumulated Provisions Not Deducted from Assets:

Property insurance $900 $8,808 $9,694 $14 Injuries and damages (Note 2) 1,810 2,980 1,980 2,810 Environmental 6,514 1,320 2,671 5,163 Total $9,224 $13,108 $14,345 $7,987 Year ended December 31, 1995 Accumulated Provisions Deducted from Assets Doubtful Accounts $1,950 $3,997 $3,889 $2,058 Accumulated Provisions Not Deducted from Assets:

Property insurance $1,916 $4,810 $5,826 $900 Injuries and damages (Note 2) 2,660 710 1,560 1,810 Environmental 5,350 4,435 3,271 6,514 Total $9,926 $9,955 $10,657 $9,224 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the estimated cost of for injuries and damages.

S-7

ENTERGY GULF STATES, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Period Income (Note 1) of Period Year ended December 31, 1997 Accumulated Provisions Deducted from Assets Doubtful Accounts SI,997 $3,695 S3,901 $1,791 Accumulated Provisions Not Deducted from Assets-Property insurance S17,003 $5,584 S18,270 $4,317 Injuries and damages (Note 2) 9,594 5,479 9,734 5,339 Environmental 21,829 3,746 1,786 23,789 Total $48,426 $14,809 S29,790 $33,445 Year ended December 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts $1,608 $4,709 $4,320 $1,997 Accumulated Provisions Not Deducted from Assets Property insurance $14,141 $5,899 $3,037 $17,003 Injuries and damages (Note 2) 5,199 7,955 3,560 9,594 Environmental 21,864 365 400 21,829 Total $41,204 $14,219 $6,997 $48,426 Year ended December 31, 1995 Accumulated Provisions Deducted from Assets Doubtful Accounts $715 $3,715 $2,822 $1,608 Accumulated Provisions Not Deducted from Assets Property insurance $10,451 $6,396 $2,706 $14,141 Injuries and damages (Note 2) 6,922 6,243 7,966 5,199 Environmental 20,314 2,483 933 21,864 Total $37,687 $15,122 $11,605 $41,204 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the estimated cost of settling claims for injuries and damages.

S-8

ENTERGY LOUISIANA, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Period Income (Note 1) of Period Year ended December 31, 1997 Accumulated Provisions Deducted from Assets-Doubtful Accounts $1,429 $2,542 $2,814 $1,157 Accumulated Provisions Not Deducted from Assets:

Property insurance $261 $5,411 $5,091 $581 Injuries and damages (Note 2) 9,443 5,080 4,579 9,944 Environmental 9,979 495 2,875 7,599 Total $19,683 $10,986 $12,545 $18,124 Year ended December 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts $1,390 $3,241 $3,202 $1,429 Accumulated Provisions Not Deducted from Assets:

Property insurance $1,013 $4,583 $5,335 $261 Injuries and damages (Note 2) 8,414 10,646 9,617 9,443 Environmental 11,379 495 1,895 9,979 Total $20,806 $15,724 $16,847 $19,683 Year ended December 31, 1995 Accumulated Provisions Deducted from Assets Doubtful Accounts $1,175 $2,450 $2,235 $1,390 Accumulated Provisions Not Deducted from Assets:

Property insurance $814 $3,537 $3,338 $1,013 Injuries and damages (Note 2) 7,350 4,486 3,422 8,414 Environmental 16,394 (89) 4,926 11,379 Total $24,558 $7,934 $11,686 $20,806 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the estimated cost of for injuries and damages.

S-9

ENTERGY MISSISSIPPI, INC.

SCHEDULE 1I - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description ofPeriod Income kP*ote 1) 01 rerlou Year ended December-31, 1997 Accumulated Provisions Deducted from Assets S931

$1,374 $1,950 S2,393 Doubtful Accounts Accumulated Provisions Not Deducted from Assets:

$2,082 $1,520 $1,423 $2,179 Property insurance 2,905 4,055 2,298 4,662 Injuries and damages (Note 2) 693 330 796 227 Environmental

$5,680 S5,905 $4,517 $7,068 Total Year ended December 31, 1996 Accumulated Provisions Deducted from Assets

$1,585 S2,996 $3,207 $1,374 Doubtful Accounts Accumulated Provisions Not Deducted from Assets:

$5,013 $6,846 S9,777 $2,082 Property insurance 2,565 928 588 2,905 Injuries and damages (Note 2) 693 467 330 104 Environmental $5,680

$8,045 $8,104 $10,469 Total Year ended December 31, 1995 Accumulated Provisions Deducted from Assets

$2,070 $1,691 $2,176 $1,585 Doubtful Accounts Accumulated Provisions Not Deducted from Assets:

$3,779 $1,520 $286 $5,013 Property insurance 3,725 (1,154) 6 2,565 Injuries and damages (Note 2) 684 735 952 467 Environmental

$8,188 $1,101 $1,244 $8,045 Total Notes:

created. In the case (1) Deductions from provisions represent losses or expenses for which the respective provisions were written off.

provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously estimated cost of (2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the for injuries and damages.

S-10

ENTERGY NEW ORLEANS, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1997, 1996, and 1995 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Perod Income (Note 1) of Period Year ended December 31, 1997 Accumulated krovisions Deducted from Assets Doubtful Accounts $696 SI,599 $1,584 $711 Accumulated Provisions Not Deducted from Assets:

-Property insurance $15,666 - $179 $15,487 Injuries and damages (Note 2) 1,393 $2,142 1,794 1,741 Environmental 55 102 157 Total $17,114 S2,244 $2,130 $17,228 Year ended December 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts $468 $2,116 S1,888 $696 Accumulated Provisions Not Deducted from Assets:

Property insurance $15,666 - - $15,666 Injuries and damages (Note 2) 1,993 $864 $1,464 1,393 Environmental 38 89 72 55 Total $17,697 $953 $1,536 $17,114 Year ended December 31, 1995 Accumulated Provisions Deducted from Assets Doubtful Accounts $830 $2,733 $3,095 $468 Accumulated Provisions Not Deducted from Assets:

Property insurance $15,911 - $245 $15,666 Injuries and damages (Note 2) 1,409 $1,382 798 1,993 Environmental (3) 75 34 38 Total $17,317 $1,457 $1,077 $17,697 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Injuries and damages provision is provided to absorb all current expenses as appropriate and for the estimated cost of for injuries and damages.

S-I1

ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Twelve Months Ended December 31, 1997 (In Thousands)

Column A Column B Column C Column D Column E Other Additions Changes Deductions Balance at from Balance Beginning Charged to Provisions at End Description of Period Income (Note 1) of Period Year ended December 31, 1997 Accumulated Provisions Deducted from Assets Doubtful Accounts $17,465 $5,300 $865 S21,900 Accumulated Provisions Not Deducted from Assets:

Property insurance $18,747 $3,300 S7,247 $14,800 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

S-12

LONDON ELECTRICITY PLC SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Period from April 1, 1996 to January 31, 1997 and for the Year Ended March 31, 1996 (In Thousands)

Column A Column B Column C Column D Column E Additions Deductions Balance at from Balance Beginning Charged to Other Provisions at End Description of Period Income Changes (Note 1)

PerindI ended T mmv2 of Period 1007 Accumulated Provisions Deducted from Assets Doubtful Accounts $13,285 $10,124 $700 $6,644 S17,465 Accumulated Provisions Not Deducted from Assets:

Insurance (2) $24,432 $2,373 $1,116 S9,174 S18.747 Period ended March 31, 1996 Accumulated Provisions Deducted from Assets Doubtful Accounts $13,783 $1,096 $(811I $783 $13,285 Accumulated Provisions Not Deducted from Assets:

Insurance (2) $26,430 $470 $(1,528) $940 $24,432 Notes:

(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off.

(2) Represents the deductible portion of casualty losses to be incurred before third party reimbursement begins.

for injuries and damages.

S-13

EXHIBIT INDEX The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC, respectively, as the exhibits and in the file numbers indicated and are incorporated herein by reference. The exhibits marked with a (+) are management contracts or compensatory plans or arrangements required to be filed herewith and required to be identified as such by Item 14 of Form 10-K. Reference is made to a duplicate list of exhibits being filed as a part of this Form 10-K, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being physically filed with this Form 10-K.

(3) (i) Articles of Incorporation Ix Entergy Corporation (a) I -- Certificate of Incorporation of Entergy Corporation dated December 3 1, 1993, (A-1 (a) to Rule 24 Certificate in 70-8059).

System Energy (b) 1 -- Amended and Restated Articles of Incorporation of System Energy and amendments thereto through April 28, 1989 (A-l(a) to Form U-1 in 70-5399).

Entergy Arkansas (c) 1 -- Amended and Restated Articles of Incorporation of Entergy Arkansas and amendments thereto through April 22, 1996 (3(a) to Form 10-Q for the quarter ended March 31, 1996 in 1-10764).

Entergy Gulf States (d) 1 -- Restated Articles of Incorporation of Entergy Gulf States and amendments thereto through April 22, 1996 (3(b) to Form 10-Q for the quarter ended March 31, 1996 in 1-2703).

Entergy Louisiana (e) 1 -- Restated Articles of Incorporation of Entergy Louisiana and amendments thereto through April 22, 1996 (3(c) to Form 10-Q for the quarter ended March 31, 1996 in 1-8474).

Entergy Mississippi

• (f) 1 -- Restated Articles of Incorporation of Entergy Mississippi and amendments thereto through November 17, 1997 Entergy New Orleans (g) 1 -- Restatement of Articles of Incorporation of Entergy New Orleans and amendments thereto through April 22, 1996 (3(e) to Form 10-Q for the quarter ended March 31, 1996 in 0-5807).

Entergy London (h) I -- Memorandum and Articles of Association of the Company and amendments thereto through September 1, 1997 (4.01 in 333-33331 dated October 1, 1997).

(3) (ii) By-Laws (a) -- By-Laws of Entergy Corporation effective August 25, 1992, and as presently in effect (A-2(a) to Rule 24 Certificate in 70-8059).

(b) -- By-Laws of System Energy effective May 4, 1989, and as presently in effectI (A-2(a) in 70 5399).

(c) -- By-Laws of Entergy Arkansas as amended effective May 5, 1994, and as presently in effect (3(d) to Form 10-Q for the quarter ended June 30, 1994).

(d) -- By-Laws of Entergy Gulf States as amended effective May 5, 1994, and as presently in effect (A-12 in 70-8059).

(e) -- By-Laws of Entergy Louisiana effective January 23, 1984, and as presently in effect (A-4 in 70-6962).

(f) -- By-Laws of Entergy Mississippi as amended effective April 5, 1995, and as presently in effect (3(ii)(f) to Form 10-K for the year ended December 31, 1995 in 0-320).

(g) -- By-Laws of Entergy New Orleans effective May 5, 1994, and as presently in effect (3(g) to Form 10-Q for the quarter ended June 30, 1994 in 0-5807).

(4) Instruments Defining Rights of Security Holders, Including Indentures Entergy Corporation (a) 1 -- See (4)(b) through (4)(g) below for instruments defining the rights of holders of long-term debt of System Energy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans.

(a) 2 -- Share Sale Agreement (Revised) of December 12, 1995, relating to acquisition of CitiPower Limited, among State Electricity Commission of Victoria, the State of Victoria, Entergy Victoria LDC, Entergy Victoria Holding LDC and Entergy Corporation (filed as Exhibit C 1(o) to Form U5 S for the year ended December 31, 1995 pursuant to Rule 104).

(a) 3 -- Multi-Option Syndicated Facility Agreement, dated as of January 5, 1996, among CitiPower Limited as Borrower, Commonwealth Bank of Australia as Facility Agent, Bank of America N.T. & S.A. as Arranger, and Commonwealth Bank of Australia as Security Trustee (filed as Exhibit C-l(p) to Form U5S for the year ended December 31, 1995).

(a) 4 -- Undertaking Agreement, dated as of March 7, 1996, of Entergy Corporation to Commonwealth Bank of Australia as Facility-Agent, of CitiPower Limited's obligations up to maximum of

$7,367,000 under the Multi-Option Syndicated Facility Agreement (filed as Exhibit C-1(q) to Form U5S for the year ended December 31, 1995).

E-2

(a) 5 -- Credit Agreement, dated as of September 13, 1996, among Entergy Corporation, Entcrgy Technology Holding Company, the Banks (The Bank of New York, Bank of America NT &

SA, The Bank of Nova Scotia, Banque Nationale de Paris (Houston Agency). The First National Bank of Chicago, The Fuji Bank Ltd., Societe Generale Southwest Agency, and CIBC Inc.) and The Bank of New York, as Agent (the "Entergy-ETHC Credit Agreement")

(filed as Exhibit 4(a)12 to Form 10-K for the year ended December 31, 1996 in 1-11299).

(a) 6 -- Amendment No. 1, dated as of October 22, 1996 to Credit Agreement Entergv-ETHC Credit Agreement (filed as Exhibit 4(a)13 to Form 10-K for the year ended December 31, 1996 in 1-11299).

(a) 7 -- Guaranty and Acknowledgment Agreement, dated as of October 3, 1996, by Entergy Corporation to The Bank of New York of certain promissory notes issued by ETHC in connection with acquisition of 280 Equity Holdings, Ltd (filed as Exhibit 4(a)14 to Form 10-K for the year ended December 31, 1996 in 1-11299).

(a) 8 -- Amendment, dated as of November 21, 1996, to Guaranty and Acknowledgment Agreement by Entergy Corporation to The Bank of New York of certain promissory notes issued by ETHC in connection with acquisition of 280 Equity Holdings, Ltd (filed as Exhibit 4(a)15 to Form 10-K for the year ended December 31, 1996 in 1-11299).

(a) 9 -- Guaranty and Acknowledgment Agreement, dated as of November 21, 1996, by Entergy Corporation to The Bank of New York of certain promissory notes issued by ETHC in connection with acquisition of Sentry (filed as Exhibit 4(a)16 to Form 10-K for the year ended December 31, 1996 in 1-11299).

(a) 10 -- Amended and Restated Credit Agreement, dated as of December 12, 1996, among Entergy, the Banks (Bank of America National Trust & Savings Association, The Bank of New York, The Chase Manhattan Bank, Citibank, N.A., Union Bank of Switzerland, ABN Amro Bank N.V.,

The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Mellon Bank, N.A., First National Bank of Commerce and Whitney National Bank) and Citibank, N.A., as Agent (filed as Exhibit 4(a)17 to Form 10-K for the year ended December 31, 1996 in 1-11299).

System Energy (b) 1 - Mortgage and Deed of Trust, dated as of June 15, 1977, as amended by twenty-one Supplemental Indentures (A-i in 70-5890 (Mortgage); B and C to Rule 24 Certificate in 70-5890 (First); B to Rule 24 Certificate in 70-6259 (Second); 20(a)-5 to Form 10-Q for the quarter ended June 30, 1981, in 1-3517 (Third); A-l(e)-I to Rule 24 Certificate in 70-6985 (Fourth); B to Rule 24 Certificate in 70-7021 (Fifth); B to Rule 24 Certificate in 70-7021 (Sixth); A-3(b) to Rule 24 Certificate in 70-7026 (Seventh); A-3(b) to Rule 24 Certificate in 70-7158 (Eighth); B to Rule 24 Certificate in 70-7123 (Ninth); B-I to Rule 24 Certificate in 70-7272 (Tenth); B-2 to Rule 24 Certificate in 70-7272 (Eleventh); B-3 to Rule 24 Certificate in 70-7272 (Twelfth); B-1 to Rule 24 Certificate in 70-7382 (Thirteenth); B-2 to Rule 24 Certificate in 70-7382 (Fourteenth); A-2(c) to Rule 24 Certificate in 70-7946 (Fifteenth);

A-2(c) to Rule 24 Certificate in 70-7946 (Sixteenth); A-2(d) to Rule 24 Certificate in 70-7946 (Seventeenth); A-2(e) to Rule 24 Certificate dated May 4, 1993 in 70-7946 (Eighteenth); A 2(g) to Rule 24 Certificate dated May 6, 1994, in 70-7946 (Nineteenth); A-2(a)(1) to Rule 24 E-3

II Certificate dated August 8, 1996 in File No. 70-8511 (Twentieth); and A-2(a)(2) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511 (Twenty-first)).

(b) 2 -- Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Steven Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561) and Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215).

(b) 3 -- Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M'.- Carta (Steven Kaba, successor), as Owner Trustees, and SLystem- Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated April 21, 1989 in 70-7561) and Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d)

Rule 24 Certificate dated January 31, 1994 in 70-8215).

(b) 4 -- Indenture (for Unsecured Debt Securities), dated as of September 1, 1995, between System Energy Resources, Inc., and Chemical Bank (B-I0(a) to Rule 24 Certificate in 70-8511).

Entergy Arkansas (c) 1 -- Mortgage and Deed of Trust, dated as of October 1, 1944, as amended by fifty-fourth Supplemental Indentures (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121 (First); 7(c) in 2-7605 (Second); 7(d) in 2'8100 (Third); 7(a)-4 in 2-8482 (Fourth); 7(a)-5 in 2-9149 (Fifth); 4(a)-6 in 2-9789 (Sixth); 4(a)-7 in 2-10261 (Seventh); 4(a)-8 in 2-11043 (Eighth); 2(b)-9 in 2-11468 (Ninth); 2(b)-10 in 2-15767 (Tenth); D in 70-3952 (Eleventh); D in 70-4099 (Twelfth); 4(d) in 2-23185 (Thirteenth); 2(c) in 2-24414 (Fourteenth); 2(c) in 2-25913 (Fifteenth); 2(c) in 2-28869 (Sixteenth); 2(d) in 2-28869 (Seventeenth); 2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646 (Nineteenth); 2(c) in 2-39253 (Twentieth); 2(c) in 2-41080 (Twenty-first); C-1 to Rule 24 Certificate in 70-5151 (Twenty-second); C-1 to Rule 24 Certificate in 70-5257 (Twenty-third); C to Rule 24 Certificate in 70-5343 (Twenty-fourth); C-I to Rule 24 Certificate in 70-5404 (Twenty-fifth); C to Rule 24 Certificate in 70-5502 (Twenty-sixth); C- I to Rule 24 Certificate in 70-5556 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-5693 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6078 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6174 (Thirtieth); C-I to Rule 24 Certificate in 70-6246 (Thirty-first); C-I to Rule 24 Certificate in 70-6498 (Thirty-second); A-4b-2 to Rule 24 Certificate in 70-6326 (Thirty-third); C-1 to Rule 24 Certificate in 70-6607 (Thirty-fourth); C-I to Rule 24 Certificate in 70-6650 (Thirty-fifth); C-1 to Rule 24 Certificate, dated December 1, 1982, in 70-6774 (Thirty-sixth); C-1 to Rule 24 Certificate, dated February 17, 1983, in 70-6774 (Thirty-seventh); A-2(a) to Rule:24 Certificate, dated December 5, 1984, in 70-6858 (Thirty-eighth); A-3(a) to Rule 24 Certificate in 70-7127 (Thirty-ninth); A-7 to Rule 24 Certificate in 70-7068 (Fortieth); A-8(b) to Rule 24 Certificate dated July 6, 1989 in 70-7346 (Forty-first); A-8(c) to Rule 24 Certificate, dated February 1, 1990 in 70-7346 (Forty-second);

4 to Form 10-Q for the quarter ended September 30, 1990 in 1-10764 (Forty-third); A-2(a) to Rule 24 Certificate, dated November 30, 1990, in 70-7802 (Forty-fourth); A-2(b) to Rule 24 Certificate, dated January 24, 1991, in 70-7802 (Forty-fifth); 4(d)(2) in 33-54298 (Forty-sixth); 4(c)(2) to Form 10-K for the year ended December 31, 1992 in 1-10764 (Forty seventh); 4(b) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-eighth);

4(c) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-ninth); 4(b) to Form E-4

10-Q for the quarter ended September 30, 1993 in 1-10764 (Fiftieth); 4(c) to Form 10-Q for the quarter ended September 30, 1993 in 1-10764 (Fifty-first); 4(a) to Form 10-Q for the quarter ended June 30, 1994 (Fifty-second); C-2 to Form U5S for the year ended December 31, 1995 (Fifty-third); and C-2(a) to Form U5S for the year ended December 31, 1996 (Fifty-fourth)).

(c) 2 -- Indenture for Unsecured Subordinated Debt Securities relating to Trust Securities between Entergy Arkansas and Bank of New York (as Trustee), dated as of August 1, 1996 (filed as Exhibit A-l(a) to Rule 24 Certificate dated August 26, 1996 in File No. 70-8723).

(c) 3 -- Amended and Restated Trust Agreement of Entergy Arkansas Capital I, dated as of August 14, 1996 (filed as Exhibit A-3(a) to Rule 24 Certificate dated August 26, 19SL6 in File No. 70 8723).

(c) 4 -- Guarantee Agreement between Entergy Arkansas (as Guarantor) and The Bank of New York (as Trustee), dated as of August 14, 1996, with respect to Entergy Arkansas Capital I's obligations on its 8 1/2% Cumulative Quarterly Income Preferred Securities, Series A (filed as Exhibit A-4(a) to Rule 24 Certificate dated August 26, 1996 in File No. 70-8723).

Entergy Gulf States (d) 1 -- Indenture of Mortgage, dated September 1, 1926, as amended by certain Supplemental Indentures (B-a-I-1 in Registration No. 2-2449 (Mortgage); 7-A-9 in Registration No. 2-6893 (Seventh); B to Form 8-K dated September 1, 1959 (Eighteenth); B to Form 8-K dated February 1, 1966 (Twenty-second); B to Form 8-K dated March 1, 1967 (Twenty-third); C to Form 8-K dated March 1, 1968 (Twenty-fourth); B to Form 8-K dated November 1, 1968 (Twenty-fifth); B to Form 8-K dated April 1, 1969 (Twenty-sixth); 2-A-8 in Registration No.

2-66612 (Thirty-eighth); 4-2 to Form 10-K for the year ended December 31, 1984 in 1-2703 (Forty-eighth); 4-2 to Form 10-K for the year ended December 31, 1988 in 1-2703 (Fifty second); 4 to Form 10-K for the year ended December 31, 1991 in 1-2703 (Fifty-third); 4 to Form 8-K dated July 29, 1992 in 1-2703 (Fifth-fourth); 4 to Form 10-K dated December 31, 1992 in 1-2703 (Fifty-fifth); 4 to Form 10-Q for the quarter ended March 31, 1993 in 1-2703 (Fifty-sixth); and 4-2 to Amendment No. 9 to Registration No. 2-76551 (Fifty-seventh)).

(d) 2 - Indenture, dated March 21, 1939, accepting resignation of The Chase National Bank of the City of New York as trustee and appointing Central Hanover Bank and Trust Company as successor trustee (B-a- 1-6 in Registration No. 2-4076).

(d) 3 -- Trust Indenture for 9.72% Debentures due July 1, 1998 (4 in Registration No. 33-40113).

(d) 4 -- Indenture for Unsecured Subordinated Debt Securities relating to Trust Securities, dated as of January 15, 1997 (filed as Exhibit A-i1 (a) to Rule 24 Certificate dated February 6, 1997 in File No. 70-8721).

(d) 5 -- Amended and Restated Trust Agreement of Entergy Gulf States Capital I dated January 28, 1997 of Series A Preferred Securities (filed as Exhibit A-13(a) to Rule 24 Certificate dated February 6, 1997 in File No.70-872 1).

(d) 6 -- Guarantee Agreement between Entergy Gulf States, Inc. (as Guarantor) and The Bank of New York (as Trustee) dated as of January 28, 1997 with respect to Entergy Gulf States Capital I's E-5

obligation on its 8.75% Cumulative Quarterly Income Preferred Securities, Series A (filed as Exhibit A-14(a) to Rule 24 Certificate dated February 6, 1997 in File No. 70-8721).

Entergy Louisiana (e) I -- Mortgage and Deed of Trust, dated as of April 1, 1944, as amended by fifty-one Supplemental Indentures (7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); 7(c) in 2-8636 (Second); 4(b)-3 in 2-10412 (Third); 4(b)-4 in 2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862 (Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429 (Eighth); 4(c)-9 in 2-25801 (Ninth) 4(c)-10 in 2-26911 (Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659 (Twelfth); C to Rule 24 Certificate in 70-4793 (Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 2(b)-2 in 2-39437 (Fifteenth), 2(b)-2 in 2-42523 (Sixteenth); C to Rule 24 Certificate in 70-524ý- (Seventeenth);

C to Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to Rule 24 Certificate in 70-5449 (Nineteenth); C-I to Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to Rule 24 Certificate in 70-5711 (Twenty-second); C-I to Rule24 Certificate in 70-5919 (Twenty-third); C-1 to Rule24 Certificate in 70-6102 (Twenty-fourth); C-1 to Rule24 Certificate in 70-6169 (Twenty-fifth); C-i to Rule24 Certificate in 70-6278 (Twenty-sixth); C-1 to Rule 24 Certificate in 70-6355 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-6508 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6556 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6635 (Thirtieth); C-1 to Rule 24 Certificate in 70-6834 (Thirty-first); C-I to Rule 24 Certificate in 70-6886 (Thirty-second); C-1 to Rule 24 Certificate in 70-6993 (Thirty-third); C-2 to Rule 24 Certificate in 70-6993 (Thirty-fourth); C-3 to Rule 24 Certificate in 70-6993 (Thirty-fifth);

A-2(a) to Rule 24 Certificate in 70-7166 (Thirty-sixth); A-2(a) in 70-7226 (Thirty-seventh);

C-1 to Rule 24 Certificate in 70-7270 (Thirty-eighth); 4(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1988, in 1-8474 (Thirty-ninth); A-2(b) to Rule 24 Certificate in 70-7553 (Fortieth); A-2(d) to Rule 24 Certificate in 70-7553 (Forty-first); A-3(a) to Rule 24 Certificate in 70-7822 (Forty-second); A-3(b) to Rule 24 Certificate in 70-7822 (Forty-third);

A-2(b) to Rule 24 Certificate in File No. 70-7822 (Forty-fourth); A-3(c) to Rule 24 Certificate in 70-7822 (Forty-fifth); A-2(c) to Rule 24 Certificate dated April 7, 1993 in 70-7822 (Forty sixth); A-3(d) to Rule 24 Certificate dated June 4, 1993 in 70-7822 (Forth-seventh); A-3(e) to Rule 24 Certificate dated December 21, 1993 in 70-7822 (Forty-eighth); A-3(f) to Rule 24 Certificate dated August 1, 1994 in 70-7822 (Forty-ninth); A-4(c) to Rule 24 Certificate dated September 28, 1994 in 70-7653 (Fiftieth) and A-2(a) to Rule 24 Certificate dated April 4, 1996 in File No. 70-8487 (Fifty-first)).

(e) 2 -- Facility Lease No. 1, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-I in Registration No. 33-30660).

(e) 3 - Facility Lease No. 2, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-2 in Registration No. 33-30660).

(e) 4 -- Facility Lease No. 3. dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-3 in Registration No. 33-30660).

(e) 5 -- Indenture for Unsecured Subordinated Debt Securities relating to Trust Securities, dated as of July 1, 1996 (filed as Exhibit A-14(a) to Rule 24 Certificate dated July 25, 1996 in File No.

70-8487).

E-6

(e) 6 -- Amended and Restated Trust Agreement of Entergy Louisiana Capital I dated July 16, 1996 of Series A Preferred Securities (filed as Exhibit A-16(a) to Rule 24 Certificate dated July 25, 1996 in File No. 70-8487).

(e) 7 -- Guarantee Agreement between Entergy Louisiana, Inc. (as Guarantor) and The Bank of New York (as Trustee) dated as of July 16, 1996 with respect to Entergy Louisiana Capital l's obligation on its 9% Cumulative Quarterly Income Preferred Securities, Series A (filed as Exhibit A-19(a) to Rule 24 Certificate dated July 25, 1996 in File No. 70-8487).

Entergy Mississippi (f) 1 -- Mortgage and Deed of Trust, dated as of September 1, 1944, as amend.1 by twenty-five.

Supplemental Indentures (7(d) in 2-5437 (Mortgage); 7(b) in 2-7051 (First); 7(c) in 2-7763 (Second); 7(d) in 2-8484 (Third); 4(b)-4 in 2-10059 (Fourth); 2(b)-5 in 2-13942 (Fifth); A-Il to Form U-I in 70-4116 (Sixth); 2(b)-7 in 2-23084 (Seventh); 4(c)-9 in 2-24234 (Eighth);

2(b)-9(a) in 2-25502 (Ninth); A-i 1(a) to Form U-i in 70-4803 (Tenth); A-12(a) to Form U-I in 70-4892 (Eleventh); A-13(a) to Form U-i in 70-5165 (Twelfth); A-14(a) to Form U-i in 70-5286 (Thirteenth); A-15(a) to Form U-1 in 70-5371 (Fourteenth); A-16(a) to Form U-i in 70-5417 (Fifteenth); A-17 to Form U-i in 70-5484 (Sixteenth); 2(a)-19 in 2-54234 (Seventeenth); C-1 to Rule 24 Certificate in 70-6619 (Eighteenth); A-2(c) to Rule 24 Certificate in 70-6672 (Nineteenth); A-2(d) to Rule 24 Certificate in 70-6672 (Twentieth);

C-i(a) to Rule 24 Certificate in 70-6816 (Twenty-first); C-1(a) to Rule 24 Certificate in 70-7020 (Twenty-second); C-i(b) to Rule 24 Certificate in 70-7020 (Twenty-third); C-1(a) to Rule 24 Certificate in 70-7230 (Twenty-fourth); and A-2(a) to Rule 24 Certificate in 70-7419 (Twenty-fifth)).

(f) 2 - Mortgage and Deed of Trust, dated as of February 1, 1988, as amended by eleventh Supplemental Indentures (A-2(a)-2 to Rule 24 Certificate in 70-7461 (Mortgage); A-2(b)-2 in 70-7461 (First); A-5(b) to Rule 24 Certificate in 70-7419 (Second); A-4(b) to Rule 24 Certificate in-70-7554 (Third); A-l(b)-1 to Rule 24 Certificate in 70-7737 (Fourth); A-2(b) to Rule 24 Certificate dated November 24, 1992 in 70-7914 (Fifth); A-2(e) to Rule 24 Certificate dated January 22, 1993 in 70-7914 (Sixth); A-2(g) to Form U-1 in 70-7914 (Seventh); A-2(i) to Rule 24 Certificate dated November 10, 1993 in 70-7914 (Eighth); A-2(j) to Rule 24 Certificate dated July 22, 1994 in 70-7914 (Ninth); and (A-2(l) to Rule 24 Certificate dated April 21, 1995 in File 70-7914 (Tenth); and A-2(a) to Rule 24 Certificate dated June 27, 1997 in File 70-8719 (Eleventh)).

Entergy New Orleans (g) 1 -- Mortgage and Deed of Trust, dated as of May 1, 1987, as amended by six Supplemental Indentures (A-2(c) to Rule 24 Certificate in 70-7350 (Mortgage); A-5(b) to Rule 24 Certificate in 70-7350 (First); A-4(b) to Rule 24 Certificate in 70-7448 (Second); 4(f)4 to Form 10-K for the year ended December 31, 1992 in 0-5 807 (Third); 4(a) to Form 10-Q for the quarter ended September 30, 1993 in 0-5807 (Fourth); 4(a) to Form 8-K dated April 26, 1995 in File No. 0 5807 (Fifth); and 4(a) to Form 8-K dated March 22, 1996 in File No. 0-5807 (Sixth)).

E-7

Entergy London (h) I -- Indenture for Unsecured Subordinated Debt Securities relating to Preferred Securities, dated as of November 1, 1997 (filed as Exhibit A-l(a) to Rule 24 Certificate dated December 4, 1997 in File No. 70-9081).

(h) 2 -- Amended and Restated Limited Partnership Agreement of Entergy London Capital, L.P. dated as of November 19, 1997 of Series A Preferred Securities (filed as Exhibit A-5(a) to Rule 24 Certificate dated December 4, 1997 in File No. 70-9081).

(h) 3 -- Guarantee Agreement between Entergy London Investments plc (as Guarantor) and The Bank of New York (as Trustee) dated as of November 19, 1997 with respect to intergy London Capital, L.P.'s obligation on its 8-5/8% Cumulative Quarterly Income Preferred Securities, Series A (filed as Exhibit A-6(a) to Rule 24 Certificate dated December 4, 1997 in File No.70-908 1).

• (h) 4 The BPS 1,010,000,000 Restated Credit Agreement dated November 17, 1997 among Entergy Power UK plc, ABN AMRO Bank N.V., Bank of America International Limited and Union Bank of Switzerland as arrangers and ABN AMRO Bank N.V. as Agent for the banks named therein.

(10) Material Contracts Entergy Corporation (a) 1 -- Agreement, dated April 23, 1982, among certain System companies, relating to System Planning and Development and Intra-System Transactions (10(a)l to Form 10-K for the year ended December 31, 1982, in 1-3517).

(a) 2 -- Middle South Utilities (now Entergy Corporation) System Agency Agreement, dated December 11, 1970 (5(a)-2 in 2-41080).

(a) 3 -- Amendment, dated February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-4 in 2-41080).

(a) 4 -- Amendment, dated May 12, 1988, to Middle South Utilities System-Agency Agreement, dated December 11, 1970 (5(a)-4 in 2-41080).

(a) 5 -- Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).

(a) 6 -- Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)-5 in 241080).

(a) 7 -- Amendment, dated January 1, 1972, to Service Agreement with Entergy Services (5(a)-6 in 2-43175).

(a) 8 -- Amendment, dated April 27, 1984, to Service Agreement with Entergy Services (10(a)-7 to Form 10-K for the year ended December 31, 1984, in 1-3517).

E-8

(a) 9 -- Amendment, dated August 1, 1988, to Service Agreement with Entergy Services (10(a)-8 to Form 10-K for the year ended December 31, 1988, in 1-3517).

(a) 10 -- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(a)-9 to Form 10-K for the year ended December 31, 1990, in 1-3517).

(a) 11 -- Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a)- 11 for the year ended December 31, 1994 in 1-3517).

(a) 12 -- Availability Agreement, dated June 21, 1974, among System Energy and certain other System companies (B to Rule 24 Certificate, dated June 24, 1974, in 70-5399).

(a) 13-- First Amendment to Availability Agreement, dated as of June 30, 1977 (B to Rule 24 Certificate, dated June 24, 1977, in 70-5399).

(a) 14 -- Second Amendment to Availability Agreement, dated as of June 15, 1981 (E to Rule 24 Certificate, dated July 1, 1981, in 70-6592).

(a) 15 -- Third Amendment to Availability Agreement, dated as of June 28, 1984 (B-13(a) to Rule 24 Certificate, dated July 6, 1984, in 70-6985).

(a) 16-- Fourth Amendment to Availability Agreement, dated as of June 1, 1989 (A to Rule 24 Certificate, dated June 8, 1989, in 70-5399).

(a) 17-- Eighteenth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (C-2 to Rule 24 Certificate, dated October 1, 1986, in 70-7272).

(a) 18 - Nineteenth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (C-3 to Rule 24 Certificate, dated October 1, 1986, in 70-7272).

(a) 19- Twenty-sixth Assignment of Availability Agreement, Consent and Agreement, dated as of October 1, 1992, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-2(c) to Rule 24 Certificate, dated November 2, 1992, in 70-7946).

(a) 20-- Twenty-seventh Assignment of Availability Agreement, Consent and Agreement, dated as of April 1, 1993, with United States Trust Company of New York and Gerard F. Ganey as Trustees (B-2(d) to Rule 24 Certificate dated May 4, 1993 in 70-7946).

(a) 21-- Twenty-ninth Assignment of Availability Agreement, Consent and Agreement, dated as of April 1, 1994, with United States Trust Company of New York and Gerard F. Ganey as Trustees (B-2(f) to Rule 24 Certificate dated May 6, 1994, in 70-7946).

(a) 22-- Thirtieth Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-2(a) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511).

E-9

(a) 23 -- Thirty-first Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi. and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-2(b) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511).

(a) 24-- Thirty-second Assignment of Availability Agreement, Consent and Agreement, dated as of December 27, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and The Chase Manhattan Bank (filed as Exhibit B-2(a) to Rule 24 Certificate dated January 13, 1997 in File No.70-756 1).

(a) 25-- Capital Funds Agreement, dated June 21, 1974, between Entergy Corporation and System Energy (C to Rule 24 Certificate, dated June 24, 1974, in 70-5399).

(a) 26-- First Amendment to Capital Funds Agreement, dated as of June 1, 1989 (B to Rule 24 Certificate, dated June 8, 1989, in 70-5399).

(a) 27-- Eighteenth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (D-2 to Rule 24 Certificate, dated October 1, 1986, in 70-7272).

(a) 28 -- Nineteenth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (D-3 to Rule 24 Certificate, dated October 1, 1986, in 70-7272).

(a) 29-- Twenty-sixth Supplementary Capital Funds Agreement and Assignment, dated as of October 1, 1992, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(c) to Rule 24 Certificate dated November 2, 1992 in 70-7946).

(a) 30 -- Twenty-seventh Supplementary Capital Funds Agreement and Assignment, dated as of April 1, 1993, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B 3(d) to Rule 24 Certificate dated May 4, 1993 in 70-7946).

(a) 31 - Twenty-ninth Supplementary Capital Funds Agreement and Assignment, dated as of April 1, 1994, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B 3(f) to Rule 24 Certificate dated May 6, 1994, in 70-7946).

(a) 32-- Thirtieth Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996, among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-3(a) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511).

(a) 33 -- Thirty-first Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996, among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-3(b) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511).

(a) 34-- Thirty-second Supplementary Capital Funds Agreement and Assignment, dated as of December 27, 1996, among Entergy Corporation, System Energy and The Chase Manhattan E-10

Bank (filed as Exhibit B-1(a) to Rule 24 Certificate dated January 13, 1997 in File No.

70-7561).

(a) 35 -- First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, Deposit Guaranty National Bank, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate, dated June 8, 1989, in 70-7026).

(a) 36-- First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate, dated June 8, 1989, in 70-7123).

(a) 37-- First Amendment to Supplementary Capital Funds Agreement and Assignment, dated as of June 1, 1989, by and between Entergy Corporation, System Energy and Chemical Bank (C to Rule 24 Certificate, dated June 8, 1989, in 70-7561).

+(a) 38-- Agreement between Entergy Corporation and Edwin Lupberger (10(a)-42 to Form 10-K for the year ended December 31, 1985, in 1-3517).

(a) 39 - Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624).

(a) 40 - Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-l(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-I(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate, dated October 30, 1981, in 70-6337).

(a) 41 - Operating Agreement dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337).

(a) 42-- Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate, dated January 9, 1989, in 70-756 1).

(a) 43 -- Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate, dated January 9, 1989, in 70-7561).

(a) 44-- Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337).

(a) 45 -- Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (10(aaa) in 33-4033).

(a) 46 -- Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K, dated June 4, 1982, in 1-3517).

+(a) 47-- Post-Retirement Plan (10(a)37 to Form 10-K for the year ended December 31, 1983, in 1-3517).

E-1 1

(a) 48 -- Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)-39 to Form 10-K for the year ended December 31, 1982, in 1-3517).

(a) 49-- First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984, in 1-3517).

(a) 50 -- Revised Unit Power Sales Agreement (10(ss) in 33-4033).

(a) 51 -- Middle So.uth Utilities Inc. and Subsidiary Companies Intercompany Income-Tax Allocation Agreement, dated April 28, 1988 (Exhibit D-I to Form U5S for the year ended December 31, 1987).

(a) 52-- First Amendment, dated January 1, 1990, to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989).

(a) 53-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

(a) 54 -- Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allodation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993).

(a) 55 -- Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996).

(a) 56-- Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate, dated September 27, 1990, in 70-7757).

(a) 57-- Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a) to Rule 24 Certificate, dated September 27, 1990, in 70-7757).

(a) 58-- Guarantee Agreement between Entergy Corporation and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate, dated September 27, 1990, in 70- 7757).

(a) 59-- Loan Agreement between Entergy Operations and Entergy Corporation, dated as of September 20, 1990 (B-12(b) to Rule 24 Certificate, dated June 15, 1990, in 70-7679).

(a) 60-- Loan Agreement between Entergy Power and Entergy Corporation, dated as of August 28, 1990 (A-4(b) to Rule 24 Certificate, dated September 6, 1990, in 70-7684).

(a) 61 -- Loan Agreement between Entergy Corporation and Entergy Systems and Service, Inc., dated as of December 29, 1992 (A-4(b) to Rule 24 Certificate in 70-7947).

E-12

+(a) 62 -- Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a) 52 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(a) 63-- Entergy Corporation Annual Incentive Plan (10(a) 54 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(a) 64-- Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4(a) to Rule 24 Certificate, dated May 24, 1991, in 70-783 1).

+(a) 65 -- Retired Outside Director Benefit Plan (10(a)63 to Form 10-K for the year ended December 31, 1991, in 1-3517).

+(a) 66 -- Agreement between Entergy Corporation and Jerry D. Jackson. (10(a) 67 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 67-- Agreement between Entergy Services, Inc., a subsidiary of Entergy Corporation, and Gerald D. Mclnvale (10(a) 68 to Form 10-K for the year ended December 31, 1992 in 1-3517).

• +(a)68-- Agreement between Entergy Services, Inc., a subsidiary of Entergy Corporation, and Gerald D. McInvale.

+(a) 69 -- Supplemental Retirement Plan (10(a) 69 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 70-- Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a)53 to Form 10-K for the-year ended December 31, 1989 in 1-3517).

+(a) 71 -- Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a) 71 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 72 -- Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a) 72 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 73 -- Executive Medical Plan of Entergy Corporation and Subsidiaries (10(a) 73 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 74 -- Stock Plan for Outside Directors of Entergy. Corporation and Subsidiaries, as amended (10(a) 74 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(a) 75-- Summary Description of Private Ownership Vehicle Plan of Entergy Corporation and Subsidiaries (10(a) 75 to Form 10-K for the year ended December 31, 1992 in 1-3517).

(a) 76 - Agreement and Plan of Reorganization Between Entergy Corporation and Gulf States Utilities Company, dated June 5, 1992 (1 to Current Report on Form 8-K dated June 5, 1992 in 1-3517).

+(a) 77 -- Amendment to Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a) 81 to Form 10-K for the year ended December 31, 1993 in 1-11299).

E-13

+(a) 78 -- System Executive Retirement Plan (10(a) 82 to Form 10-K for the year ended December 31, 1993 in 1-11299).

System Energy (b) 1 through (b) 13-- See 10(a)-12 through 10(a)-24 above.

(b) 14 through (b) 26 -- See 10(a)-25 through 10(a)-37 above.

(b) 27-- Reallocation-Agreement, dated as of July 28, 1981, among System Energy an& certain other System companies (B-l(a) in 70-6624).

(b) 28 -- Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-1(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate, dated October 30, 1981, in 70-6337).

(b) 29 -- Operating Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337).

(b) 30-- Installment Sale Agreement, dated as of December 1, 1983 between System Energy and Claiborne County, Mississippi (B-1 to First Rule 24 Certificate in 70-6913).

(b) 31 -- Installment Sale Agreement, dated as of June 1, 1984, between System Energy and Claiborne County, Mississippi (B-2 to Second Rule 24 Certificate in 70-6913).

(b) 32-- Installment Sale Agreement, dated as of December 1, 1984, between System Energy and Claiborne County, Mississippi (B-I to First Rule 24 Certificate in 70-7026).

(b) 33 -- Amended and Restated Installment Sale Agreement, dated as of May 1, 1995, between System Energy and Claibome County, Mississippi (B-6(a) to Rule 24 Certificate in 70-8511).

(b) 34- Amended and Restated Installment Sale Agreement, dated as of February 15, 1996, between System Energy and Claibome County, Mississippi (filed as Exhibit B-6(a) to Rule 24 Certificate dated March 4, 1996 in File No. 70-8511).

(b) 35 -- Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561) and Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215).

(b) 36 -- Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated E-14

April 21, 1989 in 70-7561) and Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d)

Rule 24 Certificate dated January 31, 1994 in 70-8215).

(b) 37 -- Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate, dated January 9, 1989, in 70-7561).

(b) 38 -- Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate, dated January 9, 1989, in 70-7561).

(b) 39-- Collateralm-Trust Indenture, dated as of January 1, 1994, among System 'Energy, GGIB Funding Corporation and Bankers Trust Company, as Trustee (A-3(e) to Rule 24 Certificate dated January 31, 1994, in 70-8215), as supplemented by Supplemental Indenture No. 1 dated January 1, 1994, (A-3(f) to Rule 24 Certificate dated January 31, 1994, in 70-8215).

(b) 40 -- Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337).

(b) 41 -- Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (I0(aaa) in 33-4033).

(b) 42 Unit Power Sales Agreement, dated as of June 10, 1982,, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Ehtergy New Orleans (10(a)-39 to Form 10-K for the year ended December 31, 1982, in 1-35 17).

(b) 43 - First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984, in 1-3517).

(b) 44 -- Revised Unit Power Sales Agreement (10(ss) in 334033).

(b) 45 - Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(b) t9 Rule 24 Certificate, dated March 3, 1989, in 70-7604).

(b) 46-- System Energy's Consent, dated January 31, 1995, pursuant to Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(c)

"toRule 24 Certificate,'dated February 13, 1995 in 70-7604)."

(b) 47- Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate, dated'June 26, 1974, in 70-.5399).

(b) 48-- Service Agreement, dated as of June 21, 1974, between System. Energy and Entergy Mississippi (E to Rule 24 Certificate, dated June 26, 1974, in 70-5399).

(b) 49-- Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate, dated January 8, 1987, in 70-5399).

(b) 50-- Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987).

E-15

(b) 51 -- First Amendment, dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989).

(b) 52-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

(b) 53 -- Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S fqr the year ended December 31, 1993).

(b) 54 -- Service Agreement with Entergy Services, dated as of July 16, 1974, as amended (10(b)-43 to Form 10-K for the year ended December 31, 1988, in 1-9067).

(b) 55 -- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(b)-45 to Form 10-K for the year ended December 31, 1990, in 1-9067).

(b) 56 -- Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a) -11 to Form 10-K for the year ended December 31, 1994 in 1-3517).

(b) 57-- Operating Agreement between Entergy Operations and System Energy, dated as of June 6, 1990 (B-3(b) to Rule 24 Certificate, dated June 15, 1990, in 70-7679).

(b) 58-- Guarantee Agreement between Entergy Corporation' and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate, dated September 27, 1990, in 70-7757).

+(b) 59-- Agreement between System Energy and Donald C. Hintz (10(b)47 to Form 10-K for the year ended December 31, 1991, in 1-9067).

+(b) 60-- Agreement between Entergy Corporation and Edwin Lupberger (10(a)-42 to Form 10-K for the year ended December 31, 1985 in 1-3517).

+(b) 61 -- Agreement between Entergy Services and Gerald D. McInvale (10(a)-68 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(b) 62 -- Agreement between Entergy Services and-Gerald D. McInvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-1 1299).

(b) 63 -- Amended and Restated Reimbursement Agreement, dated as*of December 1, 1988 as amended and restated as of December 27, 1996, among System Energy Resources, Inc.,

The Bank of Tokyo-Mitsubishi, Ltd., as Funding Bank and The Chase Manhattan Bank (as successor by merger with Chemical Bank), as administrating bank, Union Bank of California, N.A., as documentation agent, and the Banks named therein, as Participating Banks (B-3(a) to Rule 24 Certificate dated January 13, 1997 in 70-7561).

E-16

Entergy Arkansas (c) 1 -- Agreement, dated April 23, 1982, among Entergy Arkansas and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a) 1 to'Form 10-K for the year ended December 31, 1982, in 1-3517).

(c) 2 -- Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)2 in 2-41080).

(c) 3 -- Amendment, dated February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-4 in 2-41080).

4 (c) 4 -- Amendment, dated May 12, 1988, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a) 4 in 2-41080).

(c) 5 -- Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)-3 in 241080).

(c) 6 -- Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)-5 in 2-41080).

(c) 7 -- Amendment, dated January 1, 1972, to Service Agreement with Entergy Services (5(a)- 6 in 2-43175).

(c) 8 - Amendment, dated April 27, 1984, to Service Agreement, with Entergy Services (10(a)- 7 to Form 10-K for the year ended December 31, 1984, in 1-3517).

(c) 9 - Amendment, dated August 1, 1988, to Service Agreement with Entergy Services (10(c)- 8 to Form 10-K for the year ended December 31, 1988, in 1-10764).

(c) 10 -- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(c)-9 to Form 10-K for the year ended December 31, 1990, in 1-10764).

(c) 11 -- Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a)- 1l to Form 10-K for the year ended December 31, 1994 in 1-3517).

(c) 12 through (c) 24 -- See 10(a)-12 through 10(a)-24 above.

(c) Agreement, dated August 20, 1954, between Entergy Arkansas and the United States of America (SPA)(13(h) in 2-11467).

(c) 26 - Amendment, dated April 19, 1955, to the United States of America (SPA) Contract,. dated August 20, 1954 (5(d)-2 in 2-41080).

(c) 27 -- Amendment, dated January 3, 1964, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-3 in 2-41080).

(c) 28 -- Amendment, dated September 5, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-4 in 2-41080).

E-17

(c) 29 -- Amendment. dated November 19, 1970, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-5 in 2-41080).

(c) 30-- Amendment, dated July 18, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-6 in 2-41080).

(c) 31 -- Amendment, dated December 27, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-7 in 2-41080).

(c) 32-- Amendment, dated January 25, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-8 in 2-41080). -L (c) 33 -- Amendment, dated October 14, 1971, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-9 in 2-43175).

(c) 34-- Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)-10 in 2-60233).

(c) 35 -- Agreement, dated May 14, 1971, between Entergy Arkansas and the United States of America (SPA) (5(e) in 2-41080).

(c) 36-- Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated May 14, 1971 (5(e)-i in 2-60233).

(c) 37 -- Contract, dated May 28, 1943, Amendment to Contract, dated July 21, 1949, and Supplement to Amendment to Contract, dated December 30, 1949, between Entergy Arkansas and McKamie Gas Cleaning Company; Agreements, dated as of September 30, 1965, between Entergy Arkansas and former stockholders of McKamie Gas Cleaning Company; and Letter Agreement, dated June 22, 1966, by Humble Oil & Refining Company accepted by Entergy Arkansas on June 24, 1966 (5(k)-7 in 2-41080).

(c) 38-- Agreement, dated April 3, 1972, between Entergy Services and Gulf United Nuclear Fuels Corporation (5(l)-3 in 2-46152).

(c) 39-- Fuel Lease, dated as of December 22, 1988, between River Fuel Trust #1 and Entergy Arkansas (B-1(b) to Rule 24 Certificate in 70-7571).

(c) 40-- White Bluff Operating Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-2(a) to Rule 24 Certificate, dated June 30, 1977, in 70-6009).

(c) 41-- White Bluff Ownership Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-1(a) to Rule 24 Certificate, dated June 30, 1977, in 70-6009).

(c) 42-- Agreement, dated June 29, 1979, between Entergy Arkansas and City of Conway, Arkansas (5(r)-3 in 2-66235).

(c) 43-- Transmission Agreement, dated August 2, 1977, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)-3 in 2-60233).

E- 18

(c) 44-- Power Coordination, Interchange and Transmission Service Agreement, dated as of June 27, 1977, between Arkansas Electric Cooperative Corporation and Entergy Arkansas (5(r)-4 in 2-60233).

(c) 45-- Independence Steam Electric Station Operating Agreement, dated July 31, 1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and-City of Conway, Arkansas (5(r)-6 in 2-66235).

(c) 46-- Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c) 51 to Form 10-K for the year ended December 31, 1984, in 1-10764).

(c) 47-- Independence Steam Electric Station Ownership Agreement, dated July 31, -1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and City of Conway, Arkansas (5(r)-7 in 2-66235).

(c) 48 -- Amendment, dated December 28, 1979, to the Independence Steam Electric Station Ownership Agreement (5(r)-7(a) in 2-66235).

(c) 49 -- Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c) 54 to Form 10-K for the year ended December 31, 1984, in 1-10764).

(c) 50-- Owner's Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station (10(c) 55 to Form 10-K for the year ended December 31, 1984, in 1-10764).

(c) 51-- Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company of New York, as Trustee (10(c) 56 to Form 10-K for the year ended December 31, 1984, in 1-10764).

(c) 52-- Power Coordination, Interchange and Transmission Service Agreement, dated as of July 3 1, 1979, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)-8 in 2-66235).

(c) 53 -- Power Coordination, Interchange and Transmission Agreement, dated as of June 29, 1979, between City of Conway, Arkansas and Entergy Arkansas (5(r)-9 in 2-66235).

(c) 54 -- Agreement, dated June 21, 1979, between Entergy Arkansas and Reeves E. Ritchie ((1 0)(b)-90 to Form 10-K for the year ended December 31, 1980, in 1-10764).

(c) 55 -- Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-l(a) in 70-6624).

+(c) 56-- Post-Retirement Plan (10(b) 55 to Form 10-K for the year ended December 31, 1983, in 1-10764).

(c) 57 - Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a) 39 to Form 10-K for the year ended December 31, 1982, in 1-3517).

E-19

(c) 58 -- First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between Svstem Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergv New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984, in 1-3517).

(c) 59-- Revised Unit Power Sales Agreement (10(ss) in 33-4033).

(c) 60-- Contract For Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated June 30, 1983, among the DOE, System Fuels and Entergy Arkansas (10(b)-57 to Form 10-K for the year ended December 31, 1983, in 1-10764).

(c) 61 -- Middle South Utilities, Inc. and Subsidiary Companies Intercompany Incomet-Tax Allocation Agreement, dated April 28, 1988 (D-I to Form U5S for the year ended December 31, 1987).

(c) 62-- First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989).

(c) 63-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

(c) 64 -- Third Amendment dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993).

(c) 65 -- Assignment of Coal Supply Agreement, dated December 1, 1987, between System Fuels and Entergy Arkansas (B to Rule 24 letter filing, dated November 10, 1987, in 70-5964).

(c) 66 -- Coal Supply Agreement, dated December 22, 1976, between System Fuels and Antelope Coal Company (B-1 in 70-5964), as amended by First Amendment (A to Rule 24 Certificate in 70-5964); Second Amendment (A to Rule 24 letter filing, dated December 16, 1983, in 70-5964); and Third Amendment (A to Rule 24 letter filing, dated November 10, 1987 in 70-5964).

(c) 67 - Operating Agreement between Entergy Operations and Entergy Arkansas, dated as of June 6, 1990 (B-l(b) to Rule 24 Certificate, dated June 15, 1990, in 70-7679).

(c) 68 -- Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate, dated September 27, 1990, in 70-7757).

(c) 69 - Agreement for Purchase and Sale of Independence Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-3(c) to Rule 24 Certificate, dated September 6, 1990, in 70-7684).

(c) 70 -- Agreement for Purchase and Sale of Ritchie Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-4(d) to Rule 24 Certificate, dated September 6, 1990, in 70-7684).

E-20

(c) 71 -- Ritchie Steam Electric Station Unit No. 2 Operating Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-5(a) to Rule 24 Certificate, dated September 6. 1990, in 70-7684).

(c) 72 -- Ritchie Steam Electric Station Unit No. 2 Ownership Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-6(a) to Rule 24 Certificate, dated September 6, 1990, in 70-7684).

(c) 73-- Power Coordination, Interchange and Transmission Service Agreement between Entergv Power and Entergy Arkansas, dated as of August 28, 1990 (10(c)-71 to Form 10-K for the year ended December 31, 1990, in 1-10764).

+(c) 74 -- Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a)52 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(c) 75 - Entergy Corporation Annual Incentive Plan (10(a)54 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(c) 76-- Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4(a) to Rule 24 Certificate, dated May 24, 1991, in 70-7831).

+(c) 77-- Agreement between Arkansas Power & Light Company and R. Drake Keith. (10(c) 78 to Form 10-K for the year ended December 31, 1992 in 1-10764).

+(c) 78 -- Supplemental Retirement Plan (10(a)69 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 79 - Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a)53 to Form 10-K for the year ended December 31, 1989 in 1-3517).

+(c) 80-- Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a)71 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 81 -- Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)72 to Form 10-K for the year'ended December 31, 1992 in 1-3517).

+(c) 82-- Executive Medical Plan of Entergy Corporation and Subsidiaries (10(a)73 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 83-- Stock Plan for Outside Directors of Entergy Corporation and Subsidiaries, as amended (10(a)74 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 84-- Summary Description of Private Ownership Vehicle Plan of Entergy Corporation and Subsidiaries (10(a)75 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 85-- Agreement between Entergy Corporation and Edwin Lupberger (10(a)-42 to Form 10-K for the year ended December 31, 1985 in 1-3517).

+(c) 86 -- Agreement between Entergy Corporation and Jerry D. Jackson (10(a)-67 to Form 10-K for the year ended December 31, 1992 in 1-3517).

E-21

+(c) 87 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(c) 88 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-11299).

+(c) 89 -- Agreement between System Energy and Donald C. Hintz (10(b)-47 to Form 10-K for the year ended December 31, 1991 in 1-9067).

+(c) 90-- Summary Description of Retired Outside Director Benefit Plan. (10(c) 90 to Form 10-K for the year ended December 3 1, 1992 in 1-10764).

+(c) 91 -- Amendment to Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a) 81 to Form 10-K for the year ended December 31, 1993 in 1-11299).

+(c) 92 -- System Executive Retirement Plan (10(a) 82 to Form 10-K for the year ended December 31, 1993 in 1-11299).

(c) 93 -- Loan Agreement dated June 15, 1993, between Entergy Arkansas and Independence Country, Arkansas (B-1 (a) to Rule 24 Certificate dated July 9, 1993 in 70-8171).

and Pope (c) 94-- Installment Sale Agreement dated January 1, 1991, between Entergy Arkansas Country, Arkansas (B-I (b) to Rule 24 Certificate dated January 24, 1991 in 70-7802).

Pope (c) 95-- Installment Sale Agreement dated November 1, 1990, between Entergy Arkansas and Country, Arkansas (B-1 (a) to Rule 24 Certificate dated November 30, 1990 in 70-7802).

(c) 96-- Loan Agreement dated June 15, 1994, between Entergy Arkansas and Jefferson County, Arkansas (B-1(a) to Rule 24 Certificate dated June 30, 1994 in 70-8405).

(c) 97 -- Loan Agreement dated June 15, 1994, between Entergy Arkansas and Pope County, Arkansas (B-1(b) to Rule 24 Certificate in 70-8405).

(c) 98-- Loan Agreement dated November 15, 1995, between Entergy Arkansas and Pope 'County, Arkansas (10(c) 96 to Form 10-K for the year ended December 31, 1995 in 1-10764).

(c) 99-- Agreement as to Expenses and Liabilities between Entergy Arkansas and Entergy Arkansas Capital I, dated as of August 14, 1996 (4(j) to Form 10-Q for the quarter ended September 30, 1996 in 1-10764).

County,

• (c) 100-- Loan Agreement dated December 1, 1997, between Entergy Arkansas and Jefferson Arkansas.

Entergy Gulf States (d) 1 -- Guaranty Agreement, dated July 1, 1976, between Entergy Gulf States and American Bank and Trust Company (C and D to Form 8-K, dated August 6, 1976 in 1-2703).

E-22

(d) 2 -- Lease of Railroad Equipment, dated as of December 1, 1981, between The Connecticut Bank and Trust Company as Lessor and Entergy Gulf States as Lessee and First Supplement. dated as of December 31, 1981, relating to 605 One Hundred-Ton Unit Train Steel Coal Porter Cars (4-12 to Form 10-K for the year ended December 31, 1981 in 1-2703).

(d) 3 -- Guaranty Agreement, dated August 1, 1992, between Entergy Gulf States and Hibernia National Bank, relating to Pollution Control Revenue Refunding Bonds of the Industrial Development Board of the Parish of Calcasieu, Inc. (Louisiana) (10-1 to Form 10-K for the year ended December 31, 1992 in 1-2703).

(d) 4 -- Guaranty Agreement, dated January 1, 1993, between Entergy Gulf States and Hancock Bank of Louisiana, relating to Pollution Control Revenue Refunding Bonds of the tarish of Pointe Coupee (Louisiana) (10-2 to Form 10-K for the year ended December 31, 1992 in 1-2703).

(d) 5 -- Deposit Agreement, dated as of December 1, 1983 between Entergy Gulf States, Morgan Guaranty Trust Co. as Depositary and the Holders of Depository Receipts, relating to the Issue of 900,000 Depositary Preferred Shares, each representing 1/2 share of Adjustable Rate Cumulative Preferred Stock, Series E-$100 Par Value (4-17 to Form 10-K for the year ended December 31, 1983 in 1-2703).

(d) 6 -- Letter of Credit and Reimbursement Agreement, dated December 27, 1985, between Entergy Gulf States and Westpac Banking Corporation relating to Variable Rate Demand Pollution Control Revenue Bonds of the Parish of West Feliciana, State of Louisiana, Series 1985-D (4 26 to Form 10-K for the year ended December 31, 1985 in 1-2703) and Letter Agreement amending same dated October 20, 1992 (10-3 to Form 10-K for the year ended December 31, 1992 in 1-2703).

(d) 7 -- Reimbursement and Loan Agreement, dated as of April 23, 1986, by and between Entergy Gulf States and The Long-Term Credit Bank of Japan, Ltd., relating to Multiple Rate Demand Pollution Control Revenue Bonds of the Parish of West Feliciana, State of Louisiana, Series 1985 (4-26 to Form 10-K, for the year ended December 31, 1986 in 1-2703) and Letter Agreement amending same, dated February 19, 1993 (10 to Form 10-K for the year ended December 31, 1992 in 1-2703).

(d) 8 - Agreement effective February 1, 1964, between Sabine River Authority, State of Louisiana, and Sabine River Authority of Texas, and Entergy Gulf States, Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented (B to Form 8-K, dated May 6, 1964, A to Form 8-K, dated October 5, 1967, A to Form 8-K, dated May 5, 1969, and A to Form 8-K, dated December 1, 1969, in 1-2708).

(d) 9 -- Joint Ownership Participation and Operating Agreement regarding River Bend Unit 1 Nuclear Plant, dated August 20, 1979, between Entergy Gulf States, Cajun, and SRG&T; Power Interconnection Agreement with Cajun, dated June 26, 1978, and approved by the REA on August 16, 1979, between Entergy Gulf States and Cajun; and Letter Agreement regarding CEPCO buybacks, dated August 28, 1979, between Entergy Gulf States and Cajun (2, 3, and 4, respectively, to Form 8-K, dated September 7, 1979, in 1-2703).

(d) 10-- Ground Lease, dated August 15, 1980, between Statmont Associates Limited Partnership (Statmont) and Entergy Gulf States, as amended (3 to Form 8-K, dated August 19, 1980, and A-3-b to Form 10-Q for the quarter ended September 30, 1983 in 1-2703).

E-23

(d) 11 -- Lease and Sublease Agreement, dated August 15, 1980, between Statmont and Entergy Gulf States, as amended (4 to Form 8-K, dated August 19, 1980, and A-3-c to Form 10-Q for the quarter ended September 30, 1983 in 1-2703).

(d) 12-- Lease Agreement, dated September 18, 1980, between BLC Corporation and Entergy Gulf States (I to Form 8-K, dated October 6, 1980 in 1-2703).

(d) 13 -- Joint Ownership Participation and Operating Agreement for Big Cajun, between Entergy Gulf States, Cajun Electric Power Cooperative, Inc., and Sam Raybum G&T, Inc, dated November 14, 1980 (6 to Form 8-K, dated January 29, 1981 in 1-2703); Amendment No. 1, dated December 12, 1980 (7 to Form 8-K, dated January 29, 1981 in 1-2703); Amendment No. 2, dated December 29, 1980 (8 to Form 8-K, dated January 29, 1981 in 1-2703). -_

(d) 14-- Agreement of Joint Ownership Participation between SRMPA, SRG&T and Entergy Gulf States, dated June 6, 1980, for Nelson Station, Coal Unit #6, as amended (8 to Form 8-K, dated June 11, 1980, A-2-b to Form 10-Q For the quarter ended June 30, 1982; and 10-1 to Form 8-K, dated February 19, 1988 in 1-2703).

(d) 15-- Agreements between Southern Company and Entergy Gulf States, dated February 25, 1982, which cover the construction of a 140-mile transmission line to connect the two systems, purchase of power and use of transmission facilities (10-3.1 to Form 10-K, for the year ended December 31, 1981 in 1-2703).

+(d) 16 - Executive Income Security Plan, effective October 1, 1980, as amended, continued and completely restated effective as of March 1, 1991 (10-2 to Form 10-K for the year ended December 31, 1991 in 1-2703).

(d) 17-- Transmission Facilities Agreement between Entergy Gulf States and Mississippi Power Company, dated February 28, 1982, and Amendment, dated May 12, 1982 (A-2-c to Form 10 Q for the quarter ended March 31, 1982 in 1-2703) and Amendment, dated December 6, 1983 (10-43 to Form 10-K, for the year ended December 31, 1983 in 1-2703).

(d) 18 -- Lease Agreement dated as of June 29, 1983, between Entergy Gulf States and City National Bank of Baton Rouge, as Owner Trustee, in connection with the leasing of a Simulator and Training Center for River Bend Unit 1 (A-2-a to Form 10-Q for the quarter ended June 30, 1983 in 1-2703) and Amendment, dated December 14, 1984 (10-55 to Form 10-K, for the year ended December 31, 1984 in 1-2703).

(d) 19 - Participation Agreement, dated as of June 29, 1983, among Entergy Gulf States, City National Bank of Baton Rouge, PruFunding, Inc. Bank of the Southwest National Association, Houston and Bankers Life Company, in connection with the leasing of a Simulator and Training Center of River Bend Unit 1 (A-2-b to Form 10-Q for the quarter ended June 30, 1983 in 1-2703).

(d) 20-- Tax Indemnity Agreement, dated as of June 29, 1983, between Entergy Gulf States and PruFunding, Inc., in connection with the leasing of a Simulator and Training Center for River Bend Unit I (A-2-c to Form I0-Q for the quarter ended June 30, 1993 in 1-2703).

(d) 21 -- Agreement to Lease, dated as of August 28, 1985, among Entergy Gulf States, City National Bank of Baton Rouge, as Owner Trustee, and Prudential Interfunding Corp., as Trustor, in E-24

connection with the leasing of improvement to a Simulator and Training Facility for River Bend Unit 1 (10-69 to Form 10-K, for the year ended December 31, 1985 in 1-2703).

(d) 22-- First Amended Power Sales Agreement, dated December 1, 1985 between Sabine River Authority, State of Louisiana, and Sabine River Authority, State of Texas, and Entergy Gulf States, Central Louisiana Electric Co., Inc., and Louisiana Power and Light Company (10-72 to Form 10-K for the year ended December 31, 1985 in 1-2703).

+(d) 23 -- Deferred Compensation Plan for Directors of Entergy Gulf States and Varibus Corporation, as amended January 8, 1987, and effective January 1, 1987 (10-77 to Form 10-K for the year ended December 31, 1986 in 1-2703). Amendment dated December 4, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551).

+(d) 24 -- Trust Agreement for Deferred Payments to be made by Entergy Gulf States pursuant to the Executive Income Security Plan, by and between Entergy Gulf States and Bankers Trust Company, effective November 1, 1986 (10-78 to Form 10-K for the year ended December 31, 1986 in 1-2703).

+(d) 25 -- Trust Agreement for Deferred Installments under Entergy Gulf States' Management Incentive Compensation Plan and Administrative Guidelines by and between Entergy Gulf States and Bankers Trust Company, effective June 1, 1986 (10-79 to Form 10-K for the year ended December 31, 1986 in 1-2703).

+(d) 26-- Nonqualified Deferred Compensation Plan for Officers, Nonemployee Directors and Designated Key Employees, effective December 1, 1985, as amended, continued and completely restated effective as of March 1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-7655 1).

+(d) 27-- Trust Agreement for Entergy Gulf States' Nonqualified Directors and Designated Key Employees by and between Entergy Gulf States and First City Bank, Texas-Beaumont, N.A.

(now Texas Commerce Bank), effective July 1, 1991 (10-4 to Form 10-K for the year ended December 31, 1992 in 1-2703).

(d) 28 -- Lease Agreement, dated as of June 29, 1987, among GSG&T, Inc., and Entergy Gulf States related to the leaseback of the Lewis Creek generating station (10-83 to Form 10-K for the year ended December 31, 1988 in 1-2703).

(d) 29- Nuclear Fuel Lease Agreement between Entergy Gulf States and River Bend Fuel Services, Inc. to lease the fuel for River Bend Unit 1, dated February 7, 1989 (10-64 to Form 10-K for the year ended December 31, 1988 in 1-2703).

(d) 30-- Trust and Investment Management Agreement between Entergy Gulf States and Morgan Guaranty and Trust Company of New York (the "Decommissioning Trust Agreement) with respect to decommissioning funds authorized to be collected by Entergy Gulf States, dated March 15, 1989 (10-66 to Form 10-K for the year ended December 31, 1988 in 1-2703).

(d) 31 -- Amendment No. 2 dated November 1, 1995 between Entergy Gulf States and Mellon Bank to Decommissioning Trust Agreement (10(d) 31 to Form 10-K for the year ended December 31, 1995).

E-25

(d) 32 -- Credit Agreement, dated as of December 29, 1993, among River Bend Fuel Services, Inc. and Certain Commercial Lending Institutions and CIBC Inc. as Agent for the Lenders (10(d) 34 to Form 10-K for year ended December 31, 1994).

(d) 33 -- Amendment No. 1 dated as of January 31, to Credit Agreement, dated as of December 31, 1993, among River Bend Fuel Services, Inc. and certain commercial lending institutions and CIBC Inc. as agent for Lenders (10(d) 33 to Form 10-K for the year ended December 31, 1995).

(d) 34-- Partnership Agreement by and among Conoco Inc., and Entergy Gulf States, CITGO Petroleum. Corporation and Vista Chemical Company, dated April 28, 1988 (10-67 to Form 10-K for the-year ended December 31, 1988 in 1-2703).

+(d) 35-- Gulf States Utilities Company Executive Continuity Plan, dated January 18, 1991 (10-6 to Form 10-K for the year ended December 3 1, 1990 in 1-2703).

+(d) 36 -- Trust Agreement for Entergy Gulf States' Executive Continuity Plan, by and between Entergy Gulf States and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank),

effective May 20, 1991 (10-5 to Form 10-K for the year ended December 31, 1992 in 1-2703).

+(d) 37 -- Gulf States Utilities Board of Directors' Retirement Plan, dated February 15, 1991 (10-8 to Form 10-K for the year ended December 31, 1990 in 1-2703).

+(d) 38 -- Gulf States Utilities Company Employees' Trustee Retirement Plan effective July 1, 1955 as amended, continued and completely restated effective January 1, 1989; and Amendment No. I effective January 1, 1993 (10-6 to Form 10-K for the year ended December 31, 1992 in 1 2703).

(d) 39 -- Agreement and Plan of Reorganization, dated June 5, 1992, between Entergy Gulf States and Entergy Corporation (2 to Form 8-K, dated June 8, 1992 in 1-2703).

+(d) 40-- Gulf States Utilities Company Employee Stock Ownership Plan, as amended, continued, and completely restated effective January 1, 1984, and January 1, 1985 (A to Form 1 I-K, dated December 31, 1985 in 1-2703).

+(d) 41 -- Trust Agreement under the Gulf States Utilities Company Employee Stock Ownership Plan, dated December 30, 1976, between Entergy Gulf States and the Louisiana National Bank, as Trustee (2-A to Registration No. 2-62395).

+(d) 42-- Letter Agreement dated September 7, 1977 between Entergy Gulf States and the Trustee, delegating certain of the Trustee's functions to the ESOP Committee (2-B to Registration Statement No. 2-623 95).

+(d) 43 -- Gulf States Utilities Company Employees Thrift Plan as amended, continued and completely restated effective as of January 1, 1992 (28-1 to Amendment No. 8 to Registration No. 2 76551).

+(d) 44 Restatement of Trust Agreement under the Gulf States Utilities Company Employees Thrift Plan, reflecting changes made through January 1, 1989, between Entergy Gulf States and First E-26

City Bank, Texas-Beaumont, N.A., (now Texas Commerce Bank), as Trustee (2-A to Form 8 K dated October 20, 1989 in 1-2703).

(d) 45-- Operating Agreement between Entergy Operations and Entergy Gulf States, dated as of December 31, 1993 (B-2(f) to Rule 24 Certificate in 70-8059).

(d) 46-- Guarantee Agreement between Entergy Corporation and Entergy Gulf States, dated as of December 31, 1993 (B-5(a) to Rule 24 Certificate in 70-8059).

(d) 47 -- Service Agreement with Entergy Services, dated as of December 31, 1993 (B-6(c) to Rule 24 Certificate in 70-8059).

+(d) 48 -- Amendment to Employment Agreement between J. L. Donnelly and Entergy bulf States, dated December 22, 1993 (10(d) 57 to Form 10-K for the year ended December 31, 1993 in 1-2703).

(d) 49 -- Assignment, Assumption and Amendment Agreement to Letter of Credit and Reimbursement Agreement between Entergy Gulf States, Canadian Imperial Bank of Commerce and Westpac Banking Corporation (10(d) 58 to Form 10-K for the year ended December 31, 1993 in 1 2703).

(d) 50 -- Third Amendment, dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993).

(d) 51-- Refunding Agreement between Entergy Gulf States and West Feliciana Parish (dated December 20, 1994 (B-12(a) to Rule 24 Certificate dated December 30, 1994 in 70-8375).

(d) 52 -- Agreement as to Expenses and Liabilities between Entergy Gulf States and Entergy Gulf States Capital I, dated as of January 28, 1997 (10(d)52 to Form 10-K for the year ended December 31, 1996 in 1-2703).

+(d) 53 -- Agreement between Entergy Services and Gerald D. McInvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-11299).

Entergy Louisiana (e) 1 Agreement, dated April 23, 1982, among" Entergy Louisiana land certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a) 1 to Form 10-K for the year ended December 31, 1982, in 1-3517).

(e) 2 -- Middle South Utilities. System Agency Agreement, dated December 11, 1970 (5(a)-2 in 2-41080).

(e) 3 -- Amendment, dated as of February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-4 in 2-41080).

(e) 4 - Amendment, dated May 12, 1988, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a) 4 in 2-41080).

E-27

(e) 5 -- Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).

(e) 6 -- Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)-5 in 2-42523).

(e) 7 -- Amendment, dated as of January 1, 1972, to Service Agreement with Entergy Services (4(a)-6 in 2-45916).

(10(a) 7 (e) 8 - Amendment, dated as of April 27, 1984, to Service Agreement with Entergy Services to Form 10-K for the year ended December 31, 1984, in 1-3517).

(10(d)-8 (e) 9 -- Amendment, dated as of August 1, 1988, to Service Agreement with Entergy Sejvices to Form 10-K for the year ended December 31, 1988, in 1-8474).

(e) 10 -- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(d)-9 to Form 10-K for the year ended December 31, 1990, in 1-8474).

(e) 11 - Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a)-Il to Form 10-K for the year ended December 31, 1994 in 1-3517).

(e) 12 through (e) 24 - See 10(a)-12 through 10(a)-24 above.

(e) 25 -- Fuel Lease, dated as of January 31, 1989, between River Fuel Company #2, Inc., and Entergy Louisiana (B-1(b) to Rule 24 Certificate in 70-7580).

(e) 26-- Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-l(a) in 70-6624).

(e) 27 -- Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K, dated June 4, 1982, in 1-8474).

31, 1983, in

+(e) 28-- Post-Retirement Plan (10(c)23 to Form 10-K for the year ended December 1-8474).

(e) 29-- Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a) 39 to Form 10-K for the year ended December 31, 1982, in 1-3517).

(e) 30 - First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended Septembdr 30, 1984, in 1-3517).

(e) 31 -- Revised Unit Power Sales Agreement (10(ss) in 33-4033).

(e) 32-- Middle South Utilities, Inc. and Subsidiary Companies Intercompany Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987).

E-28

(e) 33 -- First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated January 1, 1990 (D-2 to Form U5S for the year ended December 3 1, 1989).

(e) 34-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

(e) 35-- Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 3 1, 1993).

(e) 36 - Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated February 2, 1984, among DOE, System Fuels and Entergy Louisiana (10(d)33 to Form 10-K for the year ended December 31, 1984, in 1-8474).

(e) 37 -- Operating Agreement between Entergy Operations and Entergy Louisiana, dated as of June 6, 1990 (B-2(c) to Rule 24 Certificate, dated June 15, 1990, in 70-7679).

(e) 38-- Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a), to Rule 24 Certificate, dated September 27, 1990, in 70-7757).

+(e) 39-- Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a) 52 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(e) 40 - Entergy Corporation Annual Incentive Plan (10(a) 54 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(e) 41 - Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4(a) to Rule 24 Certificate, dated May 24, 1991, in 70-783 1).

+(e) 42 - Supplemental Retirement Plan (10(a) 69 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 43 - Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a) 53 to Form 10-K for the year ended December 31, 1989 in 1-3517).

+(e) 44-- Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a) 71 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 45 - Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a) 72 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 46-- Executive Medical Plan of Entergy Corporation and Subsidiaries (10(a) 73 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 47-- Stock Plan for Outside Directors of Entergy Corporation and Subsidiaries (10(a) 74 to Form 10-K for the year ended December 31, 1992 in 1-3517).

E-29

+(e) 48-- Summary Description of Private Ownership Vehicle Plan of Entergy Corporation and Subsidiaries (10(a) 75 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 49 -- Agreement between Entergy Corporation and Edwin Lupberger (I 0(a) 42 to Form 10-K for the year ended December 31, 1985 in 1-3517).

+(e) 50 -- Agreement between Entergy Corporation and Jerry D. Jackson (10(a) 67 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(e) 51 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a) 68 to Form 10-K for the year ended-December 31, 1992 in 1-3517).

+(e) 52 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-11299).

+(e) 53 -- Agreement between System Energy and Donald C. Hintz (10(b) 47 to Form 10-K for the year ended December 31, 1991 in 1-9067).

+(e) 54-- Summary Description of Retired Outside Director Benefit Plan (10(c)90 to Form 10-K for the year ended December 31, 1992 in 1-10764).

+(e) 55 -- Amendment to Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries 81 to Form 10-K for the year ended December 31, 1993 in 1-11299).

+(e) 56 -- System Executive Retirement Plan (10(a) 82 to Form 10-K for the year ended December 31, 1993 in 1-11299).

(e) 57 -- Installment Sale Agreement, dated July 20, 1994, between Entergy Louisiana and St. Charles Parish, Louisiana (B-6(e) to Rule 24 Certificate dated August 1, 1994 in 70-7822).

(e) 58-- Installment Sale Agreement, dated November 1, 1995, between Entergy Louisiana and St.

Charles Parish, Louisiana (B-6(a) to Rule 24 Certificate dated December 19, 1995 in 70 8487).

(e) 59- Agreement as to Expenses and Liabilities between Entergy Louisiana, Inc. and Entergy Louisiana Capital I dated July 16, 1996 (4(d) to Form 10-Q for the quarter ended June 30, 1996 in 1-8474).

Entergy Mississippi (f) 1 - Agreement dated April 23, 1982, among Entergy Mississippi and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a) I to Form 10-K for the year ended December 31, 1982, in 1-3517).

(f) 2 -- Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-2 in 2-41080).

(f) 3 - Amendment, dated February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a) 4 in 2-41080).

E-30

(f) 4 -- Amendment, dated May 12, 1988, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a) 4 in 2-41080).

(f) 5 -- Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).

(f) 6 -- Service Agreement with Entergy Services, dated as of April 1, 1963 (D in 37-63).

(f) 7 -- Amendment, dated January 1, 1972, to Service Agreement with Entergy Services (A to Notice, dated October 14, 1971, in 37-63).

(f) 8 -- Amendment, dated April 27, 1984, to Service Agreement with Entergy Sercices (10(a) 7 to Form 10-K for the year ended December 31, 1984, in 1-3517).

(f) 9 -- Amendment, dated as of August 1, 1988, to Service Agreement with Entergy Services (10(e) 8 to Form 10-K for the year ended December 31, 1988, in 0-320).

(f) 10-- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(e) 9 to Form 10-K for the year ended December 31, 1990, in 0-320).

(f) 11 -- Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a)-lI to Form 10-K for the year ended December 31, 1994 in 1-3517).

(f) 12 though (f) 24-- See 10(a) 10(a)-24 above.

(f) 25-- Installment Sale Agreement, dated as of June 1, 1974, between Entergy Mississippi and Washington County, Mississippi (B-2(a) to Rule 24 Certificate, dated August 1, 1974, in 70 5504).

(f) 26 - Installment Sale Agreement, dated as of July 1, 1982, between Entergy Mississippi and Independence County, Arkansas, (B-l(c) to Rule 24 Certificate dated July 21, 1982, in 70 6672).

(f) 27 -- Installment Sale Agreement, dated as of December 1, 1982, between Entergy Mississippi and Independence County, Arkansas, (B-l(d) to Rule 24 Certificate dated December 7, 1982, in 70-6672).

(f) 28 - Amended and Restated Installment Sale Agreement, dated as of April 1, 1994, between Entergy Mississippi and Warren County, Mississippi, (B-6(a) to Rule 24 Certificate dated May 4, 1994, in 70-7914).

(f) 29-- Amended and Restated Installment Sale Agreement, dated as of April 1, 1994, between Entergy Mississippi and Washington County, Mississippi, (B-6(b) to Rule 24 Certificate dated May 4, 1994, in 70-7914).

(f) 30 -- Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B-3(a) in 70-6337).

E-3 1

(f) 31 -- Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c) 51 to Form 10-K for the year ended December 31, 1984, in 0-375).

(f) 32-- Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c) 54 to Form 10-K for the year ended December 31, 1984, in 0-375).

(f) 33 -- Owners Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi and other co- owners of the Independence Station (10(c) 55 to Form 10-K for the year ended December 31, 1984, in 0-375).

(f) 34-- Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company 15f New York, as Trustee (10(c) 56 to Form 10-K for the year ended December 31, 1984, in 0-375).

(f) 35 -- Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624).

+(f) 36-- Post-Retirement Plan (10(d) 24 to Form 10-K for the year ended December 31, 1983, in 0-320).

(f) 37 -- Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a) 39 to Form 10-K for the year ended December 31, 1982, in 1-3517).

(f) 38 -- First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984, in 1-3517).

(f) 39 -- Revised Unit Power Sales Agreement (10(ss) in 33-4033).

(f) 40 -- Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate, dated June 26, 1974, in 70-5399).

(f) 41-- Service Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (E to Rule 24 Certificate, dated June 26, 1974, in 70-5399).

(f) 42-- Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate dated January 8, 1987, in 70-5399).

(f) 43 -- Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987).

(f) 44-- First Amendment dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Tax Allocation Agreement "(D-2 to Form U5S for the year ended December 31, 1989).

(f) 45-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

E-32

(f) 46-- Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993).

+(f) 47-- Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a) 52 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(f) 48-- Entergy Corporation Annual Incentive Plan (10(a) 54 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(f) 49- Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4fa) to Rule 24 Certificate, dated May 24, 1991, in 70-783 1).

+(f) 50 -- Supplemental Retirement Plan (10(a)69 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 51-- Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a)53 to Form 10-K for the year ended December 31, 1989 in 1-3517).

+(f) 52-- Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a)71 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 53 - Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)72 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 54-- Executive Medical Plan of Entergy Corporation and Subsidiaries (10(a)73 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 55-- Stock Plan for Outside Directors of Entergy Corporation and Subsidiaries, as amended (10(a)74 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 56- Summary Description of Private Ownership Vehicle Plan of Entergy Corporation and Subsidiaries (10(a)75 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 57-- Agreement between Entergy Corporation and Edwin Lupberger (10(a)-42 to Form 10-K for the year ended December 31, 1985 in 1-3517).

+(f) 58 -- Agreement between Entergy Corporation and Jerry D. Jackson (10(a)-67 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 59 -- Agreement between Entergy Services and Gerald D. McInvale (10(a)-68 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(f) 60 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-11299).

+(f) 61 - Agreement between System Energy and Donald C. Hintz (10(b)-47 to Form 10-K for the year ended December 31, 1991 in 1-9067).

E-33

+(f) 62 -- Summary Description of Retired Outside Director Benefit Plan (10(c)-90 to Form 10-K for the year ended December 31, 1992 in 1-10764).

+(f) 63 -- Amendment to Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a) 81 to Form 10-K for the year ended December 31, 1993 in 1-11299).

+(f) 64 -- System Executive Retirement Plan (10(a) 82 to Form 10-K for the year ended December 31, 1993 in 1-11299).

Entergy New Orleans (g) I -- Agreement, dated April 23, 1982, among Entergy New Orleans and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)-i to Form 10-K for the year ended December 31, 1982, in 1-3517).

(g) 2 -- Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-2 in 2-41080).

(g) 3 -- Amendment dated as of February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a)-4 in 2-41080).

(g) 4 -- Amendment, dated May 12, 1988, to Middle South Utilities System Agency Agreement, dated December 11, 1970 (5(a) 4 in 2-41080).

(g) 5 -- Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).

(g) 6 -- Service Agreement with Entergy Services dated as of April 1, 1963 (5(a)-5 in 2-42523).

(g) 7 -- Amendment, dated as of January 1, 1972, to Service Agreement with Entergy Services (4(a)-6 in 2-45916).

(g) 8-- Amendment, dated as of April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984, in 1-35 17).

(g) 9-- Amendment, dated as of August 1, 1988, to Service Agreement with Entergy Services (10(f)-8 to Form 10-K for the year ended December 31, 1988, in 0-5807).

(g) 10-- Amendment, dated January 1, 1991, to Service Agreement with Entergy Services (10(f)-9 to Form 10-K for the year ended December 31, 1990, in 0-5807).

(g) 11 -- Amendment, dated January 1, 1992, to Service Agreement with Entergy Services (10(a)-i to Form 10-K for year ended December 31, 1994 in 1-3517).

(g) 12 through (g) 24-- See 10(a) 10(a)-24 above.

(g) 25-- Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-l(a) in 70-6624).

E-34

+(g) 26 - Post-Retirement Plan (10(e) 22 to Form 10-K for the year ended December 31, 1983, in 1-1319).

(g) 27 -- Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a) 39 to Form 10-K for the year ended December 31, 1982, in 1-3517).

(g) 28 -- First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form I0-Q for the quarter ended September 30, 1984, in 1-3517).

(g) 29 -- Revised Unit Power Sales Agreement (10(ss) in 33-4033). L (g) 30 -- Transfer Agreement, dated as of June 28, 1983, among the City of New Orleans, Entergy New Orleans and Regional Transit Authority (2(a) to Form 8-K, dated June 24, 1983, in 1-1319).

(g) 31 -- Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987).

(g) 32-- First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989).

(g) 33-- Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992).

(g) 34-- Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993).

+(g) 35 -- Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a)52 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(g) 36-- Entergy Corporation Annual Incentive Plan (10(a)54 to Form 10-K for the year ended December 31, 1989, in 1-3517).

+(g) 37-- Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4(a) to Rule 24 Certificate, dated May 24, 1991, in 70-7831).

+(g) 38 -- Supplemental Retirement Plan (10(a)69 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 39-- Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a)53 to Form 10-K for the year ended December 31, 1989 in 1-3517).

+(g) 40-- Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a)71 to Form 10-K for the year ended December 31, 1992 in 1-3517).

E-3 5

+(g) 41 -- Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)72 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 42-- Executive Medical Plan of Entergy Corporation and Subsidiaries (10(a)73 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 43-- Stock Plan for Outside Directors of Entergy Corporation and Subsidiaries, as amended (10(a)74 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 44-- Summary Description of Private Ownership Vehicle Plan of Entergy Corporation and Subsidiaries (10(a)75 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 45-- Agreement between Entergy Corporation and Edwin Lupberger (10(a)-42 to Form 10-K for the year ended December 31, 1985 in 1-3517).

+(g) 46 -- Agreement between Entergy Corporation and Jerry D. Jackson (10(a)-67 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 47 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1992 in 1-3517).

+(g) 48 -- Agreement between Entergy Services and Gerald D. Mclnvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-1.1299).

+(g) 49 -- Agreement between System Energy and Donald C. Hintz (10(b)-47 to Form 10-K for the year ended December 31, 1991 in 1-9067).

+(g) 50 -- Summary Description of Retired Outside Director Benefit Plan (10(c)-90 to Form 10-K for the year ended December 31, 1992 in 1-10764).

+(g) 51 -- Amendment to Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a) 81 to Form 10-K for the year ended December 31, 1993 in 1-11299).

+(g) 52-- System Executive Retirement Plan (10(a) 82 to Form 10-K for the year ended December 31, 1993 in 1-11299).

Entergy London (h) 1 -- London Electricity Public Electricity Supply ("PES") License dated March 26, 1990, as revised through January 8, 1996 (10.01 in File No. 333-33331).

(h) 2 -- Modifications to the PES License issued to London Electricity effective October 1997 (10.02 in File No. 333-33331).

(h) 3 -- Second-Tier License to Supply Electricity for London Electricity dated March 25, 1991 (10.03 in File No. 333-3333 1).

(h) 4 - Pooling and Settlement Agreement dated March 30, 1990, as amended and restated at October 17, 1996, and as supplemented through July 28, 1997 among the Generators named therein, the Suppliers named therein (including London Electricity), Energy Settlements and E-36

Information Services (as Settlement System Administrator), Energy Pool Funds Administration Limited (as Pool Funds Administrator), The National Grid Company plc (as Grid Operator and Ancillary Services Provider), London Electricity and Other Parties (10.04 in File No.

333-33331).

(h) 5 -- Master Connection and Use of System Agreement dated as of March 30, 1990 among The National Grid Company plc and its users (including London Electricity) (10.05 in File No.

333-33331).

(h) 6 -- Master Agreement dated as of October 25, 1995 among The National Grid Holding plc, The National Grid Company plc, London Electricity and the other RECs (kLO.06 in File No.

333-33331).

(h) 7 -- Memorandum of Understanding between the National Grid Group plc, London Electricity and each of the RECs, dated November 17, 1995 (10.07 in File No. 333-3333 1).

+(h) 8 -- Agreement between Entergy Services and Gerald D. McInvale (10(a)-68 to Form 10-K for the year ended December 31, 1997 in 1-11299).

(12) Statement Re Computation of Ratios

• (a) Entergy Arkansas's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined.

• (b) Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined.

• (c) Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined.

• (d) Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined.

• (e) Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined.

• (f) System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined.

• (g) Entergy London's Computation of Ratios of Earnings to Fixed Charges, as defined.

• (21) Subsidiaries of the Registrants (23) Consents of Experts and Counsel

• (a) The consent of Coopers & Lybrand L.L.P. is contained herein at page 250.

• (24) Powers of Attorney E-37

(27) Financial Data Schedule

• (a) Financial Data Schedule for Entergy Corporation and Subsidiaries as of December 31, 1997.

• (b) Financial Data Schedule for Entergy Arkansas as of December 31, 1997.

• (c) Financial Data Schedule for Entergy Gulf States as of December 31, 1997.

• (d) Financial Data Schedule for Entergy Louisiana as of December 31, 1997.

• (e) Financial Data Schedule for Entergy Mississippi as of December 31, 1997.

• (f) Financial Data Schedule for Entergy New Orleans as of December 31, 1997.

• (g) Financial Data Schedule for System Energy as of December 31,1997.

• (h) Financial Data Schedule for Entergy London as of December 31, 1997.

• Filed herewith.

+ Management contracts or compensatory plans or arrangements.

... . - . .. , ..- , . . . .

E-38

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF rl THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 OR 0 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to R ftirAmt, SWe of 1ncorPat ms Empkle M1uma2 Address of Priacnal Executive Offie and Telenhone Number Identification No.

1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-2703 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation)

Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange Title of Class on Which Reeistered Registrant Entergy Corporation CVommon Stock, $0.01 Par Value - 235,117,712 New York Stock Exchange, Inc.

Shares outstanding at February 28, 1997 Chicago Stock Exchange Incorporated Pacific Stock Exchange Incorporated 8-1/2% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.

Entergy Arkansas Capital I Securities, Series A Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value:

$4.40 Dividend Series New York Stock Exchange, Inc.

$4.52 Dividend Series New York Stock Exchange, Inc.

$5.08 Dividend Series New York Stock Exchange, Inc.

$8.80 Dividend Series New York Stock Exchange, Inc.

New York Stock Exchange, Inc.

Adjustable Rate Series B (Depository Receipts)

Preference Stock, Cumulative, without Par Value New York Stock Exchange, Inc.

$1.75 Dividend Series 8.75% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.

Entergy Gulf States Capital I Securities, Series A 12.64% Preferred Stock, Cumulative, $25 Par New York Stock Exchange, Inc.

Entergy Louisiana, Inc.

Value 9% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.

Entergy Louisiana Capital I Securities, Series A Securities registered pursuant to Section 12(g) of the Act:

Registrant Title of Class Entergy Arkansas, Inc. Preferred Stock, Cumulative, $100 Par Value Preferred Stock, Cumulative, $25 Par Value Preferred Stock, Cumulative, $0.01 Par Value Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value Entergy Louisiana, Inc. Preferred Stock, Cumulative, $100 Par Value Preferred Stock, Cumulative, $25 Par Value Entergy Mississippi, Inc. Preferred Stock, Cumulative, $100 Par Value Entergy New Orleans, Inc. Preferred Stock, Cumulative, $100 Par Value

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. Yesj.. No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part EIl of this Form 10-K or any amendment to this Form IO-K. [ ]

The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non affiliates, was $6.2 billion based on the reported last sale price of such stock on the New York Stock Exchange on February 28, 1997. Entergy Corporation is the sole holder of the common stock of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc.

DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be held May 9, 1997, are incorporated by reference into Part III hereof.

TABLE OF CONTENTS Page Number Definitions Part 1I Item

1. Business Item 2. Properties 35 Item 3. Legal Proceedings 36 Item 4. Submission of Matters to a Vote of Security Holders 36 Part U Item 5. Market for Registrants' Common Equity and Related Stockholder Matters 36 Item 6. Selected Financial Data 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 182 Part m Item 10. Directors and Executive Officers of the Registrants 182

11. Executive Compensation 191 Item

12. Security Ownership of Certain Beneficial Owners and Management 198 Item Item 13. Certain Relationships and Related Transactions 202 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 203 203 Experts 204 Signatures 211 Consents of Experts 214 Report of Independent Accountants on Financial Statement Schedules S-1 Index to Financial Statement Schedules E-1 Exhibit Index Inc., Entergy Gulf This combined Form 10-K is separately filed by Entergy Corporation, Entergy Arkansas, Orleans, Inc., and System States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New is filed by such Energy Resources, Inc. Information contained herein relating to any individual company and makes no other company on its own behalf. Each company makes representations only as to itself representations whatsoever as to any other company.

of the subject This report should be read in its entirety. No one section of the report deals with all aspects matter.

respect to the revenues, Investors are cautioned that forward-looking statements contained herein with Entergy earnings, competitive performance, or other prospects for the business of Entergy Corporation, Entergy New Orleans, System Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, that could cause actual outcomes and Energy, or their affdiated companies may be influenced by factors are not limited to, the effects of results to be materially different than projected. Such factors include, but and the effects weather, the performance of generating units, fuel prices and availability, regulatory decisions changes in accounting of changes in law, capital spending requirements, the evolution of competition, standards, and other factors.

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 Algiers 15th Ward of the City of New Orleans, Louisiana ALJ Administrative Law Judge ANO Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas ANO I Unit No. I of ANO ANO 2 Unit No. 2 of ANO APB Accounting Principles Board APSC Arkansas Public Service Commission Availability Agrement Agreement, dated as of June 21, 1974, as amended, among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and the assignments thereof Cajun Cajun Electric Power Cooperative, Inc.

Capital Funds Agreement Agreement, dated as of June 21, 1974, as amended, between System Energy and Entergy Corporation, and the assignments thereof CitiPower CitiPower Ltd.

City of New Orleans or City New Orleans, Louisiana Council Council of the City of New Orleans, Louisiana D.C. Circuit United States Court of Appeals for the District of Columbia Circuit DOE United States Department of Energy domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively EPA Environmental Protection Agency EPAct Energy Policy Act of 1992 i

DEFINITIONS (Continued)

Abbreviation or Acronym Term Entergy Entergy Corporation and its various direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas Power & Light Company Entergy Corporation Entergy Corporation, a Delaware corporation, successor to Entergy Corporation, a Florida corporation Entergy Enterprises Entergy Enterprises, Inc.

Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf States Utilities Company (including wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil &

Gas, Inc., and Southern Gulf Railway Company)

Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana Power & Light Company Entergy Mississippi Entergy Mississippi, Inc., formerly Mississippi Power & Light Company Entergy New Orleans Entergy New Orleans, Inc., formerly New Orleans Public Service Inc.

Entergy Operations Entergy Operations, Inc.

Entergy Power Entergy Power, Inc.

Entergy Services Entergy Services, Inc.

EPMC Entergy Power Marketing Corporation ETHC Entergy Technology Holding Company EWG Exempt Wholesale Generator FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission FUCO Foreign Utility Company G&R General and Refunding Grand Gulf Grand Gulf Steam Electric Generating Station (nuclear), owned 90% by System Energy Grand Gulf 1 Unit No. 1 of Grand Gulf Grand Gulf 2 Unit No. 2 of Grand Gulf ii

DEFINITIONS (Continued)

Abbreviation or Acronym Term independence Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 11% by Entergy Power IRS Internal Revenue Service kWh kilowatt-hour(s)

London Electricity London Electricity plc LPSC Louisiana Public Service Commission MCF 1,000 cubic feet of gas Merger The combination transaction, consummated on December 31, 1993, by which Entergy Gulf States became a subsidiary of Entergy Corporation and Entergy Corporation became a Delaware corporation MPSC Mississippi Public Service Commission MW Megawatt(s)

Nelson Unit 6 Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, owned 70% by Entergy Gulf States NISCO Nelson Industrial Steam Company 1991 NOPSI Settlement Agreement, retroactive to October 4, 1991, among Entergy New Orleans, the Council, and the Alliance for Affordable Energy, Inc. (local consumer advocate group), which settled certain Grand Gulf 1 prudence issues and certain litigation related to the resolution adopted by the Council on February 4, 1988, disallowing Entergy New Orleans' recovery of $135 million of previously deferred Grand Gulf 1-related costs 1994 NOPSI Settlement Settlement effective January 1, 1995, between Entergy New Orleans and the Council in which Entergy New Orleans agreed to implement a permanent reduction in electric and gas rates and resolve disputes with the Council in the interpretation of the 1991 NOPSI Settlement NRC Nuclear Regulatory Commission PRP Potentially Responsible Party (a person or entity that may be responsible for remediation of environmental contamination)

PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended iii

DEFINITIONS (Concluded)

Abbreviation or Acronym Term PURPA Public Utility Regulatory Policies Act Rate Cap The level of Entergy Gulf States' retail electric base rates in effect at December 31, 1993, for the Louisiana retail jurisdiction, and the level of such rates in efb prior to the settlement agreement with the PUCT on July 21, 1994, for the Texas retail jurisdiction, which may not be exceeded before December 31, 1998 Reallocation Agreement 1981 Agreement, superseded in part by a June 13, 1985 decision of FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy relating to the sale of capacity and energy from Grand Gulf Ritchie 2 Unit No. 2 of the R. E. Ritchie Steam Electric Generating Station (gas/oil)

River Bend River Bend Steam Electric Generating Station (nuclear), owned 70% by Entergy Gulf States RUS Rural Utility Services (formerly the Rural Electrification Administration or "REA")

SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards, promulgated by the Financial Accounting Standards Board SMEPA South Mississippi Electric Power Agency System Agreement Agreement, effective January 1, 1.983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc.

System Fuels System Fuels, Inc.

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 1 Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, owned 90.7% by Entergy Louisiana. The remaining 9.3% undivided interest is leased by Entergy Louisiana.

iv

PART I Item 1. Business BUSINESS OF ENTERGY General Entergy Corporation is a Delaware corporation winch, through its direct and indirect subsidiaries, engages in the domestic and foreign electric utility business, other domestic energy-related enterprises, and telecommunications based businesses. It has no significant assets other than the stock of its subsidiaries. Entergy Corporation is registered as a public utility holding company under PUHCA. As such, Entergy Corporation and. its various direct and indirect subsidiaries (with the exception of its EWG, FUCO, and ETHC subsidiaries) are subject to the broad regulatory provisions of PUHCA. PUHCA historically has limited the operations of registered holding companies to a single, integrated public utility system and functionally related activities.

Domestic Operations and Investments Entergy Corporation has five wholly-owned domestic retail electric utility subsidiaries: Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. As of December 31, 1996, these utility companies provided retail electric service to approximately 2.4 million customers in portions of the states of Arkansas, Louisiana, Mississippi, Tennessee, and Texas. In addition, Entergy Gulf States furnishes natural gas utility service in and around Baton Rouge, Louisiana, and Entergy New Orleans furnishes natural gas utility service in New Orleans, Louisiana. The business of these domestic utility companies is subject to seasonal fluctuations, with the peak period occurring during the third quarter of each year. During 1996, these domestic utility companies' combined electric sales as a percentage of total electric sales were: residential - 26.5%; commercial - 19.9%; and industrial - 41.5%. Electric revenues from these sectors as a percentage of total electric revenues were: residential 35.3%; commercial - 24.4%; and industrial - 30.8%. Sales to governmental and municipal sectors and to nonaffiliated utilities accounted for the balance of energy sales. The major industrial customers of these companies are in the chemical processing, petroleum refining, paper products, and food products industries. The retail rates and services of Entergy's domestic retail utility subsidiaries are regulated by state and/or local utility regulatory bodies.

Entergy Corporation owns directly all of the common stock of Entergy Power, a Delaware corporation and domestic power producer that owns 725 MW of fossil-fueled generating assets located in Arkansas. Entergy Power markets electric capacity and energy in the wholesale market. Entergy Corporation also owns 100% of the voting stock of System Energy, an Arkansas corporation that owns and leases an aggregate 90% undivided interest in the Grand Gulf nuclear plant. System Energy sells the capacity and energy from its. interest in Grand Gulf 1 at wholesale to its only customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (see "CAPITAL REQUIREMENTS AND FUTURE FINANCING - Certain System Financial and Support Agreements - Unit Power Sales Agreement," below). Both Entergy Power's and System Energy's wholesale power sales are subject to the jurisdiction of FERC.

Entergy Services, Inc., a Delaware corporation wholly-owned by Entergy Corporation, provides general executive, advisory, administrative, accounting, legal, engineering, and other services primarily to the domestic utility companies of Entergy Corporation, but also to Entergy Enterprises. Entergy Operations, a Delaware corporation, is also wholly-owned by Entergy Corporation and provides nuclear management, operations and maintenance services under contract for ANO, River Bend, Waterford 3, and Grand Gulf 1, subject to the owner oversight of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy, respectively. Entergy Services and Entergy Operations provide their services to Entergy's domestic retail electric utility subsidiaries, generally at cost, pursuant to service agreements approved by the SEC under PUHCA.

-I -

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans own 350%, 33*/0, 191/6, and 13*/%, respectively, of the common stock of System Fuels, a subsidiary incorporated in Louisiana that implements and/or maintains certain programs to procure, deliver, and store fuel supplies for those companies and for Entergy Gulf States.

Entergy Gulf States has wholly-owned subsidiaries that (i) operate intrastate gas pipelines in Louisiana used primarily to transport fuel to two of Entergy Gulf States' generating stations; (ii) own the Lewis Creek Station, a gas-fired generating plant, which is leased to and operated by Entergy Gulf States; and (fii) own several miles of railroad track constructed in Louisiana for the purpose of transporting coal for use as boiler fuel at Entergy Gulf States' Nelson Unit 6 generating facility.

Entergy Enterprises is a wholly-owned nonutility subsidiary of Entergy Corporation incorporated under Louisiana law, which invests in and develops energy-related projects and businesses. Entergy Enterprises, directly or through subsidiaries, markets energy-related expertise, products, and services to third parties and provides services to certain nonutility companies owned by Entergy. Servicesprovided to third-parties include (i) energy management; (ii) management, operations and maintenance services for fossil and nuclear generating plants; and (iii) energy efficient lighting, heating, and cooling systems.

Entergy Power Marketing Corporation, a Delaware corporation, is a wholly-owned subsidiary of Entergy Corporation that is in the business of marketing electricity and generating fuels to third parties. It has applied to the SEC for authority to deal in a wide range of energy commodities and related financial products.

During 1996, Entergy entered into several telecommunications-based businesses, including primarily security monitoring firms operating in North and South Carolina, Alabama, and Florida. These businesses are owned through Entergy Technology Holding Company, a wholly-owned Delaware subsidiary of Entergy Corporation. Entergy Technology Holding Company intends to engage in a variety of telecommunications based enterprises that are exempt from regulation under PUHCA.

Foreien Operations and Investments Since 1993, Entergy Corporation has directly or indirectly acquired interests in a number of foreign utility businesses. Entergy Corporation's indirect wholly-owned Australian subsidiary, CitiPower, was acquired in 1996.

CitiPower is principally engaged in the electric distribution business in Melbourne, Australia, where it serves approximately 238,000 retail customers. Entergy Corporation also indirectly owns a 5% interest in Edesur, S.A.,

which is the retail electric distribution company for about 1.9 million customers in Buenos Aires, Argentina. In addition, on February 7, 1997, Entergy Corporation acquired a controlling stock interest in London Electricity plc, a

regional electric company that is principally engaged in the distribution of electricity for approximately 2 million customers in and around London, England. London Electricity also engages in other business activities, including ownership of an interest in a 1,000 MW gas-fired combined cycle generating station and several private electric distribution systems,.

Other foreign electric generation and transmission assets in which Entergy Corporation owns an interest are set forth below:

Investment Percent Ownership Argentina - Costanera, 1,260 MW 6%

Argentina - Costanera, expansion, 220 MW 10%

Pakistan - Hub River, 1,292 MW 7%

Peru - Edegel - 793 MW 21%

Argentina - Transener 10%

(transmission 5,000 miles)

As of December 31, 1996, Entergy Corporation had a net investment of $812 million in equity capital in businesses other than its domestic retail utility businesses. Entergy Corporation continues to seek opportunities to expand its domestic and foreign businesses that are not regulated by domestic state and local utility regulatory authorities. Entergy Corporation's continued acquisition of and investments in certain foreign and domestic businesses is subject to regulation (including the effect of exemptive provisions) under PUHCA.

international operations are subject to the risks inherent in conducting business abroad, including possible nationalization or expropriation, price and currency exchange controls, limitations on foreign participation in local energy-related enterprises, and other restrictions. Changes in the relative value of currencies occur from time to time and their effects may be favorable or unfavorable on the results of operations and statement of cash flows. In addition, there are exchange control restrictions in certain countries related to the repatriation of earnings.

Selected Data Selected domestic customer and sales data for 1996 are summarized in the following tables:

Customers as of December 31, 1996 Area Served Electric Gas Entergy Arkansas Portions of Arkansas and Tennessee 614,748 Portions of Texas and Louisiana 629,583 87,384 Entergy Gulf States Portions of Louisiana 617,378 Entergy Louisiana Portions of Mississippi 375,456 Entergy Mississippi Entergy New Orleans City of New Orleans, except Algiers, which is provided electric service by Entergy Louisiana 188,913 151,528 2,426,078 238,912 Total 1996 - Selected Electric Energy Sales Data Entergy Entergy Entergy Entergy Entergy System Louisiana iWsissippi New Orlean Energy Total (a)

Arkansm Gulf States (Mllions of kWh)

Electric DeparUnmet: - 96,326 Sales to retail customes 17,134 31,551 30,843 11,272 5,526 Sales for resale:

10,471 656 .143 1,368 66 8,302

- Affiliates

• 982 521

• 212 10,583

-Ote 6,720 2,148 31,968 13,161 5,804 8,302 106,909 Total 34,325 34,355 Steam Department:

- Sales to steam products custome - 1,826 - 1,826 31,968 13,161 5,804 8,302 108,735 TOTAL 34,325 36,181

-nm -NNMMX -E=0M Avenag use per residential - 13,455 custome (kWh) 11,497 14,673 14,579 13,613 11,696 (a) Includes the effect of intercompany eliminations.

Entergy New Orleans sold 18,192,798 MCF of natural gas to retail customers in 1996. Revenues from natural gas operations for each of the three years in the period ended December 31, 1996, were material for Entergy New Orleans, but not material for Entergy (see "INDUSTRY SEGMENTS" below for a description of Entergy New Orleans' business segments).

Entergy Gulf States sold 7,325,289 MCF of natural gas to retail customers in 1996. Revenues from natural gas operations for each of the three years in the period ended December 31, 1996, were not material for Entergy Gulf States.

See "ENTERGY CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE YEAR COMPARISON," and "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON. OF ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, and SYSTEM ENERGY," which follow each company's financial statements in this report, for further information with respect to operating statistics.

Employees As of December 31, 1996, Entergy had 13,363 employees as follows:

Full-time:

Entergy Corporation Entergy Arkansas 1,455 Entergy Gulf States 1,566 Entergy Louisiana 756 Entergy Mississippi 742 Entergy New Orleans 328 .

System Energy Entergy Operations 3,728 Entergy Services 2,940 Other subsidiaries 1,713 Total Full-time 13,228 Part-time 135 Total Entergy 13,363 Competition Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" for a detailed discussion of competitive challenges Entergy faces in the utility industry, including the recent filings of the domestic utility companies with their respective state and local regulatory authorities addressing transition to competition.

CAPITAL REQUIREMENTS AND FUTURE FINANCING Construction expenditures for the domestic utility companies and System Energy (including -environmental are estimated expenditures, which are immaterial, and AFUDC, but excluding nuclear fuel) for the period 1997-1999 as follows:

1997 1998 1999 Total (In Milnions)

Entergy Arkansas $159 $186 $196 $541 Entergy Gulf States 140 147 150 437 Entergy Louisian 102 99 99. 300 Entergy Mississippi 63 66 68 197 Entergy New Orleans 27 28 29 84 System Energy 19 21 23 63 in connection with the With the exception of Entergy Arkansas, no significant construction costs are expected replacement of ANO domestic utility companies' generating facilities. Projected construction expenditures for the See Note 9 for additional 2's steamn generators are included in Entergy Arkansas' estimated figures above. of factors, including information. Actual construction costs may vary from these, estimates because of a number to nuclear units to meet changes in load growth estimates, changes in environmental regulations, modifications In addition to and cost of capital.

regulatory requirements, increasing costs of labor, equipment and materials, stock maturites and preferred construction expenditure requirements, Entergy must meet scheduled long-term debt requirements and financing and cash sinking fuind requirements. See Notes 4, 5,6, and 7 for further capital information.

in, or make loans to, its Entergy Corporation's primary capital requirements are to invest periodically DISCUSSION AND subsidiaries and to invest in new enterprises. See "MANAGEMENT'S FINANCIAL of Entergy Corporation's ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES," for additional discussion The principal for such investments.

current and futture planned investments in its subsidiaries and financial sources such as the Certain events, source of fuinds for Entegy Corporation is dividend distributions from its subsidiaries. write-offs or Substantial River Bend issues discussed in Notes 2 and 9, could limit the amount of these distributions.

Gulf States' ability to pay charges resulting fromn adverse rulings in this matter could adversely affect Entergy dividends.

Certain System Financial and Supioort Agreements Mississippi, Entergy New Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Orleans, and System Energy) 90% ownership and The Unit Power Sales Agreement allocates capacity and: energy from System Energy's (36%), Entergy Louisiana (14%/),

leasehold interests in Grand Gulf 1 (and the related costs) to Entergy Arkansas Entergy Louisiana, Entergy Entergy Mississippi (33%/), and Entergy New Orleans (17%). Entergy Arkansas, entitlements of capacity Mfississippi, and Entergy New Orleans make payments to System Energy for their respective delivered, so long as Grand Gulf 1 adenergy on a full cost-of-service basis regardless of the quantity of energy Energy's only source remains in commercial operation. Payments under the Unit Power Sales Agreement, are System commercial operation of operating revenues. The financial condition of System Energy depends upon the continued Mississippi, and Louisiana, Entergy of Grand Gulf 1 and the receipt of payments from Entergy Arkansas, Entergy Mississippi, and Entergy Entergy New Orleans. Payments made by Entergy Arkansas, Entergy Louisiana, Entergy rates. In the case of Entergy New Orleans under the Unit Power Sales Agreement are generally recovered through of electricity from their respective Arkansas and Entergy Louisiana, payments are also recovered through sales shares.

retained shares of Grand Gulf 1. See Note 2 for further information regarding retained

IL-Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

The Availability Agreement among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans was entered into in 1974 in connection with the financing by System Energy of Grand Gulf. The Availability Agreement provided that System Energy would join in the System Agreement cn or before the date on which Grand Gulf I was placed in commercial operation. It also provided that System Energy would make available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans all capacity and energy available from System Energy's share of Grand Gulf.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans also agreed severally to pay System Energy monthly for the right to receive capacity and energy available from Grand Gulf in amounts that (when added to any amounts received by System Energy under the Unit Power Sales Agreement, or otherwise) would at least equal System Energy's total operating expenses for Grand Gulf (including depreciation at a specified rate) and interest charges.

Under the Availability Agreement, as amended to date:

- the obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans for payments for Grand Gulf 1 became effective upon commercial operation of Grand Gulf I on July 1, 1985;

- the sale of capacity and energy generated by Grand Gulf is governed by the Unit Power Sales Agreement;

- the September 1989 write-off of System Energy's investment in Grand Gulf 2, amounting to approximately $900 million, is being amortized for Availability Agreement purposes over 27 years rather than in the month the write-off was recognized on System Energy's books; and

- the allocation percentages under the Availability Agreement are fixed as follows: Entergy Arkansas 17.1%; Entergy Louisiana - 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%.

As noted above, the Unit Power Sales Agreement provides for different allocation percentages for sales of capacity and energy firom Grand Gulf 1. However, the allocation percentages under the Availability Agreemnmt remain in effect and would govern payments made under such agreement in the event of a shortfall of funds available to System Energy from other sources, including payments by Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to System Energy under the Unit Power Sales Agreement.

System Energy has assigned its rights to payments and advances from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under the Availability Agreement as security for its first mortgage bonds and reimbursement obligations to certain banks providing the letters of credit in connection with the equity funding of the sale and leaseback transactions described in Note 10 under "Sale and Leaseback Transactions Grand Gulf 1 Lease Obligations (System Energy)." In these assignments, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further agreed that, in the event they were prohibited by governmental action firom making payments under the Availability Agreement (if, for example, FERC reduced or disallowed such payments as constituting excessive rates), they would then make subordinated advances to System Energy in the same amounts and at the same times as the prohibited payments. System Energy would not be allowed to repay these subordinated advances so long as it remained in default under the related indebtedness or in other similar circumstances.

Each of the assignment agreements relating to the Availability Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans shall make payments directly to System Energy.

However, if there is an event of default, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy

New Orleans must make those payments directly to the holders of indebtedness that are the beneticianes or sucn assignment agreements. The payments must be made pro rata according to the amount of the respective obligations secured.

The obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make payments under the Availability Agreement are subject to the receipt and continued effectiveness of all necessary regulatory approvals. Sales of capacity and energy under the Availability Agreement would require that the Availability Agreement be submitted to FERC for approval with respect to the terms of such sale. No such filing with FERC has been made because sales of capacity and energy from Grand Gulf are being made pursuant to the Unit Power Sales Agreement. Other aspects of the Availability Agreement, including the obligations'of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make subordinated advances, are subject to the jurisdiction of the SEC under PUHCA, whose approval has been obtained. If, for any reason, sales of jurisdictional portions of the capacity and energy are made in the future pursuant to the Availability Agreement, the Availability Agreement would be submitted to FERC for approval.

to Since commercial operation of Grand Gulf 1 began, payments under the Unit Power Sales Agreement payments System Energy have exceeded the amounts payable under the Availability Agreement. Accordingly, no under the Availability Agreement by Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New of Entergy Arkansas, Entergy Orleans have ever been required. In the event such payments were required, the ability paid under the Louisiana, Entergy Mississippi, and Entergy New Orleans to recover from their customers amounts before Availability Agreement, or under the assignments thereof, would depend upon the outcome of rate proceedings that arose over the allocation of capacity and state and local regulatory authorities. In view of the controversies full recovery would be likely energy from Grand Gulf 1 pursuant to the Unit Power Sales Agreement, opposition to and the outcome of such proceedings, should they occur, is not predictable.

The Availability Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, upon obtaining the consent, if required, of those holders of System Energy's indebtedness then outstanding who have received the assignments of the Availability Agreement.

Capital Funds Agreement (Entergy Corporation and System Energy)

System Energy and Entergy Corporation have entered into the Capital Funds Agreement whereby Entergy Corporation has agreed to supply System Energy with sufficient capital to (i) maintain System Energy's equity debt) and (ii) permit capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term for borrowed money of System the continued commercial operation of Grand Gulf 1 and pay in full all indebtedness Energy when due under any circumstances.

Entergy Corporation has entered into various supplements to the Capital Funds, Agreement, and System Energy has assigned its rights under such supplements as security for its first mortgage bonds and for reimbursement and leaseback obligations to certain banks providing letters of credit in connection with the equity finding of the sale Transactions - Grand Gulf 1 Lease Obligations transactions described in Note 10 under "'Sale and Leaseback for borrowed money incurred by (System Energy)." Each such supplement provides- that permitted indebtedness rights under the System Energy in connection with the financing of Grand Gulf may be secured by System Energy's In addition, in the Capital Funds Agreement on a pro rata basis (except for the Specific Payments, as defined below).

being secured, Entergy Corporation supplements to the Capital Funds Agreement relating to the specific indebtedness to enable System Energy to make has agreed to make cash capital contributions directly to System Energy sufficient if there is an event of default, Entergy payments when due on such -indebtedness (Specific Payments). However, supplemental Corporation must make those payments directly to the holders of indebtedness benefiting from the rata according to the amount of the agreements. The payments (other than the Specific Payments) must be made pro respective obligations benefiting from the supplemental agreements.

The Capital Funds Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, upon obtaining the consent, if required, of those holders of System Energy's indebtedness then outstanding who have received the assignments of the Capital Funds Agreement.

RATE MATTERS AND REGULATION Rate Matters The domestic utility companies' retail rates are regulated by state and/or local regulatory authorities, as described below. FERC regulates their wholesale rates (including intrasystem sales pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy's sales of capacity and energy from Grand Gulf I to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement.

Wholesale Rate Matters System Enemy As described above under "CAPITAL REQUIREMENTS AND FUTURE FINANCING

- Certain System Financial and Support Aereements " System Energy. recovers costs related to its interest in Grand Gulf 1 through rates charged to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans for capacity and energy under the Unit Power Sales Agreement.

On December 12, 1995, System Energy implemented a $65.5 million rate increase, subject to refund. Refer to Note 2 for a discussion of the rate increase request filed by System Energy with FERC.

System Agreement (Energy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

The domestic utility companies engage in the coordinated plannin& construction, and operation of generation and transmission facilities pursuant to the terms of the System Agreement as described under "PROPERTY Generating Stations," below.

In connection with the Merger, FERC approved certain. rate schedule changes to integrate Entergy Gulf States into the System Agreement. Certain commitments were also adopted to assure that the ratepayers of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans will not be allocated higher costs.

Such commitments included: (i) a tracking mechanism to protect these companies from certain unexpected increases in fuel costs; (ii) the exclusion of Entergy Gulf States from the distribution of profits from power sales contracts entered into prior to the Merger; (iii) a methodology to estimate the cost of capital in future FERC proceedings; and (iv) a stipulation that these companies be insulated from certain direct effects on capacity equalization payments if Entergy Gulf States should acquire Cajun's 30% share in River Bend. See "Regulation

-.Other Regulation and Litigation," for information on appeals of FERC Merger orders and related pending rate schedule changes.

In the December 15, 1993, order approving the Merger, FERC also initiated a new proceeding to consider whether the System Agreement permits certain out-of-service generating units to be included in reserve equalization calculations under Service Schedule MSS-I of that agreement. In connection with this proceeding, the LPSC and the MPSC submitted testimony seeking retroactive refunds for Entergy Louisiana and Entergy Mississippi (estimated at

$22.6 million and $13.2 million, respectively). The FERC staff subsequently submitted testimony concluding that Entergy's treatment was reasonable. However, because it concluded that Entergy's treatment violated the tariff, FERC staff maintained that refunds of approximately $7.2 million should be ordered.

Entergy submitted testimony on September 23, 1994, describing the potential impacts (not including interest) on Service Schedule MSS-l calculations if extended reserve shutdown units were not included in the MSS-1 calc rations during the period 1987

through 1993. Under such a theory, Entergy Louisiana and Entergy Mississippi would have been overbilled by $10.6 and $8.8 million respectively, and Entergy Arkansas and Entergy New Orleans would have been underbilled by $6.3 and $13.1 million respectively. The amounts potentially subject to refund will continue to accrue. while the case is pending.

On March 3, 1995, a FERC ALJ issued an opinion holding that the practice of including the out-of-service units in the reserve equalization calculations during the period 1987 through 1993 was not permitted by Service Schedule MSS-1 and, therefore, constituted a violation of the System Agreement. However, the ALJ found that the violation was in good faith and had benefited the customers of Entergy as a whole. Accordingly, the ALU recommended that no retroactive refunds should be ordered. The ALJ also held that the System Agreement should be amended to allow out-of-service units to be included in reserve equalization as proposed in an offer of settlement filed by Entergy on February 16, 1994. The ALJ's opinion is subject to review by FERC. If FERC concurs with the finding that the System Agreement was violated, it would have the discretion to order that refunds be made. If that were to occur, certain domestic utility companies may be required to refund some or all of the amount by which they were underbilled pursuant to the System, Agreement. The domestic utility companies cannot determine at this time whether they would be authorized to recover through retail rates any amounts associated with refunds that might be ordered by FERC in this proceeding. The matter remains pending before FERC.

On March 14, 1995, the LPSC filed a complaint with FERC alleging that the System Agreement results in unjust and unreasonable rates and requested that FERC order a hearing on this matter. The LPSC contended that the failure of the System Agreement to exclude curtailable load from the determination of a domestic utility company's responsibility for reserve equalization and transmission equalization costs results in an unjust and unreasonable cost allocation to the domestic utility companies that does not cause these costs to be incurred, and also results incroiss subsidization among the domestic utility companies. Further, the LPSC alleged that the mechanism by which the domestic utility companies purchase energy under the System Agreement results in unjust and unreasonable rates because it does not permit domestic utility companies that engage in real time pricing to be charged the marginal cost of the energy generated for the real time pricing customer. In May 1995, the LPSC amended its original complaint, asserting that the System Agreement should be revised to exclude curtailable load from the cost allocation determination due to conflicts with federal policies under PURPA and with Entergy's system planning philosophy.

On August 5, 1996, FERC dismissed the LPSC's complaint and amended complaint. On September 30, 1996, FERC granted the LPSC's request for rehearing, solely for the purpose of affording FERC additional time for consideration of the matters raised on rehearing.

In June 1995, the APSC filed a complaint with FERC alleging that, because of changed circumstances, FERC's allocation of nuclear decommissioning costs is no longer just and reasonable. The APSC proposed that the System Agreement be amended to provide a new schedule that would equalize nuclear decommissioning costs according to load responsibility among the pre-Merger domestic utility companies. On December 17, 1996, the APSC notified FERC that it was withdrawing its complaint. The withdrawal became effective when FERC issued an order accepting the withdrawal on January 29, 1997.

Open Access Transmission (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

On August 2, 1991, Entergy Services, as agent for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Power, submitted to FERC (i) proposed tariffs that, subject to certain conditions, would provide to electric utilities "open access" to Entergy's integrated transmission system, and (ii) rate schedules providing for sales of wholesale power at market-based rates. FERC approved the filing in August 1992, and various parties filed appeals with the D.C. Circuit. The case was remanded to FERC in July 1994 for further proceedings. On October 31, 1994, Entergy Services, as agent for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, filed revised transmission tariffs. On January 6, 1995, FERC issued an order accepting the tariffs for filing and made them effective, subject to refund. These tariffs provide both point-to-point and network transmission service, and are intended to provide "comparability of service" over the Entergy transmission network. In that order, FERC also ordered that Entergy Power's market pricing

authority be investigated, thereby making Entergy Power's market price rate schedules subject to refund. An order in the market price rate investigation is expected to be issued in 1997. Entergy expects that no refunds relating to market base rates will be required.

On March 29, 1995, FERC issued a supplemental notice of proposed rulemaking (Mega-NOPR) which would require public utilities to provide non-discriminatory open access transmission service to wholesale customers, and which would also provide guidance on the recovery of wholesale and retail stranded costs. Under the proposal, public utilities would be required to file transmission tariffs for both point-to-point and network service. Model transmission tariffs were included in the proposal. With regard to pending proceedings, including Entergy's tariff proc*eding, FERC directed the parties to proceed with their cases while taking into account FERC's views expressed in the proposed rule. Hearings relating to Entergy Services' open access tariffs concluded on February 22, 1996, and an initial decision was issued by the ALJ on May 21, 1996. The initial decision and offers of partial settlement discussed below are now pending before FERC awaiting a final decision.

In September 1995 and January 1996, Entergy Services filed offers of partial settlement accepting certain provisions of the transmission tariffs contained in the Mega-NOPR and resolving certain rate issues. The remaining rate and tariff issues will be resolved as part of FERC's rulemaking in the Mega-NOPR, or after scheduled hearings.

In August 1995, EPMC filed an application for permission to make market-based sales, but subsequently asked that action not be taken on that request until the open access transmission service proceeding discussed above is resolved.

On December 13, 1995, Entergy Services filed revised transmission tariffs in a separate proceeding proposing terms and conditions for open access transmission service that are substantially identical to the terms and conditions contained in the Mega-NOPR transmission tariffs with rates to be the same as those determined in the pending proceeding. On February 14, 1996, FERC accepted for filing the revised transmission tariffs subject to the outcome of the pending proceeding and conditionally accepted EPMC's application for market-based sales. Subsequently, FERC accepted EPMC's application without condition.

In an April 1996 FERC order (Order No. 888), FERC issued its final rule on open access, nondiscriminatory transmission, and stranded costs. In July 1996, in response to this FERC order, Entergy Services filed, on behalf of the domestic utility companies, its open access pro forma tariff This tariff which supersedes the tariffs previously filed, is currently pending before FERC with respect to the rates for transmission service. The rates set forth in the July 1996 tariff are subject to the outcome of FERC action on the May 21, 1996 initial decision and the offers of partial settlement. On January 29, 1997, FERC accepted the non-rate terms and conditions of the July 1996 tariff, subject to limited modifications.

Retail Rate Matters General (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

Certain costs related to Grand Gulf 1, Waterford 3, and River Bend were phased into retail rates over a period of years in order to avoid the "rate shock" associated with increasing rates to reflect all such costs -at once.

The deferral period in which costs are incurred but not currently recovered has expired for all of these programs, and Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are now recovering those costs that were previously deferred.

Entergy Gulf States is involved in several rate proceedings involving, among other things, recovery of costs associated with River Bend. Some rate relief has been received, but Entergy Gulf States has been unable to obtain recognition in rates for a substantial portion of its River Bend investment. Recovery of certain costs was disallowed while other costs were deferred for future recovery, held in abeyance pending further regulatory action, or treated as investments in deregulated assets. Rate proceedings and appeals relating to these issues are ongoing as discussed in "EnterMv Gulf States" below.

As a means of minimizing the need for retail rate increases, Entergy is committed to containing costs to the greatest degree practicable. In accordance with this retail rate policy, some domestic utility-companies have agreed to retail rate caps and/or rate freezes for specified periods of time.

The retail regulatory philosophy is shitng in some jurisdictions from traditional cost-of-service regulation to iwntive-rate regulation. Management believes incentive and performance-based rate plans encourage efficiencies and productivity while permitting utilities and their customers to share in the resulting benefits. Entergy Mississippi and Entergy Louisiana have implemented incentive rate plans. Recognizing that many industrial customers have energy alternatives, Entergy continues to work with these customers to address their needs. In certain cases, competitive prices are negotiated using variable-rate designs.

Entergy has initiated proceedings with its state and local regulators regarding an orderly transition to a more competitive market for electricity. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS," for a discussion of the transition to competition filings made by Entergy Mississippi, Entergy Gulf States, Entergy Louisiana, and Entergy Arkansas with their state and local regulators.

Least Cost Integrated Resource Planning (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

Entergy continues to utilize integrated resource planning, also known as least cost planning, in order to compete more effectively in both retail and wholesale markets. Integrated resource planning is the development of integrated supply and demand side strategies to meet future electricity demands reliably, at the lowest possible cost, and in a more competitive manner.

In the fourth quarter of 1995, the domestic utility companies provided to their retail regulators (the APSC, the Council, the LPSC, the MPSC, and the PUCT) a new integrated resource plan, ("IRP"), for informational purposes only. The new IRP provides for a flexible resource strategy to meet Entergy's additional resource requirements over the next ten years. The integrated resource planning provides for the utilization of capacity currently in extended reserve shutdown to meet additional load growth, but also provides. the flexibility to rely on short-term power purchases, upgrades to existing nuclear capacity, or cogeneration when these resources are more economical.

Enterry Arkansas Rate Freeze In connection with the settlement of various issues related to the Merger, Entergy Arkansas agreed that it will not request any general retail rate increase that would take effect before November 3, 1998, except for certain instances. See Note 2 for a discussion of the rate freeze as well as other aspects of the settlement agreement between Entergy Arkansas and the APSC.

Recovery of Grand Gulf 1 Costs Under the settlement agreement entered into with the APSC in 1985 and amended in 1988, Entergy-Arkansas agreed to retain a portion of its Grand Gulf 1-related costs, recover a portion of such costs currently, and defer a portion of such costs for future recovery. In 1996 and subsequent years, Entergy Arkansas retains 22% of its 36%

interest in Grand Gulf I costs and recovers the remaining 78%. Deferrals ceased in 1990, and Entergy Arkansas is recovering a portion of the previously deferred costs each year through 1998. As of December 31, 1996, the balance of deferred costs was $228 million. Entergy Arkansas is permitted to recover on a current basis the incremental costs of financing the unrecovered deferrals.

Entergy Arkansas has the right to sell capacity and energy from its retained share of Grand Gulf I to third parties and to sell such energy to its retail customers at a price equal to Entergy Arkansas' avoided energy cost.

to Proceeds of sales to third parties of Entergy Arkansas' retained share of Grand Gulf I capacity and energy accrue the benefit of Entergy Arkansas' stockholder.

Fuel Adjustment Clause Entergy Arkansas' retail rate schedules include a fuel adjustment clause to recover the excess cost of fuel and purchased power incurred in the second prior month. The fuel adjustment clause also contains a nuclear reserve fund provision designed to cover the cost of replacement energy during refueling outages at ANO, and an incentive provision that rewards or penalizes Entergy Arkansas depending on the performance of ANO.

Eterge Gulf States Rate Cap and Other Merger-Related Rate Agreements the In 1993, the LPSC and the PUCT approved separate regulatory proposals, which included and implementation of a five-year Rate Cap on Entergy Gulf States' retail electric base rates in the respective states, provisions for passing fuel and nonfuel savings created by the Merger to the customers. See Note 2 for a discussion of the Rate Cap as well as other aspects of the settlement agreement between Entergy Gulf States and the LPSC and the PUCT.

Recovery of River Bend Costs Entergy Gulf States deferred approximately $369 million of River Bend operating and purchased power costs, depreciation, and accrued carrying charges, pursuant to a 1986 PUCT accounting order. Approximately $182 million of these costs are being amortized over a 20-year period, and the remaining $187 million was written off in the first quarter of 1996 in accordance with SFAS 121, as discussed below. As of December 31, 1996, the unamortized balance of the remaining costs was $117 million. Entergy Gulf States deferred approximately $400.4 million of similar costs pursuant to a 1986 LPSC accounting order, of which approximately $40 million was unamortized as of December 31, 1996, and are being amortized over a 10-year period ending in February 1998.

In accordance with a phase-in plan approved by the LPSC, Entergy Gulf States deferred $294 million of its River Bend costs related to the period February 1988 through February 1991. Entergy Gulf States has amortized

$225 million through December 31, 1996. The remainder of $69 million will be recovered in 1997 and early 1998.

Texas Jurisdiction - River Bend In 1988, the PUCT granted Entergy Gulf States a permanent increase in annual revenues of $59.9 million resulting from the inclusion in rate base of approximately $1.6 billion of company-wide River Bend plant investment and approximately $182 million of related Texas retail jurisdiction deferred River Bend costs (Allowed Deferrals).

At the same time, the PUCT disallowed as imprudent $63.5 million of company-wide River Bend plant costs and placed in abeyance, with no finding as to prudence, approximately $1.4 billion of company-wide River Bend plant investment and approximately $157 million of Texas retail jurisdiction deferred River Bend operating and carrying costs (Abeyed Deferrals).

The PUCT's order has been the subject of several appellate proceedings, culminating in an appeal to the Texas Supreme Court (Supreme Court). On January 31, 1997, the Supreme Court issued an opinion reversing the the PUCT's order and remanding the case to the PUCT for further proceedings. The Supreme Court found that PUCT had prejudiced Gulf States' rights by attempting to defer a ruling on the abeyed plant costs and incorrectly determined the amount of federal income tax expense that should have been allowed in rates. The Supreme Court the ruled that the PUCT could choose either to conduct hearings and take further evidence or to decide the case on filed a motion for rehearing of original evidence. On February 18, 1997, the Texas Office of Public Utility Counsel

the Supreme Court's decision, arguing that the Supreme Court's remand should have instructed the PUCT as to how the case should be dealt with on remand. Entergy Gulf States filed a brief in opposition to the motion for rehearing on February 25, 1997. Entergy Gulf States believes that it is unlikely that the Supreme Court will grant the motion for rehearing. No procedural schedule has yet been issued by the PUCT concerning the case on remand.

As of December 31, 1996, the River Bend plant costs disallowed for retail ratemaking purposes in Texas and the River Bend plant costs held in abeyance totaled (net of taxes and depreciation) approximately $12 million and

$266 million, respectively. The Allowed Deferrals were approximately $77 million, net of taxes and amortization, as of December 31, 1996. Entergy Gulf States estimates it has collected approximately $204 million of revenues as of December 31, 1996, as a result of the originally ordered rate treatment by the PUCT of these deferred costs. If recovery of the Allowed Deferrals is not upheld, future refunds could be required and future revenues based upon the Allowed Deferrals could also be lost. However, management believes that it is probable that the Allowed Deferrals will continue to be recovered in rates.

As a result of the application of SFAS 121, Entergy Gulf States wrote off Abeyed Deferrals of $169 million, net of tax, effective January 1, 1996. In light of the continuing' proceedings before the PUCT and the courts (including the January 31, 1997 decision of the Texas Supreme Court), Entergy Gulf States has made no write-offs or reserves for the River Bend plant-related costs. At this time, management and legal counsel are unable to predict the amount of the abeyed and previously disallowed River Bend plant costs that may ultimately be allowed in Entergy Gulf States' Texas retail rates.

In prior proceedings involving other utilities, the PUCT has held that the original cost of nuclear power plants will be recoverable in electric rates to the extent those costs were prudently incurred. Entergy Gulf States has previously filed with the PUCT a cost reconciliation study prepared by Sandlin Associates, management consultants with expertise in the cost analysis of nuclear power plants, which supports the reasonableness of the River Bend costs held in abeyance by the PUCT. This reconciliation study determined that approximately 82% of the River Bend cost increase above the amount included by the PUCT in rate base was a result of changes in federal nuclear safety requirements, and provided other support for the remainder of the abeyed amounts. In particular, there have been four other rate proceedings in Texas involving nuclear power plants. Disallowed investment in the plants ranged from 0% to 15%. Each case was unique, and the disallowances in each were made for different reasons. Appeals of two of these PUCT decisions are currently pending. Based upon the PUCT's prior decisions, management believes that River Bend construction costs were prudently incurred and that it is reasonably possible that it will recover through rates, or otherwise through means such as a deregulated asset plan, all or substantially all of the abeyed River Bend plant costs. In the event of an adverse ruling in this case, an after-tax write off, as of December 31, 1996, of up to $278 million could be required.

NISCO Unrecovered Costs In 1986, the PUCT ordered that the purchased power costs from NISCO in excess of Entergy Gulf States' avoided costs be disallowed. The PUCT disallowance resulted in approximately $12 million to $15 million of unrecovered purchased power costs on an annual basis, which Entergy Gulf States continued to expense as the costs were incurred. In April 1991, the Texas Supreme Court, on the appeal of such order, ordered the PUCT to allow Entergy Gulf States to recover purchased power payments in excess of its avoided cost in future proceedings if Entergy Gulf States established to the PUCT's satisfaction that the payments were reasonable and necessary expenses.

In January 1992, Entergy Gulf States applied to the PUCT for a new fixed fuel factor and requested a final reconciliation of fuel and purchased power costs incurred between December 1, 1986 and September 30, 1991.

Entergy Gulf States proposed to recover net under-recoveries and interest (including under-recoveries related to NISCO) over a twelve-month period. In June 1993, the PUCT concluded that the purchased power payments made to NISCO in excess of Entergy Gulf States' avoided cost were not reasonably incurred. In October 1993, Entergy of Gulf States appealed the PUCT's order to the Travis County District Court where the matter is still pending. As costs and December 31, 1996, Entergy Gulf States has expensed $140.8 million of unrecovered purchased power

deferred revenue pending the appeal to the District Court No assurance can be given as to the timing or outcome of the appeal.

Retail Rate Proceedings Refer to Note 2 for a discussion of additional retail rate proceedings which have been resolved during the current year and/or are currently outstanding in the regulatory jurisdictions in which Entergy Gulf States operates.

Fuel Recovery Entergy Gulf States' Texas rate schedules include a fixed fuel factor to recover fuel and purchased power costs not recovered in base rates. The fixed factor may be revised every six months in accordance with a schedule set by the PUCT for each utility. To the extent actual costs vary from the fixed factor, refunds or surcharges are required or permitted, respectively. Fuel costs are also subject to reconciliation proceedings every three years.

Entergy Gulf States' Louisiana electric rate schedules include a fuel adjustment clause to recover the cost of fuel and purchased power costs in the second prior month, adjusted by a surcharge for deferred fuel expense arising from the monthly reconciliation of actual fuel cost incurred with fuel revenues billed to customers. See Note 2 for a discussion of the LPSC fuel cost reviews.

Entergy Gulf States' Louisiana gas rates include a purchased gas adjustment to recover the cost of purchased gas.

Steam Customer Contract In August 1996, Entergy Gulf States entered into agreements with its only steam customer whereby a generating facility will be leased to such customer beginning in August 1997, the expiration date of the previous contract. As a result of these arrangements, Entergy Gulf States' annualized revenues are expected to decrease by approximately $33 million, and its net income is expected to be reduced by approximately $15 million annually. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," for a further discussion.

Entergy Louisiana Recovery of Grand Gulf I Costs In a series of LPSC orders, court decisions, and agreements from late 1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to costs associated with Waterford 3 and Entergy Louisiana's share of capacity and energy from Grand Gulf 1, subject to certain terms and conditions. With respect to Waterford 3, Entergy Louisiana was granted an increase aggregating $170.9 million over the period 1985-1988, and Entergy Louisiana agreed to permanently absorb, and not recover from retail ratepayers, $284 million of its investment in the unit and to defer $266 million of its costs related to the years 1985-1988 to be recovered from April 1988 through June 1997.

As of December 31, 1996, EntergyLouisiana's unrecovered deferral balance was $5.7 million.

With respect to Grand Gulf 1, Entergy Louisiana agreed to retain, and not recover from retail ratepayers, 18% of its 14% share, or approximately 2.52%, of the costs of Grand Gulf l's capacity and energy. Non-fuel operation and maintenance costs for Grand Gulf 1 are recovered through Entergy Louisiana's base rates.

Additionally, Entergy Louisiana is allowed to recover, through the fuel adjustment clause, 4.6 cents per kWh for the energy related to its retained portion of these costs. Alternatively, Entergy Louisiana may sell such energy to nonaffiliated parties at prices above the fuel adjustment clause recovery amount, subject to the LPSC's approval.

Performance-Based Formula Rate Plan In June 1995, in conjunction with the LPSC's rate review, a performance-based formula rate plan previously proposed by Entergy Louisiana was approved with certain modifications. See Note 2 for a discussion of Entergy Louisiana's performance-based formula rate plan.

Fuel Adjustment Clause Entergy Louisiana's rate schedules include a fuel adjustment clause to recover the cost of fuel and purchased power in the second prior month. The fuel adjustment also includes a surcharge for deferred fuel expense arising from the monthly reconciliation of actual fuel cost incurred with fuel revenues billed to customers.

Entergy Mississinpi Retail Rate Proceedings Refer to Note 2 for a discussion of the retail rate proceedings which have been resolved during the current year and/or are currently outstanding in the regulatory jurisdictions in which Entergy Mississippi operates.

Rate Freeze In connection with the settlement of various issues related to the Merger, Entergy Mississippi agreed that it for certain instances.

will not request any general retail rate increase to take effect before November 3, 1998, except Entergy See Note 2 for a discussion of the rate freeze as well as other aspects of the settlement agreement between Mississippi and the MPSC.

Recovery of Grand Gulf I Costs in The MPSC granted Entergy Mississippi an annual base rate increase of approximately $326.5 million also provided for the deferral of a portion of connection with its allocated share of Grand Gulf 1 costs. The MPSC over a period of six years such costs that were incurred each year through 1992, and recovery of these deferrals ending in 1998. As of December 31, 1996, the uncollected balance of Entergy Mississippi's deferred costs was deferred approximately $247 million. Entergy Mississippi is permitted to recover the carrying charges on all amounts on a current basis.

Formula Rate Plan Under a formulary incentive-rate plan (Formula Rate Plan) effective March 25, 1994, Entergy Mississippi's against a benchmark earned rate of return is calculated automatically every 12 months and compared to and adjusted Plan allows for rate~of return (calculated under a separate formula within the Formula Rate Plan). The Formula Rate returns to benchmark returns and upon periodic small adjustments in rates based on a comparison of actual earned plan filing for the 1995 test year.

certain performance factors. Refer to Note 2 for a discussion of the formula rate The formula rate plan filing for the 1996 test year will be filed in March 1997.

Fuel Adjustment Clause in the cost of fuel Entergy Mississippi's rate schedules include a fuel adjustment clause that recovers changes costs for the month, adjusted and purchased power. The monthly fuel adjustment rate is based on projected sales and prior month.

for differences between actual and estimated costs and kWh sales for the second

Entergy New Orleans Earnings Analysis Filings Refer to Note 2 for a discussion of the earnings analysis filings which have been resolved during the curren year and/or are currently outstanding in the regulatory jurisdiction in which Entergy New Orleans operates.

Recovery of Grand Gulf 1 Costs Under Entergy New Orleans' various rate settlements with the Council in 1986, 1988, and 1991, Entergy New Orleans agreed to absorb and not recover from ratepayers a total of $96.2 million of its Grand Gulf I costs.

Entergy New Orleans was permitted to implement annual rate increases in decreasing amounts each year through 1995, and to defer certain costs and related carrying charges, for recovery on a schedule extending from 1991 through 2001. As of December 31, 1996, the uncollected balance of Entergy New Orleans' deferred costs was $136 million. The 1994 NOPSI Settlement did not affect the scheduled Grand Gulf I phase-in rate increases.

Fuel Adjustment Clause Entergy New Orleans' electric rate schedules include a fuel adjustment clause to recover the cost of fuel in the second prior month, adjusted by a surcharge for deferred fuel expense arising from the monthly reconciliation of actual fuel incurred with fuel cost revenues billed to customers. The adjustment, on a monthly basis, also includes the difference between nonfuel Grand Gulf 1 costs paid by Entergy New Orleans and the estimate of such costs provided in Entergy New Orleans' Grand Gulf I rate settlements. Entergy New Orleans' gas rate schedules include an adjustmerit to reflect gas costs in excess of those collected in base rates, adjusted by a surcharge similar to that included in the electric fuel adjustment clause.

Reeulation Federal Regulation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Eatergy New Orleans, and System Energy)

PUHCA As a public utility holding company registered under PUHCA, Entergy Corporation and its various direct and indirect subsidiaries (with the exception of its EWG, FUCO, and ETHC subsidiaries) are subject to the broad regulatory provisions of PUHCA. Except with respect to investments in certain domestic power projects, foreign utility company projects, and telecommunication projects, PUHCA limits the operations of a registered holding company system to a single, integrated public utility system, plus additional systems and businesses.

Entergy Corporation andy other electric utility holding companies have supported legislation in the -United States Congress which would repeal PUHCA and transfer certain aspects of the oversight of public utility holding companies from the SEC to FERC. Entergy believes that PUHCA inhibits its ability to compete in the evolving electric energy marketplace and largely duplicates the oversight activities already performed by FERC and state and local regulators. In June 1995, the SEC adopted a report proposing options for the repeal or significant modification of PUHCA and proposed rule changes that would reduce the regulations governing utility holding companies. One rule change adopted as a result of such proposals eliminated the requirement to receive prior authorization for capital contributions made by a parent company to its nonutility subsidiary companies and for financing its nonutility subsidiary companies. Such rule was appealed to the D.C. Circuit by the City of New Orleans, and the appeal was subsequently denied in January 1996.

Federal PowerAt The domestiC utility companies, System Energy, Entergy Power, and EPMC are subject to the Federal power Act as administered by FERC. and the DOE. The Federal Power Act provides for regulatory jurisdiction over the licensing of certain hydroelectric projects, the transmission and wholesale sale of electric energy in interstate commerce, and certain other activities, including accounting policies and practices. Such regulation includes jurisdiction over the rates charged by System Energy for capacity and energy provided to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans from Grand Gulf 1.

Entergy Arkansas holds a license for two hydroelectric projects (70 MW) that was renewed on July 2, 1980.

This license, granted by FERC, expires in February 2003.

Regulation of the Nuclear Power Industry (Entergy Corporation, Entergy -Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)

Regulation of Nuclear Poe Under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974, operation of nuclear plants is intensively regulated by the NRC, which has broad power to impose licensing and safe~ty-related' requirements. In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy, as owners of all or a portion of ANO, River Bend, Waterford 3, and Grand Gulf 1, respectively, and Entergy Operations, as the licensee and operator of these units, are subject to the jurisdiction of the NRC. Revised safety requirements promulgated by the NRC have, in the past, necessitated substantial capital expenditures at these nuclear plants, and additional such expenditures could be.

required in the future.

The nuclear power industry faces uncertainties with respect to the cost and long-term availability of sites for disposal of speot nuclear fuel and other radioactive waste, nuclear plant operations, the technological and financial aspects of decommissioning plants at the end of their licensed lives, and requirements relating to nuclear insurance.

These matters are briefly discussed below.

Regulation of Snet Fuel and Other HighiLevel Radioactive Waste Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee,. to construct storage fatcilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. However, the DOE has not yet identified a permanent storage repository and, as a r esult, future expenditures may be required to increase spent fuel storage capacity at the plant sites. For fuirther information concerning spent fuel disposal contracts with the DOE, schedules for initial shipments of spent nuclear fuel, current on-site storage capacity, and costs of providing additional on-site storage, see Note 9.

Regulation of Low-Level Radioactive Waste The availability and cost of disposal facilities for low-level radioactive waste resulting from normal nuclear plant operations are subject to a number of uncertainties. Under the Low-Level Radioactive Waste Policy Act of 1980, as amended, each state is responsible for disposal of its own waste, and states may participate in regional compacts to fulfill. thei responsibilities jointly. The States of Arkansas. apd Louisiana participate mn the Central Interstate Low Level Radioactive Waste Compact (Central States Compact), and the State of Mississippi participates in the Southeast Low Level Radioactive Waste Compact (Southeast Compact). Two disposal sites are currently operating in the United States, but only one site, the Barnwell Disposal Facility (Barnwell), located in South Carolina and operated by the Southeast Compact, is open to out-of-region generators. The availability of Barnwell provides only temnporary relief from low-level radioactive waste storage and does not alleviate the need to develop new disposal capacity.

Both the Central States Compact and the Southeast Compact are working to establish additional disposal sites. Entergy, along with other waste generators, funds the development costs for new disposal facilities. To date, Entergy's expenditures for the development of new disposal facilities total approximately $50 million. Future levels of expenditures are difficult to predict. The current schedule for the site development in both the Central States Compact and the Southeast Compact projects that the new facilities will not be operational before 2000. Due to the political and emotional nature of siting low-level radioactive waste disposal facilities, future delays can be anticipated. Until long-term disposal facilities are established, Entergy will seek continued access to existing facilities. If such access is unavailable, Entergy will store low-level waste at its nuclear plant sites.

Regulation of Nuclear Plant Decommissioning Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy are recovering from ratepayers portions of their estimated decommissioning costs for ANO, River Bend, Waterford 3, and Grand Gulf 1, respectively. These amounts are deposited in trust funds that, together with the related earnings, can only be used for future decommissioning costs. Estimated decommissioning costs are periodically reviewed and updated to reflect inflation and changes in regulatory requirements and technology, and applications are periodically made to appropriate regulatory authorities to reflect in rates any future changes in projected decommissioning costs. For additional information with respect to decommissioning costs for ANO, River Bend, Waterford 3, and Grand Gulf 1, see Note 9.

The EPAct requires all electric utilities (including Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy) that purchased uranium enrichment services from the DOE to contribute up to a total of $150 million annually, adjusted for inflation, up to a total of $2.25 billion over approximately 15 years, for decontamination and decommissioning of enrichment facilities. In accordance with the EPAct, contributions to decontamination and decommissioning funds are recovered through rates in the same manner as other fuel costs. See Note 9 for the estimated annual contributions by Entergy for decontamination and decommissioning fees.

Nuclear Insurance The Price-Anderson Act limits public liability for a single nuclear incident to approximately $8.92 billion.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy have protection with respect to this liability through a combination of private insurance and an industry assessment program, and also have insurance for property damage, costs of replacement power, and other risks relating to nuclear generating units. For a discussion of insurance applicable to the nuclear programs of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy, see Note 9.

Nuclear Operations General (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)

Entergy Operations operates ANO, River Bend, Waterford 3, and Grand Gulf 1, subject to the owner oversight of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy, respectively. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy, and the other Grand Gulf I and River Bend co-owners, have retained their ownership interests in their respective nuclear generating units. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy have also retained their associated capacity and energy entitlements, and pay directly or reimburse Entergy Operations at cost for its operation of the units.

ANO Matters (Entergy Corporation and Entergy Arkansas)

Entergy Operations has made periodic inspections and repairs on ANO 2's steam generators. In October 1996, Entergy Corporation's Board of Directors authorized Entergy Operations to negotiate a contract, with appropriate cancellation provisions, for the fabrication and replacement of the steam generators at ANO 2. Entergy

Operations estimates the cost of fabrication and replacement of the steam generators to be approximately $150 million. A letter of intent for the fabrication has been signed by Entergy Operations, which includes a commitment for not more than $3.2 million, and a contract is expected to be entered into in 1997. If the contract to purchase the steam generators is not canceled, the steam generators will be installed during a planned refueling outage in 2000.

See Note 9 for additional information.

River Bend (Entergy Corporation and Entergy Gulf States)

In connection with the Merger, Entergy Gulf States filed two applications with the NRC in January 1993 to amend the River Bend operating license. The applications sought the NRC's consent to the Merger and to a change in the licensed operator of the facility from Entergy Gulf States to Entergy Operations. The NRC Staff issued the two license amendments for River Bend, which were effective immediately upon consummation of the Merger. On February 14, 1994, Cajun filed with the D.C. Circuit petitions for review of the two license amendments for River Bend. In March 1995, the D.C. Circuit ordered that the original NRC order and license amendments be set aside, and remanded the case to the NRC for further consideration. Subsequently, the NRC affirmed its original findings and reissued the two license amendments. Cajun and the Arkansas Cities and Cooperative filed petitions for review of those NRC orders with the D. C. Circuit. Pursuant to the Cajun Settlement, on an unopposed motion of the parties to the proceedings before the D.C. Circuit, the D.C. Circuit ordered' that the cases be removed from the calendar for oral argument and held in abeyance pending a further order of the court. The two license amendments are in full force and effect.

State Regulation (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

General Entergy Arkansas is subject to regulation by the APSC and the Tennessee Public Service Commission (TPSC). APSC regulation includes the authority to set rates, determine reasonable and adequate service, fix the value of property used and useful, require proper accounting, control leasing, control the acquisition or sale of any public utility plant or property constituting an operating unit or system, set rates of depreciation, issue certificates of convenience and necessity and certificates of environmental compatibility and public need, and control the issuance and sale of securities. Regulation by the TPSC includes the authority to set standards of service and rates for service to customers in the state, require proper accounting, control the issuance and sale of securities, and issue certificates of convenience and necessity.

Entergy Gulf States is subject to the jurisdiction of the municipal authorities of incorporated cities in Texas as to retail rates and services within their boundaries, with appellate jurisdiction over such matters residing in the PUCT. Entergy Gulf States is also subject to regulation by the PUCT as to retail rates and services in rural areas, certification of new generating plants, and extensions of service into new areas. Entergy Gulf States is subject to regulation by the LPSC as to electric and gas service, rates and charges, certification of generating facilities and power or capacity purchase contracts, depreciation, accounting, and other matters.

Entergy Louisiana is subject to regulation by the LPSC as to electric service, rates and charges, certification of generating facilities and power or capacity purchase contracts, depreciation, accounting, and other matters.

Entergy Louisiana is also subject to the jurisdiction of the Council with respect to such matters within Algiers.

Entergy Mississippi is subject to regulation as to service, service areas, facilities, and retail rates by the MPSC. Entergy Mississippi is also subject to regulation by the APSC as to the certificate of environmental compatibility and public need for the Independence Station.

Entergy New Orleans is subject to regulation by the Council as to electric and gas service, rates and charges, standards of service, depreciation, accounting, issuance of certain securities, and other matters.

Franchises Entergy Arkansas holds exclusive franchises to provide electric service in approximately 300 incorporated cities and towns in Arkansas. These franchises are unlimited in duration and continue until such a time when the municipalities purchase the utility property. In Arkansas, franchises are considered to be contracts and, therefore, are terminable upon breach of the contract.

Entergy Gulf States holds non-exclusive firanchises, permits, or certificates of convenience and necessity to provide electric and gas service in approximately 55 incorporated villages, cities, and towns in Louisiana and approximately 63 incorporated cities and towns in Texas. Entergy Gulf States ordinarily holds 50-year franchises in Texas and 60-year franchises in Louisiana. Entergy Gulf States' current electric franchises will expire during 2007 2036 in Texas and during 2015 - 2046 in Louisiana. The natural gas firanchise in the City of Baton Rouge will expire in 2015. In addition, Entergy Gulf States has received from the PUCT a certificate of convenience and necessity to provide electric service to areas within 21 counties in eastern Texas.

Entergy Louisiana holds non-exclusive franchises to provide electric service in approximately 116 incorporated villages, cities, and towns. Most of these municipal franchises have 25-year terms, although six municipalities have granted Entergy Louisiana 60-year fi-anchises. Entergy Louisiana also supplies electric service in approximately 353 unincorporated communities, all of which are located in parishes in which Entergy Louisiana holds non-exclusive franchises.

Entergy Mississippi has received from the MPSC certificates of public convenience and necessity to provide electric service to areas within 45 counties in western Mississippi, which include a number of municipalities. Under Mississippi statutory law, such certificates are exclusive. Entergy Mississippi may continue to serve in such municipalities upon payment of a statutory franchise fee, regardless of whether an original municipal franchise is still in existence.

Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to city ordinances, which state, among other things, that the City has a continuing option to purchase Entergy New Orleans' electric and gas utility properties.

System Energy has no distribution firanchises. Its business is currently limited to wholesale power sales.

Environmental Regulation General In the areas of air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters, the facilities and operations of Entergy are subject to regulation by various federal, state, and local authorities. Entergy believes that its affected subsidiaries are in substantial compliance with environmental regulations currently applicable to their respective facilities and operations. Because environmental regulations are subject to change, the ultimate compliance costs to Entergy cannot be precisely estimated. However, management currently estimates that ultimate capital expenditures for environmental compliance purposes, including those discussed in "Clean Air Lessation," below, will not be material for Entergy as a whole.

Clean Air Le-islation The Clean Air Act Amendments of 1990 (the Act) set up three programs that affect Entergy: an acid rain program for control of sulfur dioxide (SO 2) and nitrogen oxides (NOx), an ozone nonattainment area program for control of NOx and volatile organic compounds, and an operating permits program for administration and enforcement of these and other Clean Air Act programs.

Under the acid rain program, no additional control equipment is expected to be required by Entergy to control SO 2. The Act provides "allowances" to most of the affected Entergy generating units for emissions based upon past emission levels and operating characteristics. Each allowance is an entitlement to emit one ton of SO2 per year. Under the Act, utilities will be required to possess allowances for S02 emissions from affected generating units. All Entergy generating units are classified as "Phase 11" units under the Act and are subject to S02 allowance requiremnts beginning in the year 2000. Based on operating history, the domestic utility companies have been allocated more allowances than are currently necessary for normal operations. Management believes that it will be able to operate its units efficiently without installing scrubbers or purchasing allowances from outside sources, and that one or more of the domestic utility companies may have excess allowances.

Control equipment may eventually be required for NOx reductions due to the ozone o status of the areas served by Entergy Gulf States in and around Beaumont and Houston, Texas. Texas environmental authorities are studying the causes of ozone pollution and have deferred NOx controls on power plants until at least 1999. If Texas decides to regulate NOx, the cost of such control equipment for the affected Entergy Gulf States plants is estimated at $10.4 million through the year 2000.

Other Environmental Matters The provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), authorize the EPA and, indirectly, the states to require generators and certain transporters of certain hazardous substances released from or at a site, and the owners or operators of any such site, to clean-up the site or reimburse such clean-up costs. CERCLA has been interpreted to impose joint and several liability on responsible parties. Entergy sent waste materials to various disposal sites over the years. Also, certain operating procedures and maintenance practices, which historically were not subject to regulation, are now regulated by environmental laws. Some of these sites have been the subject of governmental action under CERCLA, as a result of which the domnestic utility companies have become involved with site clean-up activities. These companies have participated to various degrees in accordance with their respective potential liabilities in such site clean-ups and have developed experience with clean-up costs. The domestic utility companies have established reserves for such environmental clean-up/restoration activities. In the aggregate, the cost of such remediation is not considered material to these companies or to Entergy.

Entergy Arkansas Entergy Arkansas has received notices from time to time from the EPA, the Arkansas Department of Pollution Control and Ecology (ADPC&E), and others alleging that it, along with others, may be a PRP for clean-up costs associated with various sites in Arkansas. Most of these sites are neither owned nor operated by any Entergy company. Contaminants at the sites include polychlorinated biphenyls (PCBs), lead, and other hazardous substances.

At the, EPA's request, Entergy Arkansas voluntarily performed stabilization activities at the Benton Salvage site in Saline County, Arkansas. While the EPA has not named PRPs for this site, Entergy Arkansas has attempted to negotiate an agreement with the EPA. Entergy Arkansas and the EPA were unable to reach an agremenmt satisfactory to both parties. Region 6 EPA initiated its own clean-up of the site in October 1996. Entergy Arkansas does not believe that its potential liability with respect to this site will be material.

Reynolds Metals Company (Reynolds) and Entergy Arkansas notified the EPA in 1989 of possible PCB Arkansas contamination at two former Reynolds plant sites (Jones Mill and Patterson) in Arkansas to which Entergy at the substations serving the plant sites had supplied power. Subsequently, Entergy Arkansas completed remediation that flows from at a cost of $1.7 million. Additional PCB contamination was found in a portion of a drainage ditch the Patterson facility to the Ouachita River. Reynolds demanded that Entergy Arkansas participate in remediation efforts with respect to the ditch. Entergy Arkansas and independent contractors engaged by Entergy Arkansas the electrical conducted an investigation of the ditch contamination and the possible migration of PCBs from that none of the equipment that Entergy Arkansas maintained at the plant. The investigation concluded contamination was caused by Entergy Arkansas. Entergy Arkansas has thus far expended approximately $150,000

on investigation of the ditch. In May 1995, Entergy Arkansas was named as a defendant in a suit by Reynolds seeking to recover a share of its costs associated with the clean-up of hazardous substances at the Patterson site.

Reynolds alleges that it has spent $11.2 million to clean-up the site, and that Entergy Arkansas bears some responsibility for PCB contamination at the site. Entergy Arkansas believes that it has no liability for containation at the Patterson site and is contesting the lawsuit. An August 1997 trial date has been tentatively scheduled.

Entergy Arkansas entered into a Consent Administrative Order, dated February 21, 1991, with the ADPC&E that named Entergy Arkansas as a PRP for the initial stabilization associated with contamination at the Utilities Services, Inc. state Superfiznd site located near Rison, Arkansas. This site was found to have soil contaminated by PCBs and pentachlorophenol (a wood preservative). Containers and drums that contained PCBs and other hazardous substances were found at the site. Entergy Arkansas' share of total remediation costs is estimated not to exceed $5.0 million. Entergy Arkansas is attempting to identify and notify other PRPs with respect to this site. Entergy Arkansas has received assurances that the ADPC&E will use its enforcement authority to allocate remediation expenses among Entergy Arkansas and any other PRPs that can be identified. Approximately 20 PRPs have been identified to date.

Entergy Arkansas has performed the activities necessary to stabilize the site, at a cost of approximately $400,000.

Entergy Arkansas believes that its potential liability for this site will not be material.

Entergy Gulf States Entergy Gulf States has been designated by the EPA as a PRP for the clean-up of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the clean-up of these sites. Several class action and other suits have been filed in state and federal courts seeking relief from Entergy Gulf States and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States premises (see "Other Regulation and Litigation" below). While the amounts at issue may be substantial, Entergy Gulf States believes that its results of operations and financial condition will not be materially adversely affected by the outcome of the suits. As of December 31, 1996, a remaining recorded liability of $21.4 million existed relating to the clean-up of seven sites at which Entergy Gulf States has been designated a PRP.

In 1971, Entergy Gulf States purchased property near its Sabine generating station, known as the Bailey site, for possible expansion of cooling water facilities. Entergy Gulf States sold the property in 1984. In October 1984, an abandoned waste site on the property was included on the Superfimd National Priorities List (NPL) by the EPA.

Entergy Gulf States has pursued negotiations with the EPA and is a member of a task force with other PRPs for the voluntary clean-up of the waste site. A consent decree has been signed by all PRPs for the voluntary clean-up of the Bailey site. Remediation costs are currently expected to be approximately $33 million, however, federal and state agencies are still examining potential liabilities associated with natural resource damage. Entergy Gulf States is expected to be responsible for 2.26% of the estimated clean-up cost. This matter is currently under negotiation with the other PRPs and the agencies. Entergy Gulf States does not believe that its remaining responsibility with respect to this site will be material after allowance for the existing provision for clean-up in the amount of $629,000.

Entergy Gulf States is currently involved in a multi-phased remedial investigation of an abandoned manufactured gas plant (MGP) site, known as the Lake Charles Service Center, located in Lake Charles, Louisiana.

The property was the site of an MGP that is believed to have operated from approximately 1916 to 193 1. Coal tar, a by-product of the distillation process employed at MGPs, was apparently routed to a portion of the property for disposal. The same area has also been used as a landfill. Under an order issued by the Louisiana Department of Environmental Quality (LDEQ), which is currently stayed, Entergy Gulf States was required to investigate and, if necessary, take remedial action at the site. Preliminary estimates of remediation costs are approximately $20 million.

On February 13, 1995, the EPA published a proposed rule adding the Lake Charles Service Center to the NPL.

Another PRP has been identified and is believed to have had a role in the ownership and operation of the MGP.

Negotiations with that company for joint participation and possible remedial action have been held and are expected to continue. Entergy Gulf States has agreed to the terms of the Administrative Order on Consent (AOC) negotiated between Entergy and the EPA. The AOC is expected to be signed by both parties in 1997. Entergy Gulf States does

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not presently believe that its ultimate responsibility with respect to this site will be material after allowance for the existing provision for clean-up of $19.8 million.

Entergy Gulf States is currently involved in an initial investigation of an MGP site, known as the Old Jnnings Ice Plant, located in Jennings, Louisiana. The MGP site is believed to have operated from approximately 1909-1926. In July 1996, a petroleum-like substance was discovered on the surface soil, a notification was made to the LDEQ. The LDEQ was aware of this site based upon a survey performed by an environmental consultant for the EPA. Entergy Gulf States obtained the services of an environmental consultant to collect core samples and to perform a search of historical records to determine the type of operation that occurred at Jennings. Results of the core sampling are not final, but limited amounts of contamination were found on-site. Entergy Gulf States does not presently believe that its ultimate responsibility with respect to this site will be material. The amount of the existing provision for clean-up is $500,000.

Entergy Gulf States along with Entergy Louisiana has been named as a PRP for an abandoned waste oil recycling plant site in Livingston Parish, Louisiana, known as Combustion, Inc., which is included on the NPL.

Although most surface remediation has been completed, additional studies related to residual groundwater contamination are expected to continue in 1997. Entergy Gulf States and Entergy Louisiana have been named as defendants in a class action lawsuit lodged against a group of PRPs associated with the site. (For information regarding litigation in connection with the Combustion, Inc. site, see "Other Regulation and Litigation" below.)

Entergy Gulf States does not presently believe that its ultimate responsibility with respect to this site will be material.

Entergy Gulf States received notification in 1992 from the EPA of potential liability with respect to a site in Iota, Louisiana. This site was the depository of a variety of wastes, including medical and chemical wastes. During 1996, Entergy Gulf States paid approximately $45,000 to the EPA to settle its liability for this site.

Entergy Gulf States, along with Entergy Arkansas and Entergy Louisiana, has been notified of its potential Gulf States liability with respect to the Benton Salvage site located in Saline County, Arkansas. Although Entergy to be and Entergy Louisiana have had minor involvement in the Benton Salvage site, no remediation is expected required by these companies. See "Entergy Arkansas" above for a discussion of the Benton Salvage site.

Entergy Louisiana, Entergy New Orleans, and System Energy Entergy Louisiana, Entergy New Orleans, and System Energy have received notices from the EPA and/or the states of Louisiana and Mississippi that one or more of them may be a PRP for disposal sites that are neither owned nor operated by any Entergy subsidiary. In response to such notices, thesites discussed below have been remediated:

" Entergy Louisiana, along with Entergy Arkansas and Entergy Gulf States, was notified in 1990 of its potential liability relating to the Benton Salvage site located in Saline County, Arkansas. Although Entergy are Gulf States and Entergy Louisiana have been involved in the Benton Salvage site, their contributions considered minor. Therefore, no remediation action is required by these companies. See "Entergy Arkansas" above for a discussion of the Benton Salvage site.

" The EPA named Entergy Louisiana and System Energy as two of the 44 PRPs for the Disposal Systems, a

Inc. site in Mississippi. The State of Mississippi has indicated that it intends to have the PRPs conduct clean-up of the Disposal Systems, Inc. site but has not yet taken formal action. Entergy Louisiana has "settledits involvement in this matter with the EPA. The State of Mississippi is continuing to evaluate whether additional remediation measures are necessary. However, further remediation costs at the site are not expected to be material.

retired From 1992 to 1994, Entergy Louisiana performed site assessments and remedial activities at three municipal sites, previously owned and power plants, known as the Homer, Jonesboro, and Thibodaux part of the operated by Louisiana municipalities. Entergy Louisiana purchased the power plants as their useful lives.

acquisition of municipal electric systems after operating them for the last few years of

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The site assessments indicated some subsurface contamination from fuel oil. In December 1994, Entergy Louisiana completed all remediation work at Homer to the LDEQ's satisfaction and the LDEQ granted "No Further Action" status in February 1995. All remediation activities at the Jonesboro Plant were completed in May 1996. Remediation of the Thibodaux site is expected to be completed in 1998. The costs incurred through December 31, 1996 for the Homer, Jonesboro, and Thibodaux sites are $22,000, $156,000, and

$125,000, respectively. Remaining costs for both Homer and Jonesboro sites are considered immaterial.

Significant remedial activities are ongoing at the Thibodaux site.

There are certain disposal sites for which Entergy Louisiana and Entergy New Orleans have been named by the EPA as PRPs for associated clean-up costs, but management believes no liability exists in connection with these sites for Entergy Louisiana and Entergy New Orleans. Such Louisiana sites include Combustion Inc., an abandoned waste oil recycling plant site located in Livingston Parish (involving at least 70 PRPs, including Entergy Gulf States),

and the Dutchtown site (also included on the NPL and involving 57 PRPs). Entergy Louisiana has found no evidence of its involvement in the Combustion Inc. site. (For information regarding litigation in connection with the Livingston Parish site, see "Other Regulation and Litigation," below). With respect to the Dutchtown site, Entergy New Orleans believes it has no liability because the material it sent to this site was not a hazardous substance.

During 1993, the LDEQ issued new rules for solid waste regulation, including regulation of waste water impoundments. Entergy Louisiana has determined that certain of its power plant waste water impoundments were affected by these regulations and has chosen to upgrade or close them. As a result, a remaining recorded liability in the amount of $6.7 million existed at December 31, 1996, for waste water upgrades and closures to be completed by the end of 1997. Cumulative expenditures relating to the upgrades and closures of waste water impoundments were

$7.1 million as of December 31, 1996.

Other Regulation and Litigation Merger (Entergy Corporation and Entergy Gulf States)

In July and August 1992, applications were filed with FERC, the LPSC, the PUCT, and the SEC under PUHCA, seeking authorization of various aspects of the Merger. In January 1993, Entergy Gulf States filed two applications with the NRC seeking approval of the change in ownership of Entergy Gulf States and an amendment to the operating license for River Bend to reflect its operation by Entergy Operations. All regulatory approvals were obtained in 1993 and the Merger was consummated on December 31, 1993.

FERC's orders approving the Merger were appealed to the D.C. Circuit by Entergy Services, the City, the Arkansas Electric Energy Consumers (AEEC), the APSC, Cajun, the MPSC, the American Forest and Paper Association, the State of Mississippi, the City of Benton and other cities, and Occidental Chemical Corporation (Occidental). Entergy Services sought review of FERC's deletion of a 40% cap on the amount of fuel savings Entergy Gulf States may be required to transfer to other Entergy domestic utility companies under a tracking mechanism designed to protect the other companies from certain unexpected increases in fuel costs. The other parties sought to overturn FERC's decisions on various grounds, including the issues of whether FERC appropriately conditioned the Merger to protect various interested parties from alleged harm and FERC's reliance on Entergy's transmission tariff to mitigate any potential anticompetitive impacts of the Merger.

On November 18, 1994, the D. C. Circuit denied motions filed by Cajun, Occidental, and AEEC for a remand to FERC and a partial summary grant of the petitions for review. At the same time, the D.C. Circuit ordered that the cases be held in abeyance pending FERC's issuance of (i) a final order on remand' in the proceedings on Entergy's transmission tariff (see discussion of tariff case in "RATE MATTERS AND REGULATION - Rate Matters - Wholesale Rate Matters - Open Access Transmission" above), and (ii) a final order on competition issues in the proceedings on the Merger.

On December 30, 1993, Entergy Services submitted to FERC tariff revisions to comply with FERC's order dated December 15, 1993, approving the Merger. On February 4, 1994, the APSC and AEEC filed with FERC a

joint protest to the compliance'filing, alleging that Entergy should be required to insulate the ratepayers of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans from all litigation liabilities related to Entergy Gulf States' River Bend nuclear facility. In its May 17, 1994, order on rehearing, FERC addressed Entergy's commitment to insulate the customers of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans against liability resulting from certain litigation involving River Bend. In response to FERC's clarification of Entergy's commitment, Entergy Services filed a new compliance filing on June 16, 1994. APSC and AEEC subsequently filed protests questioning the adequacy of Entergy's June 16, 1994, compliance filing. FERC has not yet acted on the compliance filings.

Requests for rehearing of the SEC order approving the Merger were filed with the SEC by Houston Industries Incorporated and its subsidiary Houston Lighting & Power Company on December 28, 1993, and petitions for review seeking to set aside the SEC order were filed with the D.C. Circuit by these parties and by Cajun in February 1994. The matter was subsequently remanded by the D.C. Circuit to the SEC for further consideration in light of developments at FERC relating to Entergy's transmission tariffs. On December 61 1996, pursuant to a settlement with Entergy Gulf States, Houston Industries Incorporated and Houston Lighting & Power Company withdrew their petitions for review of the SEC order.

Employment Litigation Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are defendants in numerous lawsuits described below that have been filed by former employees asserting that they were wrongfully terminated and/or discriminated against due to age, race, and/or sex. Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are vigorously defending these suits and deny any liability to the plaintiffs. However, no assurance can be given as to the outcome of these cases.

(Entergy Corporation and Entergy Arkansas)

Entergy Corporation and Entergy Arkansas are defendants in five suits filed in federal court on behalf of-a total of approximately 62 plaintiffs who claim they were illegally terminated from their jobs due to discrimination on the basis of age or race. One-of these suits seeks class certification. A trial date is scheduled in March 1997 for one suit comprised of 29 plaintiffs, and a trial date is scheduled in May 1997 for another suit comprised of 18 plaintiffs.

Trial dates have not been set in the other suits.

(Entergy Corporation and Entergy Gulf States)

Entergy Corporation and Entergy Gulf States are defendants in lawsuits involving approximately 176 plaintiffs filed in state court in Texas by former employees who claim that they lost their jobs as a result of the Merger. The plaintiffs in these cases have asserted various claims, including discrimination on the basis of age, race, and/or sex. The court has preliminarily ruled that each plaintiff's claim should be tried separately. The first case is scheduled for trial in June 1997.

(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)

Fmtergy Corporation, Entergy Gulf States and Entergy Louisiana. are defendants in a suit filed in federal court in Louisiana by approximately 39 plaintiffs who claim, among other things, they were wrongfully discharged from their employment on the basis of their age. No trial date has been set for this case.

(Entergy Louisiana and Entergy New Orleans)

Entergy Louisiana and Entergy New Orleans are defendants in a suit filed in state court in Louisiana by 110 plaintiffs who seek to certify a class on behalf of all employees who allegedly were terminated or required to resign on the basis of age. The court has set a hearing for certification of the class for March 13, 1997; no trial date has

been set. Entergy LAuisiana and/or Entergy New Orleans also are defendants in approximately 27 other suits filed in federal or state court by plaintiffs who claim they were wrongfully discharged on the basis of age, race, or sex.

Asbestos and Hazardous Waste Suits (Entergy Gulf States and Entergy Louisiana)

A number of plaintiffs who allegedly suffered damage or injury, or are survivors of persons who died, allegedly as a result of exposure to "hazardous toxic waste" that emanated from a site in Livingston Parish, sued Entergy Gulf States and approximately 70 other defendants, including Entergy Louisiana, in 17 suits filed in the Livingston Parish, Louisiana District Court (State District Court). The plaintiffs alleged that the deflndants generated, transported, or participated in the storage of such wastes at the facility, which was previously operated as a waste oil recycling facility. These State District Court suits, which seek damages in total amounts ranging fiom $1 million to $10 billion and are now consolidated in a class action, and three federal suits in three states other than Louisiana involving issues arising from the same facility, have been removed and transfer respectively, to the US. District Court for the Middle District of Louisiana. Entergy Gulf States settled all claims against it in the suits and the settlements were approved by court order on February 7, 1996. Entergy Louisiana received preliminary approval of a settlement of all claims against it in the suits for approximately $2.3 million. A court date for the fairness hearing to approve the settlement has not been set.

(Etergy Gulf States)

A total of 23 suits have been filed on behalf of approximately 4,255 plaintiffs in state and federal courts in Jefferson County, Texas. These suits seek relief from Entergy Gulf States as well as numerous other defendants for damages caused to the plaintiffs or others by the alleged exposure to hazardous waste and asbestos on the defendants' premises. All of the plaintiffs in such suits are also suing Entergy Gulf States and all other dendants on a conspiracy count. It is not yet known how many of the plaintiffs in the suits discussed above worked on Entergy Gulf States' prmacs. There have been numerous asbestos-related law suits filed in the District Court of Calcasieu Parish in Lake Charles, Louisiana, on behalf of approximately 200-plaintift naming numerous defendants including Entergy Gulf States. The suits allege that each plaintiff contracted an asbestos-relatgd disease from exposure to asbestos insulatim products on the premises of such defendants. Settlements of the Jefferson County suits involving approximately 1,800 plaintiffs and Calcasieu Parish suits involving approximately 91 plaintiffs are in the process of being consunmmated. In May 1996, the majority of remaining cases in Calcasieu Parish involving approximately 70 plaintiffs were settled for an immaterial amount; there are approximately 40 cases still pending.: Entergy Gulf States' share of the settlements of these cases was not material to its financial position or results of operations.

Cajun - River Bend Litigation (Entergy Corporation and Entergy Gulf States)

Entergy Gulf States and Cajun, respectively, own 70% and 30% undivided interests in River Bend (operated by Entergy Gulf States), and 42% and 58% undivided interests in Big Cajun 2, Unit 3 (operated by Cajun). These relationships have spawned a number of long-standing disputes and claims between the parties. An agreemet setting forth terms for the resolution of all such disputes was reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, and was approved by the United States District Court for the Middle District of Louisiana (District Court) on August 26, 1996 (Cajun Settlement). The terms include, but are not limited to, the following: (i) Cajun's interest in River Bead will be turned over to the RUS, which will have the option to retain the interest, sell it to a third party, or transfer it to Entergy Gulf States at no cost; (ii) Cajun will set aside a total of $125 million for its share of the decommissioning costs of River Bend; (iii) Cajun will transfer certain transmission assets to Entergy Gulf States; (iv) Cajun will settle transmission disputes and be released from claims for payment under transmission arrangements with Entergy Gulf States as discussed under "Cajun - Transmission Service" below; (v) all funds paid by Entergy Gulf States into the registry of the District Court will be returned to Entergy Gulf States; (vi) Cajun will be released from its unpaid past, present, and future liability for River Bend costs and expenses; and (vii) all litigation between Cajun and Entergy Gulf States will be dismissed. On September 6, 1996, the Committee of Unsecured Creditors in the Cajun bankruptcy proceeding filed a Notice of Appeal to the United States Court of

Appeals for the Fifth Circuit (Fifth Circuit), objecting that the order approving the Cajun Settlement was separate from the approval of a plan of reorganization and, therefore, improper. The Cajun Settlement is subject to this appeal and approvals by the appropriate regulatory agencies. Entergy Gulf States expects to make filings with FERC and the SEC seeking approval for the transfer of certain Cajun transmission assets to Entergy Gulf States.

Management believes that it isprobable that the Cajun Settlement will ultimately be approved and consummated.

The Cajun Settlement resolved Cajun's civil action instituted in June 1989 against Entergy Gulf States, in which Cajun sought to rescind or terminate the Joint Ownership Participation and Operating Agreement (Operating Agreement) entered into on August 28, 1979, relating to River Bend. In that suit, Cajun also sought to recover its alleged $1.6 billion investment in the unit plus attorneys' fees, interest, and costs. The Cajun Settlement resolves both the portion of the suit by Cajun to rescind the Operating Agreement and the breach of contract claims.

In 1992, two member cooperatives of Cajun brought an additional independent action to declare the Operating Agreement null and void, based upon Entergy Gulf States' failure to get prior LPSC approval which was alleged to be necessary. Prior to its bankruptcy proceedings, Cajun intervened as a plaintiff in this action. Entergy Gulf States believes the suits are without merit and believes Cajun's claim is mooted by the Cajun Settlement.

On December 21, 1994, Cajun filed a petition in the United States Bankruptcy Court for the Middle District of Louisiana seeking relief under Chapter 11 of the Bankruptcy Code. Proponents of all of the plans of reorganization submitted to the Bankruptcy Court have incorporated the Cajun Settlement as an integral condition to the effectiveness of their plan. The timing and completion of a reorganization plan depends on Bankruptcy Court approval and any required regulatory approvals. The Bankruptcy Court has approved proposals by three groups seeking to acquire the non-nuclear assets of Cajun and has signed an order that establishes rules for how Cajun's creditors will vote on the three plans. On December. 16, 1996, the Bankruptcy Court began hearings on the balloting and the plan that will be adopted. The matter remains before the Bankruptcy Court.

See Note 9 for additional information regarding the Cajun litigation, Cajun's bankruptcy proceedings, and related filings.

Caiun - Transmission Service (Entergy Corporation and Entergy Gulf States)

Entergy Gulf States and Cajun are parties to FERC proceedings relating to transmission service charge disputes. See Note 9 for additional information regarding these FERC proceedings, FERC orders issued as a result of such proceedings, and the potential effects of these proceedings- upon Entergy Gulf States.

On December 7, 1993, Cajun filed a complaint in the Middle District of Louisiana alleging that Entergy Gulf States failed to provide Cajun an opportunity to construct certain facilities that allegedly would have reduced its rates under Service Schedule CTOC, and is seeking an order compelling the conveyance of certain facilities and awarding unspecified damages. Entergy Gulf States has moved to dismiss the complaint on the basis, among others, that FERC has already addressed the matter in the proceedings described in Note 9.

Service Area Dispute (Entergy Corporation and Entergy Gulf States)

Entergy Gulf States was requested by Cajun and Jefferson Davis Electric Cooperative, Inc. (Jefferson Davis), to provide the transmission of power over Entergy Gulf States' system for delivery to an area near Lake Charles, Louisiana. Cajun and Jefferson Davis filed a suit in federal court in the Western District of Louisiana alleging that Entergy Gulf States breached its obligations under the parties' contract and violated the antitrust laws by refusing to provide the transmission service. Cajun and Jefferson Davis seek an injunction requiring Entergy Gulf States to provide the requested service and unspecified treble damages for Entergy Gulf States' refusal to provide the service. In November 1989, the federal court denied Cajun's and Jefferson Davis' motion for a preliminary injunction. Entergy Gulf States believes this proceeding is resolved by the Cajun Settlement.

(Entergy Cor.oration and Entergy Mississippi)

On October 11, 1994, twelve Mississippi cities filed a complaint in state court against Entergy Mississippi and eight electric power associations seeking a judgment from the court declaring unconstitutional certain Mississippi statutes that establish 'the procedure that must be followed before a municipality can acquire the facilities and certificate rights of a utility serving in the municipality. Specifically, the suit requests that the, court declare unconstitutional certain 1987 amendments to the Mississippi Public Utilities Act that require that the MPSC cancel a utility's certificate to serve in the municipality before a municipality may acquire a utility's facilities located in the municipality. The suit also -requests thatthe court find that Mississippi municipalities can serve any consumer in the boundaries of the municipality and within one mile thereof. On January 6, 1995, Entergy Mississippi and the other defendants filed motions to dismiss. In October 1995, the state court dismissed the complaint. The plaintiffs have appealed the,dismissal to the Mississippi Supreme Court, where it is currently pending.

Taxes' Paid Under Protest (Entergy Corporation and Entergy Louisiana)

Since the mid-1980's, Entergy Louisiana and the tax authorities of St. Charles Parish, Louisiana (Parish),

the parish in which Waterford 3 is located, have disputed use taxes paid on nuclear fuel ($6.5 million through 1996) under protest by Entergy Louisiana. Entergy Louisiana has been successful in lawsuits in the Parish with regard to recovering these taxes, plus interest, and also with regard to Parish lease tax issues pertaining to fuel financing arrangements. In June 1995, Entergy Louisiana received a favorable decision from the Louisiana Fifth Circuit Court of Appeals that confirmed that no such use taxes are due. The Parish and Entergy Louisiana are currently discussing a possible settlement of all pending tax-related litigation including the likely return of the amounts previously paid under protest The suits by Entergy Louisiana with regard to state use tax paid under protest on nuclear fuel are still pendg.

Federal Income Tax Audit (Entergy Corporation, Entergy Louisiana, and System Energy)

In August 1994, Entergy received an IRS report covering the federal income tax audit of Entergy Corporation and subsidiaries for the years 1988 - 1990. The report asserts an $80 million tax deficiency for the 1990 consolidated federal income tax returns related primarily to the utilization of accelerated investment tax credits associated with Waterford 3 and Grand Gulf nuclear plants. Changes to the initial report, made in the IRS appeal process, have reduced the assessment related to the issue by $22 million to $58 million. Entergy and the Appeals Officer agreed to pursue a "technical advice" ruling from the IRS National Office to address the remainder of the issue. Entergy Corporation believes there is no material tax deficiency and is confident that a satisfactory resolution of the matter will be achieved.

Panda Eneray Corporation Complaint (Entergy Corporation)

Panda Energy Corporation (Panda) has commenced litigation in the Dallas District Court naming Entergy Corporation, Energy Enterprises, Entergy Power, Entergy Power Asia, Ltd., and Entergy Power Development Corporation as defendants. The allegations against the defendants include, among others, tortious, interferenc with contractual relations, conspiracy, misappropriation of corporate opportunity, unfair competition and fraud, and constructive trust issues. Panda seeks damages of approximately $4.8 billion, of which $3.6 billion is caimed in punitive damages. Entergy believes that this litigation is unfounded, but entered into arrangements on April 30, 1996, to settle th matter for $350,000, subject to revocation by Entergy if the court ruled on the case.

Thereafter, the Dallas District Court entered an order of dismissal because the plaintiff was unable to show any damages and the facts did not support a cause of action against the defendants. As a result, Entergy revoked the

$350,000 settlement agreement. In May of 1996, Panda filed an appeal of the court's order for dismissal. Appeal briefs have been submitted by both parties, but no date has yet been designated for oral argument.

Catalyst Technologies. Inc. (Entergy Corporation)

In June 1993, Catalyst Technologies, Inc. (CTI) filed a petition against Electec, Inc. (Electec), the predecessor to Entergy Faterprises. Prior to the filing of the petition, CTI and Electec entered into an agreemeat whereby CTM was required to raise a specified amount of funding in exchange for the right to acquire Electec's computer software technology marketing rights. CTM alleges that due to actions of Electec, it was unable to secure the necessary funding, and, therefore, was not able to meet the terms of the agreement. The petition alleges breach of contract, breach of the obligation of good-faith and fair dealing, and bad-faith breach of contract against Electec. It was originally believed CTI was claiming damages of approximately $36 million from Entergy Enterprises. It now appears that CTI will allege damages ranging from $231 million to $258 million. Entergy Enterprises' position is that CTI is not entitled to any damages, and that even if damages were sustained, they would not exceed $600,000.

The case is scheduled for a jury trial beginning on July 14, 1997, in Civil District Court for the Parish of Orleans, Louisiana. Entergy Enterprises is vigorously contesting these claims.

EARNINGS RATIOS OF DOMESTIC UTILITY COMPANIES AND SYSTEM ENERGY The domestic utility companies' and System Energy's ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of SEC Regulation S-K are as follows:

Ratios of Earnings to Fixed Charges Years Ended December 31.

1992 1993 1994 1995 1996 Entergy Arkansas 2.28 3.11(b) 2.32 2.56 2.93 Entergy Gulf States 1.72 1.54 .36(c) 1.86 1.47 Entergy Louisiaa 2.79 3.06 2.91 3.18 3.16 Energy Mississippi 2.37 3.79(b) 2.12 2.92 3.54 Entergy New Orleans 2.66 4.68(b) 1.91 3.93 3.51 System Energy 2.04 1.87 1.23 2.07 2.21 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Years Ended December 31, 1992 1993 1994 1995 1996 1.86 2.54(b) 1.97 2.12 2.44 Entergy Arkansas 1.37 1.21 .29(c) 1.54 1.19 Entergy Gulf States(a) 2.18 2.39 2.43 2.60 2.64 Entery Lonisiana 1.97 3.08(b) 1.81 2.51 3.07 Entergy Mississippi 2.36 4.12(b) 1.73 3.56 3.22 Entergy New Orleans.

(a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock.

(b) Earnings for the year ended December 31, 1993, include approximately $81 million, $52 million, and $18 million for Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans, respectively, related to the change in accounting principle to provide for the accrual of estimated unbilled revenues.

(c) Earnings for the year ended December 31, 1994, for Entergy Gulf States were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $144.8 million and $197.1 million, respectively.

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INDUSTRY SEGMENTS Ente.r New Orleans Narrative Descridon of Enterey New Orleans Industry Segments Electric Service Enagy New Orleans supplied retail electric service to 188,912 customers as of December 31, 1996. During 1996, 40% of electric operating revenues was derived from residential sales, 39% from commercial sales, 6% from industrial sales, and 15% from sales to governmental and municipal customers.

Natural Gas Service Entergy New Orleans supplied retail natural gas service to 151,528 customers as of December 31, 1996.

During 1996, 56% of gas operating revenues was derived from residential sales, 19% from commercial sales, 9%

fromi industrial sales, and 16% from sales to governmental and municipal customers. (See "FUEL SUPPLY Natural Gas Purchased for Resale.")

Selected minancial Information Relating to Industry Segments For selected financial information relating to Entergy New Orleans' industry segments, see Entergy New Orleans' financial statements and Note 15.

Employees by Seement Enter New Orleans' full-time employees by industry segment as of December 31, 1996, were as follows:

Electric 219 Natural Gas 109 Total 328 (For further information with respect to Entergy New Orleans' segments, see "PROPERTY.")

Entergy Gulf States For the year ended December 31, 1996, 95% of Entergy Gulf States' operating revenues was derived from the electric utility business. Of the remaining operating revenues 3% was derived from the steam business and 2%

from the natural gas business.

PROPERTY Generatim Stations The total capability of Entergy's owned and leased generating stations as of December 31, 1996, by company and by fuel type, is indicated below:

Owned and Leased Capability MW(1)

Gas Turbine and Internal Company Total Fossil Nuclear Combustion Hydro Etergy Arkansas 4,373 (2) 2,379 1,694 230 (4) 70 Entergy Gulf States 6,558 (2) 5,828 655 75 Entergy Louisiana 5,423 (2) 4,329 1,075 19 Entergy Mississippi 3,063 (2) 3,052 - 11 Entergy New Orleans 934 (2) 918 16 1,061 - 1,061 -_

System Energy Total 21,412 (3) 16,506 (3) 4,485 351 70 (1) "Owned and Leased Capability" is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.

(2) Excludes the capacity of fossil-fueled generating stations placed on extended reserve as follows: Entergy Arkansas - 506 MW; Entergy Gulf States - 405 MW; Entergy Louisiana - 157 MW; Entergy Mississippi 73 MW; and Entergy New Orleans - 143 MW. Generating stations that are not expected to be utilized in the near-term to meet load requirements are placed in extended reserve shutdown in order to miniize operating expenses.

(3) Excludes net capability of generating facilities owned by Entergy Power, which owns 725 MW of fossil fueled capacity.

(4) Includes 188 MW of capacity leased by Entergy Arkansas through 1999.

Load and capacity projections are regularly reviewed in order to coordinate and recommend the location and time of installation of additional generating capacity and of interconnections in light of the availability of power, the location of new loads, and maximum economy to Entergy. Based on load and capability projections and bulk power availability, Entergy has no current plans to install additional generating capacity. When new generation resources are needed, Entergy expects to meet this need by means other than construction of new base load generating capacity.

In the meantime, Entergy will meet capacity needs by, among other things, purchasing power in the wholesale power market and/or removing generating stations from extended reserve shutdown.

shared Under the terms of the System Agreement, certain generating capacity and other power resources are provides that parties having among the domestic utility companies. Among other things, the System Agreement generating reserves greater than their load requirements (long companies) shall receive payments from those parties having deficiencies in generating reserves (short companies) and an amount sufficient to cover certain of the long preferred and companies' costs, including operating expenses, fixed charges on debt, dividend requirements on

preference stock, and a fair rate of return on common equity investment. Under the System Agreement, these charges are based on costs associated with the long companies' steam electric generating units fueled by oil or gas. In addition, for all energy exchanged among the domestic utility companies under the System Agreement, the short compaes w required to pay the cost of fuel consumed in generating such energy plus a charge to cover other associated costs (see "RATE MATTERS AND REGULATION - Rate Matters - Wholesale Rate Matters System " above, for a discussion of FERC proceedings relating to the System Agreement).

Entergy's business is subject to seasonal fluctuations, with the peak period occurring in the summer months.

The 1996 peak demand of 19,444 MW occurred on July 22, 1996. The net capability at the time of peak was 21,127 MW, net of off-system firm sales of 285 MW. The capacity margin at the time of the peak was approximately 8.0%

excluding units placed on extended reserve and capacity owned by Entergy Power.

Interconnections The electric power supply facilities of Entergy consist principally of steam-electric production facilities strategically located with reference to availability of fuel, protection of local loads, and other controlling economic factors. These are interconnected by a transmission system operating at various voltages up to 500 kilovolts.

Generally, with the exception of Grand Gulf 1, Entergy Power's capacity and a small portion of Entergy Mississippi's capacity, operating facilities or interests therein are owned by the domestic utility company serving the area in which the facilities are located. However, all of Entergy's generating facilities are centrally dispatched and operated in order to obtain the lowest cost sources of energy with a minimum of investment and the most efficient use of plant.

In addition to the many neighboring utilities with which the domestic utility companies interconnect, the domestic utility companies are members of the Southwest Power Pool, the primary purpose of which is to ensure the reliability and adequacy of the electric bulk power supply in the southwest region of the United States. The Southwest Power Pool is a member of the North American Electric Reliability Council. The domestic utility companies are also members of the Western Systems Power Pool.

Gas Property As of December 31, 1996, Entergy New Orleans distributed and transported natural gas for distribution solely within the limits of the City of New Orleans through a total of 1,439 miles of gas distribution mains and 40 miles of gas transmission pipelines. Koch Gateway Pipeline Company is a principal supplier of natural gas to Entergy New Orleans, delivering to six of Entergy New Orleans' 14 delivery points.

As of December 31, 1996, the gas properties of Entergy Gulf States were not material to Entergy Gulf States.

Titles Entergy's generating stations are generally located on properties owned in fee simple. The greater portion of the transmission and distribution lines of the domestic utility companies has been constructed over property of private owners pursuant to easements or on public highways and streets pursuant to appropriate franchises. The rights of each domestic utility company in the realty on which its facilities are located are considered by it to be adequate for its use in the conduct of its business. Minor defects and irregularities customarily found in properties of like size and character exist, but such defects and irregularities do not materially impair the use of the properties affected thereby.

The domestic utility companies generally have the right of eminent domain, whereby they may, if necessary, perfect or secure titles to, or easements or servitudes on, privately-held lands used or to be used in their utility operations.

Substantially all the physical properties owned by each domestic utility company and System Energy, respectively, are subject to the lien of a mortgage and deed of trust securing the first mortgage bonds of such company. The Lewis Creek generating station is owned by GSG&T, Inc., a subsidiary of Entergy Gulf States, and is

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not subject to the lien of the Entergy Gulf States mortgage securing the first mortgage bonds of Entergy Gulf States, but is leased to and operated by Entergy Gulf States. In the case of Entergy Louisiana, certain properties are also subject to the iens of second mortgages securing other obligations of Fatergy Louisiana. In the case of Entergy Mississippi and Entergy New Orleans, substantially all of their properties and assets are also subject to the second mortgage lien of their respective general and refinding mortgage bond indentures.

FUEL SUPPLY The sources of generatiom and average fuel cost per kWh for the domestic utility companies and System Energy for the years 1994-1996 were:

Natural Gas Fuel Oil Nuclear Fuel Coal

% Cents  % Cents  % Cents  % Cents of per of per of Per of Per Year Ge.n kWh Gen kWh Gen kWh Gen kWh 1996 42 2.99 I 3.03 41 .56 16 1.73 1995 50 1.99 35 .60 15 1.73 1994 44 2.24 I 3.99 39 .60 16 1.82 Actual 1996 and projected 1997 sources of generation for the domestic utility companies and System Energy Natural Gas IFuel Oil._ Nuclear Coal 1996 1997 196 1997 1996 1997 1996 1997 Entergy Arkansas 7% 7% - 57% 51% 36% 42%

69% 66% - 20% 19% 11% 15%

Entergy Gulf States Entergy Louisiana 56% 48% - .44% 52%

13% 33% 29%

Entergy Mississippi 54% 71%

Entergy New Orleans 99% 100% 1%

System Energy - 1000/o(a) 1000/o(a) 42% 39% 1% - 41% 41% 16% 20%

Total (a) Capacity and energy from System Energy's interest in Grand Gulf 1 is allocated as follows: Entergy Arkansas 36%; Entergy Louisiana - 14%; Entergy Mississippi - 33%/o; and Entergy New Orleans - 17%.

The balance of generation, which was immaterial, was provided by hydroelectric power.

Natural Gas The domestic utility companies have long-term firm and short-term interruptible gas contracts. Long-term firm contracts comprise less than 30% of the domestic utility companies' total requirements but can be called upon, if necessary, to satisfy a significant percentage of the domestic utility companies' needs. Additional gas requirements are satisfied by short-term contracts and spot-market purchases. Entergy Gulf States has a transportation service agreement with a gas supplier that provides flexible natural gas service to certain generating stations by using such supplier's pipeline and gas storage facility.

Many factors, including wellhead deliverability, storage and pipeline capacity, and demand requirements of end users, influence the availability and price of natural gas supplies for power plants. Demand is tied to regional weather conditions as well as to the prices of other energy sources. Supplies of natural gas are expected to be adequate in 1997. However, pursuant to federal and state regulations, gas supplies to power plants may be

interrupted during periods of shortage. To the extent natural gas supplies may be disrupted, the domestic utility companies will use alternate fuels, such as oil, or rely on coal and nuclear generation.

Coal Entergy Arkansas has long-term contracts with mines in the State of Wyoming for the supply of low-sulfur coal for the White Bluff Steam Electric Generating Station and Independence. These contracts, which expire in 2002 and 2011, provide for approximately 85% of Entergy Arkansas' expected annual coal requirmients. Additional requirements are satisfied by annual spot market purchases. Entergy Gulf States has a contract for a supply of low sulfur Wyoming coal for Nelson Unit 6, which should be sufficient to satisfy the fuel requirements at Nelson Unit 6 through 2010. Cajun has advised Entergy Gulf States that Cajun has contracts that should provide an adequate supply of coal until 1999 for the operation of Big Cajun 2, Unit 3.

Nuclear Fuel The nuclear fuel cycle involves the mining and milling of uranium ore to produce a concentrate, the conversion of uranium concentrate to uranium hexafluoride gas, enrichment of that gas, fabrication of nuclear fuel assemblies for use in fueling nuclear reactors, and disposal of the spent fuel.

System Fuels is responsible for contracts to acquire nuclear material to be used in fueling Entergy Arkansas',

Entergy Louisiana's, and System Energy's nuclear units and maintaining inventories of such materials during the various stages of processing. Each of these companies contracts for the fabrication of its own nuclear fuel and purchases the required enriched uranium hexafluoride from System Fuels. The requirements for Entergy Gulf States' River Bend plant are covered by contracts made by Entergy Gulf States. Entergy Operations acts as agent for System Fuels and Entergy Gulf States in negotiating and/or administering nuclear fuel contracts.

In October 1989, System Fuels entered into a revolving credit agreement with a bank that provides up to $45 million in borrowings to finance its nuclear materials and services inventory. Should System Fuels default on its obligations under its credit agreement, Entergy Arkansas, Entergy Louisiana, and System Energy have agreed to purchase nuclear materials and services under the agreement.

Based upon the planned fuel cycles for Entergy's nuclear units, the following tabulation shows the years through which existing contracts and inventory will provide materials and services:

Acquisition of or Conversion Spent Uranium to Uranium Fuel Concentrate Hexafluoride Enrichment Fabrication Disposal ANO 1 (1) (1) (2) 2000 (3)

ANO 2 (1) (1) (2) 1999 (3)

River Bend (1) (1) (2) 2001 (3)

Waterford 3 (1) (1) (2) 1999 (3)

Grand Gulf I (1) (1) (2) 2000 (3)

(1) Current contracts will provide a significant percentage of these materials and services through termination dates ranging from 1997-2001. Additional materials and services required beyond these dates are estimated to be available for the foreseeable future.

(2) Current contracts will provide a significant percentage of these materials and services through approximately 2000.

(3) The Nuclear Waste Policy Act of 1982 provides for the disposal of spent nuclear tuei or mgn ievwi wasw u) the DOE.

Entergy will enter into additional arrangements to acquire nuclear fuel beyond the dates shown above.

Except as noted above, Entergy cannot predict the ultimate availability or cost of such arrangements at this time.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy currently have arrangements to lease nuclear fuel and related equipment and services in aggregate amounts up to $125 million, $70 million,

$80 million, and $110 million, respectively. As of December 31, 1996, the unrecovered cost base of Entergy to Arkansas', Entergy Gulf States', Entergy Louisiana's, and System Energ's nuclear fuel leases amounted approximately $79.1 million, $49.8 million, $38.2 million, and $83.6 million, respectively. The lessors finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes. These agreements are The subject to annual renewal with, in Entergy Louisiana's and Entergy Gulf States' case, the consetr of the lenders.

credit agreements for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy have been extended and now have termination dates of December 1999, December 1999, January 2000, and February 2000, maturities through respectively. The debt securities issued pursuant to these fuel lease arrangements have varying will be secured January 31, 1999. It is expected that the credit agreements will be extended or alternative financing financing cannot be by each lessor upon the maturity of the current arrangements. If extensions or alternative borrowings.

arranged, the lessee in each case must purchase sufficient nuclear fuel to allow the lessor to retire such Natural Gas Purchased for Resale Entergy New Orleans has several suppliers of natural gas for resale. Its system is interconnected with three interstate and three intrastate pipelines. Presently, Entergy New Orleans' primary suppliers are Koch Gas Services Company (KGS), an interstate gas marketer, and Bridgeline and Pontchartrain, inftrstate pipelines. Entergy New Orleans has a firm gas purchase contract with KGS. The KGS gas supply is transported to Entergy New Orleans service is pursuant to a transportation service agreement with Koch Gateway Pipeline Company (KGPC). This subject to FERC-approved rates. Entergy New Orleans has firm contracts with its two intrastate suppliers and also gas deliveries have been subject primarily to makes interruptible spot market purchases. In recent years, natural weather-related curtailments. However, Entergy New Orleans has experienced no such curtailments.

of After the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments gas interstate gas supply could occur if Entergy New Orleans' suppliers failed to perform their obligations to deliver under their supply agreements. KGPC could curtail transportation capacity only in the event of pipeline system Entergy constraints. Based on the current supply of natural gas, and absent extreme weather-related curtailments, New Orleans does not anticipate any interruptions in natural gas deliveries to its customers.

Entergy Gulf States purchases natural gas for resale under a "No-Notice" type of agreement from Mid Louisiana Gas Company. Abandonment of service by the present supplier would be subject to abandonment proceedings by FERC.

Research Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are members of the Electric Power Research Institute (EPRI). EPRI conducts a broad range of research in major EPRI projects based on technical fields related to the electric utility industry. Entergy participates in various Entergy's needs and available resources. During 1996, 1995, and 1994, Entergy contributed approximately in which Entergy was

$9 million, $9 million, and $18 million, respectively, for EPRI and other research programs involved.

Item 2. Properties the registrants.

Refer to Item 1. "Business - PROPERTY," for information regarding the properties of

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Item 3. Legal Proceedings Refer to Item 1. "Business - RATE MATTERS AND REGULATION," for details of the registrants' material rate proceedings and other regulatory proceedings and litigation that are pending or that terminated in the fourth quarter of 1996.

Item 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of 1996, no matters were submitted to a vote of the security holders of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, or System Energy.

PART II Item 5. Market for Registrants' Common EAuity and Related Stockholder Matters Entergy Corporation The shares of Entergy Corporation's common stock are listed on the New York, Chicago, and Pacific Stock Exchanges.

The high and low prices of Entergy Corporation's common stock for each quarterly period in 1996 and 1995 were as follows:

1996 1995 Hizh Low Hieh Low

"(InDollars)

First 30 3/8 26 3/8 243/4 20 Second 28 1/2 25 1/4 25 1/2 20 7/8 Third 28 518 24 7/8 26 1/8 23 5/8 Fourth 29 263/4 291/4 26 Dividends of 45 cents per share were paid on Entergy Corporation's common stock in each of the quarters of 1996 and 1995.

As of February 28, 1997, there were 92,267 stockholders of record of Entergy Corporation.

For information with respect to Entergy Corporation's future ability to pay dividends, refer to Note 8, "DIVIDEND RESTRICTIONS." In addition to the restrictions described in Note 8, PUHCA provides that, without approval of the SEC, the unrestricted, undistributed retained earnings of any Entergy Corporation subsidiary are not available for distribution to Entergy Corporation's common stockholders until such earnings are made available to Entergy Corporation through the declaration of dividends by such subsidiaries.

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy There is no market for the common stock of Entergy Corporation's wholly owned subsidiaries. Cash dividends on common stock paid by the subsidiaries to Entergy Corporation during 1996 and 1995, were as follows:

1996 1995 (In Millions)

Entergy Arkansas $142.8 $153.4 Entergy Gulf States -

Entergy Louisiana $179.2 $221.5 Entergy Mlississippi $ 79.9 $ 61.7 Entergy New Orleans $ 34.0 $ 30.6 System Energy $112.5 $ 92.8 Entergy S.A. $ 0.7 $ 3.5 Entergy Transener S.A. $ 1.7 $ 2.1 Entergy Argentina S.A. $ 0.3 Entergy Argentina S.A. Ltd. $ 3.1 In February 1997, Entergy Corporation received common stock dividend payments from its subsidiaries totaling $66.9 million. For information with respect to restrictions that limit the ability of System Energy and the domestic utility companies to pay dividends, see Note 8. In order to improve its capital structure, Entergy Gulf States has not paid common stock dividends since the third quarter of 1994. See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources".

Item 6. Selected Financial Data Entergy Corporation.. Refer to information under the heading "ENTERGY CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Entergy Arkansas. Refer to information under the heading "ENTERGY ARKANSAS, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Entergy Gulf States. Refer to information under the heading "ENTERGY GULF STATES, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Entergy Louisiana. Refer to information under the heading "ENTERGY LOUISIANA, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Entergy MississippL Refer to information under the heading "ENTERGY MISSISSIPPI, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Entergy New Orleans. Refer to information under the heading "ENTERGY NEW ORLEANS, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

System Energy. Refer to information under the heading "SYSTEM ENERGY RESOURCES, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."

Item 7. Manayement's Discussion and Analysis of Financial Condition and Results of Operations Entergy Corporation and Subsidiaries. Refer to information under the heading "ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

- LIQUIDITY AND CAPITAL RESOURCES," " - SIGNIFICANT FACTORS AND KNOWN TRENDS,"

and "- RESULTS OF OPERATIONS."

Entergy Arkansas. Refer to information under the heading "ENTERGY ARKANSAS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

Entergy Gulf States. Refer to information under the heading "ENTERGY GULF STATES, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

Entergy Louisiana. Refer to information under the heading "ENTERGY LOUISIANA, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

Entergy Mississippi. Refer to information under the heading "ENTERGY MISSISSIPPI, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

Entergy New Orleans. Refer to information under the heading "ENTERGY NEW ORLEANS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

System Energy. Refer to information under the heading "SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS."

Item 8. Fminancial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS Entergy Corporation and Subsidiaries:

Report of Management 40 Audit Committee Chairperson's Letter 41 Management's Financial Discussion and Analysis for Entergy Corporation and Subsidiaries 42 Report of Independent Accountants for Entergy Corporation and Subsidiaries 53 Management's Financial Discussion and Analysis for Entergy Corporation and Subsidiaries 54 Statements of Consolidated Income For the Years Ended December 31, 1996, 1995, and 1994 for 57 Entergy Corporation and Subsidiaries Statements of Consolidated Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 58 for Entergy Corporation and Subsidiaries Balance Sheets, December 31, 1996 and 1995 for Entergy Corporation and Subsidiaries 60 Statements of Consolidated Retained Earnings and Paid-In Capital for the Years Ended 62 December 31, 1996, 1995, and 1994 for Entergy Corporation and Subsidiaries Selected Financial Data - Five-Year Comparison for Entergy Corporation and Subsidiaries 63 Report of Independent Accountants for Entergy Arkansas, Inc. 65 Management's Financial Discussion and Analysis for Entergy Arkansas, Inc. 66 Statements of Income For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 68 Arkansas, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 69 Arkansas, Inc.

Balance Sheets, December 31, 1996 and 1995 for Entergy Arkansas, Inc. 70 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995, and 1994 for 72 Entergy Arkansas, Inc.

Selected Financial Data - Five-Year Comparison for Entergy Arkansas, Inc. 73 Report of Independent Accountants for Entergy Gulf States, Inc. 75 Management's Financial Discussion and Analysis for Entergy Gulf States, Inc. 76

Statements of Income (loss) For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 78 Gulf States, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 79 Gulf States, Inc.

Balance Sheets, December 31, 1996 and 1995 for Entergy Gulf States, Inc. 80 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995, and 1994 for 82 Entergy Gulf States, Inc.

Selected Financial Data - Five-Year Comparison for Entergy Gulf States, Inc. 83 Report of Independe Accountants for Entergy Louisiana, Inc. 85 Management's Financial Discussion and Analysis for Entergy Louisiana, Inc. 86 Statements of Income For the Years Ended December 31, 1996, 1995, and 1994 for Entere: 88 Louismana, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 89 Louisiana, Inc.

Balance Sheets, December 31, 1996 and 1995 for Entergy Louisiana, Inc. 90 Statements of Retained Earnings for the Years Ended December 31, 1996,1995, and 1994 for 92 Entergy Louisiana, Inc.

Selected Financial-Data - Five-Year Comparison for Entergy Louisiana, Inc. 93 Report of Independent Accountants for Entergy Mississippi, Inc. 95 Management's Financial Discussion and Analysis for Entergy Mississippi, Inc. 96 Statements of Income For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 98 Mississippi, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995' and 1994 for Entergy 99 Mississippi, Inc.

Balance Sheets, December 31, 1996 and 1995 for Entergy Mississippi, Inc. 100 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995, and 1994 for 102 Entergy Mississippi, Inc.

Selected Financial Data - Five-Year Comparison for Entergy Mississippi, Inc. 103 Report of Independent Accountants for Entergy New Orleans, Inc. 105 Management's Financial Discussion and Analysis for Entergy New Orleans, Inc. 106 Statements of Income For the Years Ended December 31, 1996, 1995, and 1994 for Entergy New 108 Orleans, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 for Entergy 109 New Orleans, Inc.

Balance Sheets, December 31, 1996 and 1995 for Entergy New Orleans, Inc. 110 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995, and 1994 for 112 Entergy New Orleans, Inc.

Selected Financial Data - Five-Year Comparison for Entergy New Orleans, Inc. 113 Report of Independent Accountants for System Energy Resources, Inc. 115 Managenimt's Financial Discussion and Analysis for System Energy Resources, Inc. 116 Statements of Income For the Years Ended December 31, 1996, 1995, and 1994 for System Energy 118 Resources, Inc.

Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994 for System 119 Energy Resources, Inc.

Balance Sheets, December 31, 1996 and 1995 for System Energy Resources, Inc. 120 Statements of Retained Earnings for the Years Ended December 31, 1996, 1995, and 1994 for 122 System Energy Resources, Inc.

Selected Financial Data - Five-Year Comparison for System Energy Resources, Inc.. 123 Notes to Financial Statements for Entergy Corporation and Subsidiaries 124

ENTERGY CORPORATION AND SUBSIDIARIES REPORT OF MANAGEMENT The management of Entergy Corporation and subsidiaries has prepared and is responsible for the financial statements and related financial information included herein. The financial statements are based on generally accepted accounting principles. Financial information included elsewhere in this report is consistent with the financial statements.

To meet its responsibilities with respect to financial information, management maintains and enforces a system of internal accounting controls that is designed to provide reasonable assurance, on awicst-efective basis, as to the integrity, objectivity, and reliability of the financial records, and as to the protection of assets. This system includes communication through writte policies and procedures, an employee Code of Conduct, and an organizational structure that provides for appropriate division of responsibility and the training of personnel. This system is also tested by a comprehensive internal audit program.

The independent public accountants provide an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting.. They regularly evaluate the system of internal accounting controls and perform such tests and other procedures as they deem necessary to reach and express an opinion on the fairness of the financial statements.

Management believes that these policies and procedures provide reasonable assurance that its operations are carried out with a high standard of business conduct.

ED LUPBERGER GERALD D. MCINVALE Chairman, President, and Chief Executive Officer Executive Vice President and of Entergy Corporation, Entergy Arkansas, Chief Financial Officer Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans DONALD C. HINTZ President and Chief Executive Officer of System Energy

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ENTERGY CORPORATION AND SUBSIDIARIES AUDIT COMMITTEE CHAIRPERSON'S LETTER The Entergy Corporation Board of Directors' Audit Committee is comprised of five directors who are not officers of Entergy Corporation: Lucie J. Fjeldstad, Chairperson, Admiral Kinnaird McKee, Eugene H. Owens, Robert D. Pugh, and H. Duke Shackelford. The committee held five meetings during 1996.

The Audit Committee oversees Entergy Corporation's financial reporting process on behalf of the Board of Directors and provides reasonable assurance to the Board that sufficient operating, accounting and financial controls are in existence and are adequately reviewed by programs of internal and external audits.

The Audit Committee discussed with Entergy's internal auditors and the independent public accountants (Coopers & Lybrand L.L.P.) the overall scope and specific plans for their respective audits, as well as Entergy Corporation's financial statements and the adequacy of Entergy Corporation's internal controls. The committee met, together and separately, with Entergy's internal auditors and independent public accountants, without management present, to discuss the results of their audits, their evaluation of Entergy Corporation's internal controls, and the overall quality of Entergy Corporation's financial reporting. The meetings also were designed to facilitate and encourage private communication between the committee and the internal auditors and independent public accountants.

LUCIE J. FJELDSTAD Chairperson, Audit Committee

ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flow Net cash flow from operations for Entergy, the domestic utility companies, and System Energy for the years ended December 31, 1996, 1995, and 1994, was as follows:

199"6 19 1994 (In Millions)

Entergy $1,458 $1,426 $1,558 EntergyArkansas $ 377 $ 338 $ 356 Entergy Gulf States $.322 $ 401 $ 326 Entergy Louisiana $ 352 $ 385 $ 368 Entergy Mississippi $ 182 $ 185 $ 195 Entergy New Orleans $ 44 $ 99 $ 39 System Energy $ 287 $ 96 $ 337 The positive cash flow from operations for the domestic utility companies results from continued efforts to streamline operations and to reduce costs, as well as from collections under rate phase-in plans that exceed current cash requirements for the related costs. (In the income statement, these revenue collections are offset by the amortization of previously deferred costs so that there is no effect on net income.) These phase-in plans will continue to contribute to Entergy's cash position over the next several years. Specifically, the Grand Gulf 1 phase-in plans will expire in 1998 for Entergy Arkansas and Entergy Mississippi, and in 2001 for Entergy New Orleans. Entergy Gulf States' phase-in plan for River Bend will expire in 1998, and Entergy Louisiana's phase-in plan for Waterford 3 will expire in June 1997.

Financing Sources Cash from operations, supplemented by cash on hand, was sufficient to meet substantially all investing and financing requirements of the domestic utility companies, other than early refinancings of existing debt, including capital expenditures, dividends, and debt/preferred stock maturities during 1996. System Energy issued two series of first mortgage bonds in August 1996 totaling $235 million, of which $210 million was used to meet a scheduled September 1, 1996, System Energy debt maturity. Entergy's investments in nonregulated businesses in 1996 were funded with debt and equity capital.

Entergy has been able to fund the capital requirements for its domestic utility businesses with cash from operations resulting from the items discussed above in Cash Flow. Should additional cash be needed to fund investments or retire debt, the domestic utility companies and System Energy have the ability, subject to regulatory approval and compliance with issuance tests, to issue debt or preferred securities to meet such requirements. In addition, to the extent market conditions and interest and dividend rates allow, the domestic utility companies and System Energy will continue to refinance and/or redeem higher cost debt and preferred stock prior to maturity. The domestic utility companies may continue to establish special purpose trusts as financing subsidiaries for the purpose of issuing preferred trust securities, such as those issued in 1996 by Entergy Louisiana Capital I and Entergy Arkansas Capital I, and those issued in January 1997 by Entergy Gulf States Capital I. Entergy Corporation, the domestic utility companies, and System Energy also have SEC authorization to effect short-term borrowings. See Notes 4, 5, 6, 7, and 9 for additional information on Entergy's capital and refinancing requirements in 1997-2001.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In May 1996, Entergy Corporation registered 10 million additional shares of common stock pursuant to a new dividend reinvestment and stock purchase plan, which became effective in July 1996. See Note 5 for further discussion.

Financing Uses Productive investment by Entergy Corporation is integral to enhancing the long-term value of its common stock. Entergy Corporation has been expanding its investments in business opportunities o~rseas as well as in the United States. Through the end of 1996, Entergy Corporation had acquired or participated in foreign electric ventures in Australia, Argentina, Chile, Pakistan, and Peru, and had acquired several telecommunications-based businesses in the United States. As of December 31, 1996, Entergy Corporation had a net investment of $812 million in equity capital in businesses other than its domestic retail utility business. See Note 13 for a discussion of Entergy Corporation's acquisition of CitiPower on January 5, 1996, and Note 16 for Entergy Corporation's acquisition of London Electricity plc on February 7, 1997.

To make capital investments, fund its subsidiaries, and pay dividends, Entergy Corporation will utilize internally generated funds, cash on hand, funds available under its $300 million credit facility, funds received from its dividend reinvestment and stock purchase plan, and other bank financings if required. See Note 9 for a discussion of subsidiaries. During capital requirements. Entergy Corporation receives funds through dividend payments from its 1996, such dividend payments from subsidiaries totaled $554.2 million. In order to improve its capital, structure, Entergy Gulf States has not paid common stock dividends since the third quarter of 1994. In 1996, Entergy Corporation paid $405 million of common stock dividends. Declarations of dividends on common stock are made at the discretion of Entergy Corporation's Board of Directors. Management will not recommend future dividend increases to the Board unless such increases are justified by adequate earnings growth of Entergy Corporation and its subsidiaries. See Note 8 for information on dividend restrictions.

Enterev Corporation and Enterzy Gulf States See Notes 2 and 9 regarding River Bend and Cajun issues, including recent developments. An adverse ruling regarding River Bend could result in up to approximately $278 million of potential write-offs (net of tax) and up to

$204 million in refunds of previously collected revenue. Such write-offs and charges could result in substantial net losses being reported in the future by Entergy Gulf States, with resulting adverse adjustments to the common equity of Entergy Corporation and Entergy Gulf States. Adverse resolution of these matters could negatively affect Entergy Gulf States' ability to obtain financing, which could in tumn affect Entergy Gulf States' liquidity and ability to resume paying dividends.

Enter*y Corporation and System Energy Under the Capital Funds Agreement, Entergy Corporation has agreed to supply to System Energy sufficient capital to maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short term debt), to permit the continued commercial operation of Grand Gulf 1, and to pay in full all indebtedness for the Capital borrowed money of System Energy when due under any circumstances. In addition, under supplements to Funds Agreement assigning System Energy's rights as security for specific debt of System Energy, Entergy Corporation has agreed to make cash capital contributions, if required, to enable System Energy to make payments of on such debt when due. The Capital Funds Agreement can be terminated by the parties thereto, subject to consent certain creditors.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Competition and Industry Challenges The electric utility industry traditionally has operated as a regulated monopoly in which there was little opportunity for direct competition in the provision of electric service. The industry is now undergoing a transition to an environment of increased retail and wholesale competition. The causes of the movement toward competition are numerous and complex. -They include legislative and regulatory changes, technological advances, consumer demands, greater availability of natural gas, environmental needs, and other factors. The in'reasingly competitive environment presents opportunities to compete for new customers, as well as the risk of loss of existing customers.

The following issues have been identified by Entergy as its major competitive challenges.

Open Access Transmission The EPAct addressed a wide range of energy issues and is being implemented by both FERC and state regulators. The EPAct is designed to promote wholesale competition among utility and nonutility generators by amending PUHCA to exempt from regulation a class of EWGs, among others, consisting of utility affiliates and nonutilities that own and operate facilities for the generation and transmission of power for sale at wholesale. The EPAct also gave FERC the authority to order investor-owned utilities to transmit wholesale power and energy to or for wholesale purchasers and sellers. This creates potential for electric utilities and other power producers to gain increased access to the transmission systems of other utilities to facilitate wholesale sales.

In response to the EPAct, FERC commenced a rulemaking on the subject of "stranded costs" in 1994. This rulemaking concerns a regulatory firmnwork for dealing with recovery of costs that were prudently incurred by electric utilities to serve customers under the traditional regulatory framework. These costs may become "stranded" as a result of increased competition. The risk of exposure to stranded costs that may result from competition in, the industry will depend on the extent and timing of retail competition, the resolution of jurisdictional issues concerning stranded cost recovery, and the extent to which such costs are recovered from departing or remaining customers.

FERC issued Order No. 888 as the final order in this rulemaldng in April 1996 requiring that all public utilities subject to its jurisdiction provide comparable wholesale transmission access through the filing of a single open access tariff In addition, FERC ruled that public utilities are entitled to full recovery of prudently incurred costs associated with wholesale requirements signed before July 11, 1994. If the costs are stranded by retail wheeling, public utilities should first seek recovery of these costs from the appropriate state or local regulators.

FERC indicated that it would be the primary forum for recovery in cases where retail customers become wholesale purchasers.

FERC also issued Order No. 889, which prescribes the requirements and procedures for the implementation and maintenance of an open access same-time information system by each public utility. In addition, FERC issued a notice of proposed rulemaking concerning capacity reservation tariffs as the next phase of its efforts to promote wholesale competition. In July 1996, Entergy Services filed, on behalf of the domestic utility companies, an open access proforma tariff.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS access same-time In September 1996, FERC issued an order revising the original requirement that open providers by November 1, 1996.

information service sites and standards of conduct be in place for all transmission same-tim information FERC scheduled a two-step compliance procedure in which the operation of open access operations and service sites was to begin on a test basis beginning in December 1996, with full commercial Services filed its compliance with the standards of conduct beginning in January 1997. In January 1997, Enteigy standards of conduct with FERC, and an open access same-time information site was established.

regarding the In response to Order No. 888, Entergy Services filed a request for clarification and rehearing costs; (ii) the following four issues: (i) the .special nature and treatment of stranded nuclear decommissioning unbundling requirements for registered reciprocity rules applicable to rural electric cooperatives; (iii) the functional pending.

holding companies; and (iv) the nature of network service. The request for rehearing is currently Transition to Competition Filings Entergy has initiated discussions with its state and local regulators regarding an orderly transition to a more competitive market for electricity. As discussed in more detail in Note 2, Entergy Arkansas, Entergy Gulf States, the transition to and Entergy Louisiana have made filings with their respective state regulators. concerning competition. Thes filings call for the accelerated recovery of the companies' nuclear investment and nuclear-related possibly purchase obligations over a seven-year period and for the protection of certain classes of ratepayers from of the domestic unfairly bearing the burden of cost shifting which may, result frion competition. The majority utilities' current net investment in nuclear generation shown in Note 1 is included in the proposals for accelerated August 1996 transition to recovery filed with state regulators. Sec Note 2 for a discussion of Entergy Mississippi's competition filing with the MPSC.

Retail and Wholesale Rate Issues The retail regulatory philosophy is shifting in some jurisdictions from traditional cost-of-service regulation to while mcentive-rate regulation. Incentive and performance-based rate plans encourage efficiencies and productivity and Entergy Louisiana have permitting utilities and their customers to share in the results. Entergy Mississippi implemented incentive-rate plans.

and have Several of the domestic utility companies have recently been ordered to grant base rate reductions rate reductions is a refunded or credited customers for previous overconlections of rates. The confinuing pattern of characteristic of the competitive environment in which the domestic utilities operate. See Note 2 for additional rate increase.

discussion of rate reductions and incentive-rate regulation, as weil as a System Energy proposed Legislative Activity Retail wheeling is the transmission and/or distribution by an electric utility of energy produced by another utility's area of entity over the utility's transmission and distribution system to a retail customer in the electric have already initiated the service. California, Rhode Island, New Hampshire, Massachusetts, and Pennsylvania of industry restructuring of the utility industry within their respective states. Most other states have initiated studies to have a reasonable restructuring. Included in the majority of the more developed proposals are plans for utilities opportunity to recover investments in utility plant that have previously been determined to be prudently incurred.

to study retail competition/industry Within the areas served by the domestic utility companies, formal proceedings restructuring are being conducted by the LPSC, the MPSC, and the PUCT.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS In January 1996, the Council voted to investigate retail utility service competition. Although no date has been set, the investigation will focus on the impact of competition, service unbundling, and utility restructuring on consumers of retail electric and gas utility service in New Orleans.

The PUCT has developed rules that permit greater wholesale electric competition in Texas, as mandated by the Texas legislature in its '1995 session. In January 1997, the PUCT submitted reports to the Texas legislature concerning broader competitive issues such as the unbundling of electric utility operations, market-based pricing, performance-based raternaling, and the identification and recovery of potential stranded costs as part of the transition to a more competitive electric industry environment. Currently it is uncertain what action, if any, the legislature may take with respect to these issues.

See Note 2 for information related to the LPSC and MPSC generic proceedings on competition.

A number of bills were introduced in Congress during 1996 that called for future deregulation of the electric power industry. Included in these proposals are some that would amend or repeal PUHCA and/or PURPA. Other provisions in some of the bills would give consumers the ability to choose their own electricity service.

On February 20, 1997,- the SEC issued new Rule 58 under PUHCA, which will permit registered public utility holding companies: to enter into an array of energy-related businesses for which specific approval had previously been required. These businesses include, among other things, management, operations and maintenance contracting for energy-related facilities, energy efficiency contracting, and the sale and.servicing of a range of electric appliances and equipment. The rule, which will become effective on Mardh 22, 1997, will permit broader diversification by Entergy into these businesses.

Municipalization In somenareas of the country, municipalities (or comparable entities) whose residents are served at retail by an investor-owned utility pursuant to a franchise,' are exploring the possibility of establishing new electric distribution systems, or extending existing ones. In some cases, municipalities are also seeking new delivery points in order to serve retail customers, especially large industrial customers, which currently receive service from an investor-owned utility. Where successful, the establishment of a municipal system or the acquisition by a municipal system of a utility's customers- could result in the utility's inability to recover costs that it has incurred for the purpose of serving those customers.

Industry Consolidation Another factor in making the transition to competition nationwide is the continuing and accelerating trend of utility mergers. A significant trend developing among the more recent merger announcements is the proposed combination of electric utilities and gas pipeline and/or distribution companies.

Functional Unbundling An additional trend which has recently emerged is the unbundling of traditional utility functions. In some areas of the country, utilities are attempting to sell either all or a substantial -portion of their generation assets and will become, in large part, suppliers of transmission and distribution services only.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Effects of Alternate Energy Sources on Retail Electric Sales to Industrial and Large Commercial Customers Many industrial and large commercial customers of the domestic utility companies have cost structures that are energy sensitive. For this reason, these customers are currently exploring, or in the future may explore, available and efficiency energy alternatives such as fuel switching, cogeneration, self-generation, production shifting, measures. To the extent that these customers avail themselves of such options, the domestic utility companies may Entergy suffer a loss of load. Accordingly, in an effort to retain such load, certain of the domestic utiity compames, have negotiated electric service contracts with large industrial and Gulf States and Entergy Louisiana in particular, represented by these customers. Electric service commercial customers with the specific aim of retaining the load under such agreements may be provided at tariffed rates lower than would otherwise be applicable.

Th results of operations of the domestic utility companies have not thus far been materially adversely affected as a result of the negotiation of retail electric service agreements with industrial and large commercial customers. This is due in large measure to the utilities' success in reducing costs, overall load growth, increasing service agreements.

sales to all customer classes, and the regulatory treatment accorded to negotiated electric However, in view of the likelihood of increased competition in the electric utility business in the future, there can be customers will not no assurance that the effect of negotiated electric prices for industrial and large commercial eventually have a negative effect on the results of operations of the domestic utility companies.

any During 1995, the Council approved a resolution requiring prior approval of the regulatory treatment of lost contribution to fixed costs as a result of incentive-rate agreements with large industrial or commercial customers of entered into for the purposes of retaining those customers,. The Council's resolution also requires prior approval the regulatory treatment of stranded costs resulting from the loss of large customers.

that will During 1995, Entergy Louisiana received separate notices from two large industrial customers proceed with proposed cogeneration projects for the purpose of fulfilling their future electric energy needs. These customers will continue to purchase their energy requirements from Entergy Louisiana until their cogeneration these facilities are completed and operational, which is expected to occur in 1997 and 1998. After that time, 1996, these two customers will continue to purchase energy from Entergy Louisiana, but at a reduced level. During customers represented an aggregate of approximately 17%/ of total Entergy Louisiana industrial sales, and provided 12% of total industrial base revenues.

that During 1996, Entergy Gulf States entered into agreements concerning a steam generating station cogenerated electricity for a large industrial historically has been contractually dedicated to providing steam and will customer. Under thes agreements, the generating facility was leased to the customer, but Entergy Gulf States major continue to operate the facility. The customer has announced that it will spend $190 million to make which improvements to the facility, including a new 150 MW gas turbine generator. As a result of these agreements, its contracts with Entergy Gulf were entered into with the expectation that the customer otherwise would terminate to States and construct its own generating facilities, Entergy Gulf States' revenues from this customer are estimated States' net income is be reduced by approximately $33 million annually beginning in August 1997, and Entergy Gulf expected to be reduced by approximately $15 million annually.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS In November 1996, another industrial customer of Entergy Gulf States with an electrical load of approximately 31 MW ceased purchasing electricity from Entergy Gulf States due to the commencement of operations of a cogeneration facility. This is expected to result in an annual revenue loss to Entergy Gulf States of approximately $5.5 million, and an annual reduction in net income of approximately $3.3 million.

Domestic and Foreign Investments Entergy Corporation seeks opportunities to expand its domestic and foreign businesses that are not regulated by domestic state and local regulatory authorities. Such business ventures currently include power development and operations and retail services related to the-utility business. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" for a discussion of Entergy Corporation's 1996 investments in domestic and foreign nonregulated businesses. These investments may involve a greater risk than domestically regulated utility enterprises. In 1996, Entergy Corporation's investments in domestic and foreign nonregulated investments reduced consolidated net income by approximately $25.4 million. While such investments did not have a positive effect on 1996 earnings, management believes they will show profits in the near term In an effort to expand into new energy-related businesses, Entergy plans to commercialize the fiber optic telecommunications network that connects system facilities and supports its internal business needs. Entergy will provide long-haul fiber optic capacity to major telecommunications carriers which, in turn, will market that service to third parties. The Telecommunications Act of 1996 permits a company such as Entergy to market such a service, subject to state and local regulatory approval. This law contains an exemption from PUHCA that will permit registered utility holding companies to form and capitalize subsidiaries to engage in telephone, telecommunications, and information service businesses without SEC approval. However, the law requires that such telecommunications subsidiaries file for exemption with the Federal Communications Commission, and that they not engage in transactions with utility affiliates within their holding company systems or acquire utility affiliates' rate-based property without state or local regulatory approval.

During 1996, Entergy Corporation's wholly-owned subsidiary, Entergy Technology Holding Company, entered the electronic security monitoring business through the acquisition of six fell-service security monitoring companies. These companies serve an aggregate of approximately 80,000 customers within the states of North Carolina, South Carolina, Alabama, and Florida. These acquisitions represent an investment by Entergy Corporation of approximately $83 million in the security monitoring industry, substantially all of which was financed by debt.

In October 1995, FERC issued an order granting EWG status to EPMC, which was created in 1995 to become a buyer and seller of electric energy and generating fuels. In February 1996, FERC approved market-based rate sales of electricity by EPMC. Such approval allows EPMC to begin providing wholesale customers with a variety of services, including physical trading. An application currently is pending before the SEC seeking additional authority for EPMC to purchase and sell derivative contracts relating to electricity, gas, and fuels.

In January 1997, Entergy Corporation announced that a preliminary agreement had been reached with Maine Yankee Atomic Power Company (Maine Yankee) for a new nonutility subsidiary of Entergy Enterprises to provide management and operations services for the Maine Yankee nuclear plant. Subsequently, Entergy Nuclear, Inc.

(Entergy Nuclear), a Delaware corporation, was organized for this purpose. On February 13, 1997, an agreement to provide such services for an initial period of up to one year was executed by Entergy Nuclear and Maine Yankee.

The creation of Entergy Nuclear and its undertaking with Maine Yankee are authorized by existing SEC orders previously granted to Entergy Enterprises. Entergy Corporation has an application pending at the SEC to create a different structure under which Entergy Nuclear would engage in this business.

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS distribution On January 5, 1996, Entergy Corporation finalized its acquisition of CitiPower, an electric suburbs. The purchase price of CitiPower was company serving Melbourne, Australia, and surrounding by Entergy Corporation, and the approximately $1.2 billion, of which $294 million represented an equity investment the majority of remainder represented debt that is non-recourse to Entergy Corporation. Entergy Corporation funded credit. CitiPower serves the equity portion of the investment by using $230 million of its $300 million line of customers. At theme of the acquisition, approximately 238,000 customers, the majority of which are commercial CitiPower had 846 employees.

for $2.1 billion.

On December 18, 1996, Entergy made a formal cash offer to acquire London Electricity two million customers in the metropolitan London Electricity is a regional electric company serving approximately area of London, England. The offer was approved by authorities in the United Kingdom and as of February 7, 1997, over 90% of the commnon the offer was made unconditional and Entergy, through an English subsidiary, controlled expects to gain control of shares of London Electricity. Through procedures available under applicable law, Entergy with $1.7 billion of debt that is 100% of the common shares of London Electricity. The acquisition was financed from available non-recourse to Entergy Corporation, and $392 million of equity provided by Entergy Corporation cash and borrowings under its $300 million line of credit.

a proposed 1,100 In 1996, Entergy made a proposal to develop, finance and construct the Saltend Project, Petroleum Company chemical MW gas fired, combined cycle cogeneration plant to be located adjacent to the British to the negotiation of definitive facility in northeast England. The development of the Saltend Project is subject agreements and obtaining all necessary governmental approvals, which is expected to be accomplished in 1997. The years, currently is estimated to be total cost of this project, which would be developed over a period of about two approximately $650 million.

equity interest On December 20, 1996, Entergy exercised an option to acquire, through a subsidiary, a 25%

cycle generating facility in San Isidro S.A., a Chilean company which is developing a 370 MW gas fired, combined an quarter of 1997, will require in central Chile. Entergy's interest, which is expected to be acquired during the first relating to the payment of the estimated $20 million cash investment as well as a guaranty of up to $30 million the developer, is Empresa turnkey contractor for the San Isidro project. The other owner of the project, who is also Nacional de Electricidad, S.A. (ENDESA).

ANO Matters 2's steam generators, Entergy Operations has made periodic inspections and repairs on the tubes in ANO authorized Entergy which have experienced cracking. In October 1996, Entergy Corporation's Board of Directors for the fabrication and replacement of Operations to negotiate a contract with appropriate cancellation provisions, the steam generators at ANO. See Note 9 for additional information.

Dereeulated Utility Operations jurisdiction and steam Entergy Gulf States discontinued regulatory accounting principles for its wholesale respectively. The operating department and the Louisiana deregulated portion of River Bend during 1989 and 1991, 1995, and ($5.2) million in 1994.

income (loss) from these operations was $13.9 million in 1996, $1.2 million in

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ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS The increases in 1996 and 1995 net income from deregulated operations were principally due to increased revenues, partially offset by increased depreciation. The future impact of the deregulated utility operations on Entergy and Entergy Gulf States' results of operations and financial position will depend on future operating costs, the efficiency and availability of generating units, and the future market for energy over the remaining life of the assets. The deregulated opera"ons will be subject to the requirements of SFAS 121, as discussed in Note 1, in determining the recognition of any asset impairment.

Property Tax Exemptions Waterford 3's local property tax exemptions expired in December 1995. In a March 1996 LPSC order, Entergy Louisiana was permitted to defer recovery of the estimated Waterford 3 property tax from January 1996 through June 1996. The order allows for the recovery of the property tax beginning in July 1996 and also for the recovery, from July 1996 through June 1997; of the related deferral. In April 1996, Louisiana authorities assessed 1996 property taxes of $19.3 million on Waterford 3.

River Bend's local property tax exemptions expired in December 1996. The 1997 property tax is estimated to be approximately $13.2 million. The tax related to the Texas jurisdiction was included in the rate proceeding filed with the PUCT in November 1996. Entergy Gulf States expects that the LPSC will address the accounting treatment and recovery of River Bend's property taxes related to the Louisiana jurisdiction in conjunction with the fourth required Merger-related earnings review to be filed in May 1997.

Accountin! Issues New Accounting Standard - Entergy adopted SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of' (SFAS 121), effective January 1, 1996. This standard describes circumstances that may result in assets being impaired and provides criteria for recognition and measurement of asset impairment. See Notes 1 and 2 for information regarding the write-off recorded in 1996 and potential additional impacts of the new accounting standard on Entergy.

Continued Application of SFAS 71 - As a result of the EPAct, the actions of regulators, and other factors, the electric utility industry is moving toward a combination of competition and a modified regulatory environment.

The domestic utility companies' and System Energy's financial statements currently reflect, for the most part, assets and costs based on existing cost-based ratemaking regulations in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). Continued applicability of SFAS 71 to the domestic utility companies' and System Energy's financial statements requires that rates set by an independent regulator on a cost-of service basis be charged to and collected from customers.

In the event that all or a portion of a utility's operations cease to meet those criteria for various reasons, including deregulation, a change in the method of regulation, or a continued change in the competitive environment for the utility's regulated services, the utility should discontinue application of SFAS 71 for the relevant portion.

That discontinuation should be reported by elimination from the balance sheet of the effects of any actions of regulators recorded as regulatory assets and liabilities. The effect of discontinuing application of SFAS 71. would have a material impact on Entergy's financial statements.

ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS continue to apply SFAS 71 for The domestic utility companies' and System Energy's financial statements States' business described in "Derefulated their regulated operations, except for those portions of Entergy Gulf regarding retail competition have Utility Operations" above. Although discussions with regulatory authorities the foreseeable future, occurred and are expected to continue, management does not expect any definitive outcomes in of Entergy's I for additional discussion and therefore, the regulated operations continue to apply SFAS 71. See Note application of SFAS 71.

issued an exposure draft of a Accounting for Decommissioning Costs - In February 1996, the FASB generating units as well as liabilities proposed SFAS addressing the accounting for decommissioning costs of nuclear discussion of proposed changes in the related to the closure and removal of all long-lived assets. See Note 9 for a changes on Entergy.

accounting for decommissioning/closure costs and the potential impact of these Financial Instruments policy that financial Derivative instruments have been used by Entergy on a limited basis. Entergy has a purposes. See Notes 7 and 9 for derivatives are to be used only to mitigate business risks and not for speculative 31, 1996.

additional information concerning Entergy's derivative instruments outstanding as of December

L.

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REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Entergy Corporation We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries as of December 31, 1996 and 1995, and the related statements of consolidated income, retained earnings and paid-in capital and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Corporations management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Chose standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates

-made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the net amount of capitalized costs for River

$467 Bend exceed those costs currently being recovered through rates. At December 31, 1996, approximately million is not currently being recovered through rates. Based upon the regulatory decision on this matter, a write-off of all or a portion of such costs may be required.

As discussed in Note 1 to the consolidated financial statements, at January 1, 1996 the Company adopted and for Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets the consolidated financial statements, m Long-Lived Assets to Be Disposed Of'. Also, as discussed in Note 1 to 1996 and 1995, certain of the Corporation's subsidiaries changed their methods of accounting for incremental nuclear plant outage maintenance costs.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana February 13, 1997

ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS On January 5, 1996, Entergy Corporation finalized its acquisition of CitiPower. In accordance with the purchase method of accounting, the results of operations for 1995 and 1994 of Entergy Corporation and subsidiaries reported in its ýStatements of Consolidated Income and Cash Flows do not include CitiPower's results of operations.

See Note 13 for additional information regarding CitiPower.

Net Income Consolidated net income decreased in 1996 primarily due to the $174 million net of tax write-off of River Bend rate deferrals pursuant to SFAS 121 and the one-time recording in 1995 of the cumulative effect of the change in accounting method for incremental nuclear refueling outage maintenance costs at Entergy Arkansas. The effect of these items was partially offset by the reversal of a Cajun-River Bend litigation accrual at Entergy Gulf States.

Excluding these items, net income would have increased 17% due to decreased other operation and maintenance expenses for domestic regulated operations as a result of restructuring ,programs, as discussed in Note 12, and ongoing efficiency improvement programs throughout Entergy.

Consolidated net income increased in 1995 due primarily to increased electric operating revenues, decreased other operation and maintenance expenses, the onetime recording of the cumulative effect of the change in accounting method for incremental nuclear refueling outage maintenance. costs at Entergy Arkansas, and decreased interest expense, partially offset by increased income taxes and decreased miscellaneous income - net.

Significant factors affecting the results of operations and causing variances between the years 1996 and 1995, and between the years 1995 and 1994, are discussed under "Revenues and Sales," "Expenses," and "Other" below.

Revenues and Sales See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON," following the financial statements, for information on operating revenues by source and kWh sales.

The changes in electric operating revenues for the twelve months ended December 31, 1996 and 1995, are as follows:

Increase/

(Decrease)

Description 1996 1995 (In Millions)

Change in base revenues ($117.5) $6.6 Rate riders 1.8 15.3 Fuel cost recovery 382.3 (28.0)

Sales volume/weather 108.0 141.3 Other revenue (including unbilled) (49.3) 4.3 Sales for resale 37.6 35.6 System Energy-FERC Settlement - 120.5 Total $362.9 $295.6

ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS revenues, which do not Electric operating revenues increased in 1996 as a result of higher fuel adjustment reductions at various domestic utility affect net income, and an increase in retail energy sales, partially offset by rate and customer usage.

companies. The increase in retail sales is primarily the result of an increase in customers energy sales, the effects of Electric operating revenues increased in 1995 as a result of an increase in retail rate redu&ions at Entergy Gulf the 1994 FERC Settlement -and increased wholesale revenues, partially offset by revenues. Warmer weather and non States, Entergy Louisiana, and Entergy New Orleans and lower fuel adjustment enmgy sales. The increase in sales weather related volume growth contributed equally to the increase in retail electric area. The incrase in other for resale was primarily from increased energy sales outside of Entergy's service revenues was due to the effects of the 1994 FERC Settlement and the 1994 NOPSI Settlement for gas purchased for resale and Gas operating revenues increased in 1996 due to higher unit purchase prices colder than normal weather in the first quarter of 1996.

primarily to the acquisition Nonregulated and foreign-energy related business revenues increased in 1996 due of CitiPower. See Note 13 for additional information regarding CitiPower.

Expens included in the Operating expenses for 1996 include the operating expenses of CitiPower, which were not regarding CitiPower. Excluding the prior year financial statements. See Note 13 for additional information following discussion excludes operating expenses of CitiPower, Entergy's operating expenses increased in 1996. The the impact of the acquisition of CitiPower.

fuel costs and an increase in In 1996, fuel and purchased power expenses increased as a result of higher payroll-related expenses, energy sales. Other operation and maintenance expenses decreased in 1996 due to lower operating efficiency resulting from restructuring programs as discussed in Note 12, in addition to ongoing against operating expenses in 1996 represent the improvement programs throughout Entergy. Rate deferrals charged proposed System Energy rate increase deferral of Waterford 3 local property taxes and the deferral of a portion of the decreased primarily due to the at Entergy Mississippi and Entergy New Orleans. Nuclear refueling outage expenses in the fourth quarter of 1996 rather than effiet of deferring the nuclear refueling outage expenses at Grand Gulf 1 costs and depreciation rates recognizing those expenses as incurred. The majority of the increase in decommissioning refund. See Note 2 for a discussion of is reflected in the 1995 System Energy FERC rate increase filing, subject to the proposed rate increase.

and maintenance expenses.

Operating expenses decreased in 1995 primarily due to reduced other operation expenses resulting from the Other operation and maintenance expenses decreased because of lower payroll-related in operating expenses was restructuring program discussed in Note 12 and 1994 Merger-related costs. The decrease to a 1995 refueling outage at Grand Gulf 1 partially offset by an increase in nuclear refueling outage expenses due and the adoption of the change in accounting method at Entergy Arkansas.

to ongoing retirement and Excluding CitiPower, interest on long-term debt decreased for 1996, due primarily Energy. Borrowings by Entergy refinancing of higher cost debt at the domestic utility companies and System contributed to the increase in other Corporation from a $300 million line of credit related to CitiPower investment interest-net in 1996.

ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Interest charges decreased in 1995 as a result of the retirement and refinancing of higher cost long-term debt.

Preferred dividend requirements decreased in 1996 and 1995 due to stock redemption activities.

Other Miscellaneous other income - net decreased in 1996 as a result of the write-off of River Bend rate deferrals pursuant to SFAS 121, as discussed in Note 2, and a decrease in Grand Gulf I carrying charges at Entergy Arkansas due to a decline in the deferral balance, partially offset by the.Entergy Gulf States' reversal of a Cajun-River Bend litigation accrual. Income tax expense increased due to higher pretax income excluding the River Bend rate deferral write-off and the prior year change in accounting method.

Miscellaneous other income - net decreased in 1995 due primarily to expansion activities in nonregulated businesses. Income tax expense increased in 1995 due to higher pretax income and the effects of the 1994 FERC Settlement.

ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME For the Years Ended December 31, 1996 1995 1994 (In Thousands, Except Share Data)

Operating Revenues:

$6,450,940 $6,088,018 $5,792,410 Electric 103,992 118,962 134,456 Natural gas 49,295 46,559 59,143 Steam products 5189,987 45,901 23,889 Nonregulated and foreign energy-related businessess 7,163,526 6,287,206 5,981,820 Total Operating Expenses:

operation and maintenance:

Fuel, fuel-related expenses, and gas purchased for resale 1,635,885 1,395,889 1,450,598 704,744 356,596 340,067 Purchased power 84,972 63,979 55,148 Nuclear refueling outage expenses 1,528,351 1,613,313 1,577,383 Other operation and maintenance 695,865 659,142 790,948 Depreciation, amortization, and decommissioning 353,270 300,120 284,349 Taxes other than income taxes (33,874)

Rate deferrals 408,087 399,121 401,301 Amortization of rate deferrals 5,484,805 4,769,880 4,810,569 Total 1,678,721 1,517,326 1,171,251 Operating Income Other Income (Deductions):

Allowance for equity funds used 9,951 9,629 11,903 during construction (194,498)

Wen,-off ofRiver Bend rate deferrals 137,583 30,993 50,086 Miscellaneous - net 61,989 Total (46,964) 40,622 Interest Charges: 674,532 633,851 665,541 Interest on long-term debt 22,354 49,053 33,749 Other interest - net 4,797 Distributions on preferred securities of subsidiary Allowance for borrowed funds used (8,347) (8,368) (9,938) during construction Preferred and preference dividend requirements of 77,969 81,718 70,536 subsidiaries and other 790,571 737,201 759,675 Total 841,186 820,747 473,565 Income Before Income Taxes 421,159 336,182 131,724 IncomeTaxes Income before the Cumulative Effect 420,027 484,565 341,841 of Accounting Changes Cumulative Effect of Accounting 35,415 Changes (net of income taxes)

$420,027 $519,980 $341,841 Net Income Earmins per average common share before cumulative effect of

$1.83 $2.13 $1.49 accounting changes $1.83 $2.28 $1.49 Earnings per average common share $1.80 $1.80 $1.80 Dividends declared per common share Average number of common shares 229,084,241 227,669,970 228,734,843 outstanding See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Years Ended December 31, 1996 1995 1994 (In Thousands)

Operating Activities:

Net income $420,027 $519,980 $341,841 Noncash items included hi net income:

Write-off of River Bend rate deferrals 194,498 Cumulative effect of a chaiige in accounting principle (3h,415)

Change in rate deferrals/excess capacity-net 423,036 390,177 394,344 Depreciation, amortization, and decommissioning 790,948 695,865 659,142 Deferred income taxes and investment tax credits 76,920 (31,006) (151,731)

Allowance for equity funds used during construction (9,951) (9,629) (11,903)

Amortization of deferred revenues (14,632)

Changes in working capital:

Receivables (30,322) (30,550) (382)

Fuel inventory *(17,220) (28,956) 16,993 Accounts payable 4,011 (19,124) 65,776 Taxes accrued (27,488) 115,250 (25,689)

Interest accrued 7,176 (194) (15,255)

Other working capital accounts (121,692) (85,454) 126,058 Change in other regulatory assets (85,051) (3,876) (33,032)

Decommissioning rust contributions (52,204) (37,756) (24,755)

Provision for estimated losses and reserves 31,063 (37,752) 79,494 Other (146,238) 24,153 151,649 Net cash flow provided by operating activities 1,457,513 1,425,713 1,557,918 Investing Activities:

Construction/capital expenditures (571,890) (618,436) (676,180)

Allowance for equity funds used during construction 9,951 9,629 11,903 Nuclear fuel purchases (123,929) (207,501) (179,932)

Proceeds from sale~leaseback of nuclear fuel 109,980. 226,607 128,675 Acquisition of CitiPower (1,156,112)

Investment in nonregulated/nonutility properties (76,091) (172,814) (49,859)

Proceeds from sale of Hub River stock 26,955 Proceeds from sale of Independence 2 39,398 Proceeds from sale of nonutility property 26,000 Other (32,619) (28,982) (20,151)

Net cash flow used in investing activities (1,774,357) (791,497) (759,544)

ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Years Ended December 31, 1996 1995 1994 (In Thousands)

Financing Activities:

Proceeds from the issuance of:

39,608 109,285 24,534 59,410 General and refunding mortgage bonds 431,906 First mortgage bonds 1,066,858 273,542 164,699 Bank notes and other long-term debt 118,087 Common Stock 125,963 I-L Preferred securities of subsidiaries' trusts Retirement of: (821,575) (225,80 0) (303,800)

(45,000)

First mortgage bonds S(56,000) (69,200)

General and refunding mortgage bonds (145,110) (221,0413) (148,962)

Other long-term debt - (48,497)

Premium and expense on refinancing sale/leaseback bonds - (119,486)

Repurchase of common stock (157,503) (46,56 4) 1(49,091)

Redemption of preferred stock (24,981) (126,2o)0) 128,200 Changes in short-term borrowings - net (405,346) (408,5553) (410,223)

Common stock dividends paid 171,907 (714,5- 33) (748,216)

Net cash flow provided by (used in) financing activities 50-Effect of exchange rates on cash and cash equivalents (144,887) (80,317) 50,158 Net increase (decrease) in cash and cash equivalents 533,590 .613,907 563,749 Cash and cash equivalents at beginning ofperiod

$388,703 $533,590 $613,907 Cash and cash equivalents at end of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

$677,535 $626,531 $660,150

$218,667 Interest - net of amount capitalized $373,247 $285,738 Income taxes Noncash investing and financing activities:

$16,358 - $88,574 Capital lease obligations incurred Change in unrealized appreciation (depreciation) of $7,803 ($2,198)

$16,614 decommissioning trust assets $47,695 Acquisition of nuclear fuel See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES CONSOLDATED BALANCE SHEETS ASSETS December 31, 1996 1995 (In Thousands)

Current Assets:

Cash and cash equivalents:

Cash $34,807 $42,822 Temporary cash investmnts - at cost, which-approxkmtas market 346,782 490,768 Special dposits 7,114 Total cash and cash equivalents 388,703 533,590 Notes receivable 1,384 6,907 Accounts receivable:

Customer (less allowance for doubtful accounts of

$9.2 million in 1996 and $7.1 million in 1995) 324,687 .333,343 Other 99,066 59,176 Accrued unbilled revenues 351,429 293,461 Deferred fuel 122,184 25,924 Fuel inventory 139,603 122,167 Materials and supplies - at average cost 339,622 345,330 Rate deferrals 444,543 420,221 Prepayments and other 151,312 175,121 Total 2,362,533 2,315,240 Other Property and Investments:

Decommissioning trust funds 357,962 277,716 Nonregulated investments 513,058 372,453 Other 59,053 62,166 Total 930,073 712,335 utility Plant.

Electric 22,811,164 21,698,593 Plant acquisition adjustment - Entergy Gulf States 455,425 471,690 Electric plant under leases 679,991. 675,425 Property under capital leases - electric 147,277 145,146 Natural gas 168,143 166,872 Steam products 81,743 77,551 Construction work in progress 401,676 482,950 Nuclear fuel under capital leases 250,651 312,782 Nuclear fuel 112,625 49,100 Total 25,108,695 24,080,109 Less - accumulated depreciation and amortization 8,885,572 8,259,318 Utility plant - net 16,223,123 15,820,791 Deferled Debits and Other Assets:

Regulatory assets:

Rate deferrals 399,493 1,033,282 SFAS 109 regulatory asset - net 1,196,041 1,279,495 Unamortized loss on reacquired debt 217,664 224,131 Other regulatory assets 435,652 350,601 Long-term receivables 216,082 224,726 CitiPower license (net of $15.6 million of amortization) 606,214 Other 379,419 305,329 3,450,565 3,417,564 Total TOTAL $22,966,294 $22,265,930 See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY December 31, 1996 1995 (In Thousands)

Curret Liabilities:

Currently maturing long-term debt $345,620 $558,650 20,686 45,667 Notes payable 554,558 460,379 Accounts payable 155,534 P40,054.

Customer deposits 180,340 207,828 Taxes accrued 78,010 72,847 Accumulated deferred income taxes 195,445 203,425 Interest accrued 8,950 12,194 Dividends declared 151,287 151,140 Obligations under capital leases 247,039 184,157 Other 2,091,243 1,882,567 Total De&feed Credits and Other Liabilities: 3,770,760 3,777,644 Accumulated deferred income taxes 607,641 612,701 Accumulated deferred investment tax credits 303,664 247,360 Obligations under capital leases 1,298,306 1,277,419 Other 5,971,428 5,924,067 Total Long-term debt 7,590,804 6,777,124 216,986 253,460 Subsidiaries' preferred stock with sinking fund "150,000 150,000 Subsidiary's preference stock Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding 130,000 solely junior subordinated deferrable debentures Shareholders' Equity:

Subsidiaries! preferred stock without sinking fund 430,955 550,955

• Common stock, S.01 par value, authorized 500,000,000 shares; issued 234,456,457 shares in 1996 and 2,345 2,300 230,017,485 shares in 1995 4,320,591 4,201,483 Paid-in capital 2,341,703 2,335,579 Retained eanings 21,725 Cumulative foreign currency translation Less - treasury stock (1,496,118 shares in 1996 and 67,642 45,449 2,251,318 in 1995) 7,071,870 7,022,675 Total Commitments and Contingencies (Notes 2, 9, 10, and 16)

TOTAL $22,966,294 $22,265,930 See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED RETAINED EARNINGS AND PAID-IN CAPITAL For the Years Ended December 31, 1996 1995 1994 (In Thousands)

Retained Earnings, January I $2,335,579 $2,223,739 $2,310,082 Add:

Net income 420,027 519,980 341,841 Total 2,755,606 2,743,719 2,651,923 Deduct:

Dividends declared on common stock 412,250 409,801 411,806 Common stock retirements 13,940 Capital stock and other expenses 1,653 (1,661) 2,438 Total 413,903 408,140 428,184 Retained Earnings, December 31 $2,341,703 $2,335,579 $2,223,739 Paid-in Capital, January I $4,201,483 $4,202,134 $4,223,682 Add:

Gain (loss) on reacquisition of subsidiaries' preferred stock 1,795 (26) (23)

Common stock issuances related to stock plans 117,560 (3,002)

Total 4,320,838 4,199,106 4,223,659 Deduct:

Common stock retirements 22,468 Capital stock discounts and other expenses 247 (943)

(2,377)

Total 247 (2,377) 21,525 Paid-in Capital, December 31 $4,201L,483

$4,320,591 $4,202,134 See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 1996 1995 1994 1993 1992 (In Thousands, Except Per Share Amounts)

$ 4,098,332 Operating revenues $ 7,163,526 $ 6,287,206 $ 5,981,820 $ 4,475,224 Income before cumulative effect of a change in

$ 420,027 $ 484,565 $ 341,841 $ 458,089 $ 437,637 accounting principle Eamings per share before cumulative effect of accounting changes $ 1.83 $ 2.13 $ 1.49 $ 2.62 $ 2.48 1.80 $ 1.80 $ 1.65 $ 1.45

$ 1.80 $

Dividends declared per share 5.31% 12.58% 10.31%

6.41% 8.11%

Return on average common equity 27.93 $ 28.27 $ 24.35

$ 28.51 $ 28.41 $

Book value per share, year-end (2) $ 22,621,874 $ 22,876,697 $ 14,239,537

$ 22,966,294 $ 22,265,930 Total assets (2) $ 7,817,366 $ 8,177,882 $ 5,630,505

$ 8,335,150 $ 7,484,248 Long-term obligations (1X2) with sinking (1) Includes long-term debt (excluding currently maturing debt), preferred and preference stock fund, preferred securities of subsidiary trust, and noncurrent capital lease obligations.

(2) 1993 amounts include the effects of the Merger in accordance with the purchase method of accounting for combinations.

1996 1995 1994 1"3 1992 (In Thousands)

Electric Operating Revenues:

$2,277,647 $2,177,348 $2,127,820 $1,594,515 $1,441,628 Residential 1,071,070 1,008,474 1,573,251 1,491,818 1,500,462 Commercial 1,098,147 1,987,640 1,810,045 1,834,155 1,197,695 Industrial 136,471 127,880 169,287 154,032 159,840 Governmental 3,999,751 3,676,129 6,007,825 5,633,243 5,622,277 Total retail 280,505 243,507 376,011 334,874 293,702 Sales for resale 88,713 96,971 67,104 119,901 (123,569)

Other (1) $4,368,969 $4,016,607

$6,450,940 $6,088,018 $5,792,410 Total Billed Electric Energy Sales (Millions of kWh): 18,946 17,549 Residential 28,303 27,704 26,231 20,719 20,050 13,420 12,928 Commercial 21,234 44,340 42,260 41,030 24,889 23,610 Industrial 1,887 1,839 2,449 2,311 2,233 Governmental 59,142 55,926 96,326 92,994 89,544 Total retail 8,291 7,979 10,583 10,471 7,908 Sales for resale 67,433 63,905 106,909 103,465 97,452 Total m,= - 2 (1) 1994 includes the effects of the FERC Settlement, the 1994 NOPSI Settlement, and an Entergy Gulf States reserve for rate refund.

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REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Entergy Arkansas, Inc.

We have audited the accompanying balance sheets of Entergy Arkansas, Inc. (formerly Arkansas Power &

Light Company) as of December 31, 1996. and 1995, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsiility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial for position of the Company as of December 31, 1996 and 1995, and the results of its operations and its cash flows each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.

As discussed in Note I to the financial statements, in 1995 the Company changed its method of accounting for incremental nuclear plant outage maintenance costs.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana February 13, 1997

ENTERGY ARKANSAS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased in 1996 due primarily to the onetime recording of the cumulative effect of the change in accounting method in 1995 for incremental nuclear refueling outage maintenance costs as discussed in Note 1.

Excluding the above mentioned item, net income would have increased $21.1 million in 19%6 principally due to a decrease in other operation and maintenance expenses.

Net income increased in 1995 due primarily to the onetime recording of the cumulative effect of the change in accounting method for incremental nuclear refueli"ng outage mantenance costs. Excluding the above mentioned item, net income for 1995 decreased due to an increase in depreciation, amortization, and decommissioning expenses and income tax expense offset by an increase in revenues from retail energy sales and a decrease in other operation and maintenance expenses.

Significant factors affecting the results of operations and causing variances between the years 1996 and 1995, and between the years .1995 and 1994, are discussed under "Revenues and Sales " "Expenses," and "Other" below.

Revenues and Sales See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON," following the financial statements, for information on operating revenues by source and kWh sales.

The changes in electric operating revenues for the twelve months ended December 31, 1996, and 1995 are as follows:

Increase/

(Decrease)

Description 1996 1995 (In Millions)

Change in base revenues ($10.1) ($3.4)

Rate riders (5.3) 15.9 Fuel cost recovery 8.0 25.1 Sales volume/weather 19.5 38.2 Other revenue (including unbilled) (7.1) 9.7 Sales for resale 90.2 (28.0)

Total $95.2 $57.5 Electric operating revenues increased for 1996 due primarily to increased sales for resale and retail energy sales. The increase in sales for resale is due to higher generation availability compared to 1995. The increase in retail energy sales resulted from increased customer usage, partially attributable to more severe weather as compared to 1995.

ENTERGY ARKANSAS, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues increased for 1995 due primarily to increased retail energy sales and fuel adjustment revenues partially offset by a decrease in sales for resale to associated companies. The increase in sales volume/weather resulted from increased customers and associated usage, while the remainder resulted from wanner weather in the summer months. The decrease in sales for resale to associated companies was caused by changes in generation availability and requirements among the domestic utility companies.

Expenses Operating expenses increased in 1996 because of an increase in fuel, and purchased power expenses, partially offset by reduced amortization of previous rate deferrals and decreased other operation and maintenance expenses. The increase in fuel and purchased power expenses is largely due to an increase in generation and purchases related to the increase in sales for resale. The decrease in other operation and maintenance expenses resulted from lower payroll expenses. Payroll expenses decreased as a result of restructuring costs recorded in 1995 and the resulting decrease in employees.

Operating expenses increased in 1995 because of an increase in depreciation, amortization, and decommissioning expenses, offset by a decrease in other operation and maintenance expenses. Depreciation, amortization, and decommissioning expenses increased primarily due to additions and upgrades at ANO and additions to transmission lines, substations, and other equipment. Also, decommissioning expens e increased due to the implementation of the decommissioning rate rider which resulted from the decommissioning study performed in 1994. The decrease in other operation and maintenance expenses is largely due to restructuring costs and storm damage costs recorded in 1994.

Other Miscellaneous other income - net decreased in 1996 due to reduced Grand Gulf I carrying charges as a result of a decline in the deferral balance. Income tax expense increased in 1996 because of higher pretax income.

Income tax expense increased in 1995 primarily due to the write-off in 1994 of investment tax credits in accordance with the FERC Settlement. Income tax expense also increased due to higher pre-tax income in 1995.

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ENTERGY ARKANSAS, INC STATEMENTS OF INCOME For the Years Ended December 31, 1996 1995 1994 (In Thousands)

Operating Revenues 1,743,433 $1,648,233 $1,590,742 Operating Expenses:

Operation and maintenance:

Fuel, foel-related expenses, and gas purchased for resale 257,008 231,619 261,932 Purchased power 432,825 363,199 328,379 Nuclear refueling outage expenses 29,365 31,754 33,107 Other operation and maintenance 358,789 375,059 390,472 Deprecation, amortization, and decommisonng 167,878 162,087 149,878 Taxes other than income taxes 37,688 38,319 33,610 Amortization of rate deferrals

• 149,730 174,329 166,793 Total 1,433,283 1,376,366 1,364,171 Operating Income 310,150 271,867 226,571 Other Income.

Allowance for equity fnids used during construction 3,886 3,567 4,001 Misceilaneous - net 32,591 46,227 48,049 Total 36,477 49,794 52,050 Interest Charges:

Interest on long-tenm debt 98,531 106,853 106,001 Other interest - net 6,257 8,485 4,811 Distributions on prefewred securities of subsidiary 1,927 Allowance for borrowed funds used.

during construction (2,330) S.(2,424) (3,674)

Total 104,385 112,914 107,138 Income Before Income Taxes 242,242 208,747 171,483 Income Taxes 84,444 72,082 29,220 Income before the Cumulative Effect of Accounting Changes 157,798 136,665 142,263 Cumulative Effect of Accounting Changes (net of income taxes) -35,415-Net Income 157,798 172,080 142,263 Preferred Stock Dividend Requirements and Other 16,110 18,093 19,275 Earnings Applicable to Common Stock $141,688 $153,987 $122,988 See Notes to Financial Statements.

ENTERGY ARKANSAS, INC STATEMENTS OF CASH FLOWS For the Yea"s Ended December 31, 1996 1995 1994 (In Thousa&ds)

Operating Activitics:

Net income S157,798 $172,080 s142,263 Noncash items included in net income: - (35,415) cunulative effect of a change in accounting principle 139,701 125,504 102,959 Change in rate defrrals/excess capacity-net 167,878 162,087 149,87M Depnciation. amortization, and decommisioning (46.026) (33,112) (54,00)

Defrred immo taxes and investmet tax aedt (3,896) (3,567j. (4,001)

Allowance for equity funds used during construction Changes in working capital.

(4,292) (39,209) 10,817 Receivabtes 137 (22,195) 17,359 Fuel kinvust (1,112) 55,732 (32,114)

Accounts payable 14,035 (5,080) 2X226 Tamx accrued (2,615) (824) (346)

Interest accru*d (7,529) (2X,375) 20,324 (18,961) (16,702) (11,581) 4,125 2,849 16,617 Provision fr esl-mated losses and reserves (22,675) 6,055 (4,744)

Other 376,578 338,358 355,577 Net cash flow poded by opaing activities Investing Activities:

(145,529) (165,071) (179,116)

Ceesbucdio expenditures 3,886 3,567 4,001 Allowance for equity funds used during construction (40,074)

(26,084) (41,219)

Nuclear fuel purchase 25,451 41,832 40,074 Proceeds Ron saslceaseback of nuclear fuel (142,276) (160,891) (175,115)

Not cash foiw used in iwnesting activities Financing Activities:

Proceeds from issuance of~

First mo bigage bonds 84,256

- 118,662 27,992 Other ling4ermi debt 58,168 Prefrred securities of subsidiary trust Retirement or First mortgage bonds (112,807) (25,800) (800)

(1,700) (124,025) (30,231)

Other long-term debt (69,624) (9,500) (11,500)

Redemption of pirefrred stock

- (34,000) 12,605 Changes in short-turn borrowings - net Divdends paid:

(142,800)* (153,400) (80,000)

Common Stock (17,736) (18,362) (19,597)

Preferred stock (202,243) (246,425) (101,531)

Not cash flow used in financing activities 32,059 (68,958) 78,931 Net increase (decrease) in cash and cash equivalents 11,798 80,756 1,825 Cash and cash equivalents at beglinning of period

$43,857 $11,798 $80,756 Cash and cash equivalents at and of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for $98,717

$94,662 $102,851 Interest - net of amount capitalized,

$110,211 $113,080 $79,553 Income taxes Noacash. investing and financing activities:

Capital lease obligations incurred $16,358 $47,719

$27,500 Acquisition of nuclear fuel Change in unrealized appreciation of $1,361

$5,968 $9,128 decommissioning tust assets See Notes to Financial Statements.

ENTERGY ARKANSAS, INC.

BALANCE SHEETS ASSETS December 31, 1996 1995 (In Thousands)

Current Assets:

Cash and cash equivalents:

Cash $5,117 $7,780 Temporary cash investments - at cost I

which aproximates market:

Associated companies 17,462 908 Other 21,278 3,110 Total cash and cash equivalents 43,857 11,798 Accounts receivable:.

Customer (less allowance for doubtful accounts of $2.3 million in 1996 and $2.1 million in 1995) 71,144 81,686 Associated companies 45,303 40,577 Other 5,862 "6,962 Accrued unbilled revenues 104,764 93,556 Fuel inventory - at average cost 57,319 57,456 Materials and supplies - at average cost 72,976 75,030 Rate deferrals 153,141 .131,634 Deferred excess capacity 9,005 11,088 Deferred nuclear refueling outage costs 24,534 32,824 Prepayments and other 7,491 8,974 595,396 ..551,585 Total Other Property and Investments:

Investment in subsidiary companies - at equity 11,211 11,122 Decommissioning trust fund 203,274 166,832 Other - at cost (less accumulated depreciation) 5,058 5,085 Total 219,543 183,039 Utility Plant:

Electric 4,578,728 4,438,519 Property under capital leases 57,869 48,968 Construction work in progress 83,524 119,874 Nuclear fuel under capital lease 79,103 98,691 Nuclear fuel 27,500 Total 4,826,724 4,706,052 Less - accumulated depreciation and amortization 1,976,204 1,846,112 Utility plant - net 2,850,520 2,859,940 Deferred Debits and Other Assets:

Regulatory assets:

Rate deferrals 75,249 228,390 Deferred excess capacity 5,984 SFAS 109 regulatory asset - net 244,767 219,906 Unamortized loss on reacquired debt 56,664 58,684 Other regulatory assets 80,257 68,160 Other 31,421 28,727 Total 488,358 609,851' TOTAL $4,153,817 $4,204,415 See Notes to Financial Statements.

ENTERGY ARKANSAS, INC.

BALANCE SHEETS L TEs AND SHARKHOLD ER'S EQUrrY December 31, 1996 1995 (In Thousands)

Current Liabilities:

Currently matuing long-term debt $32,465 $28,700 667 667 Notes payable Accounts payable: 1_56 91,205 Associatedomp es 120,250 97,589 Other 18,594 21,800 Customer deposits 54,194 40,159 Taxes accrued S48,992 70,506 Accumulated defirred income taxes 27,625 30,240 Interest accrued 2,832 4,458 Dividends declared 33,873 34,450 Coowner advances "17,837 6,955 Deferred fuel cost 53,012 54,697 Obligations under capital leases 15,135 26,238 Other ,507,858 467,438 Total Deferred Credits and Other Liabilities: 785,994 823,471 Accumulated deferred income taxes 108,307 112,890 Accumulated deferred investment tax credits 83,940 93,574 Obligations under capital leases 116,762 113,998 Other 1,092,239 1,146,697 Total Long-term debt 1,255,388 1,281,203 40,027 49,027 Preferred stock with sinking fund Company-obligatednmandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 Shareholder's Equity:

Preferred stock without sinking fund 116,350 176,350 Common stock, no par value, authorized 325,000,000 shares; issued and outstanding 470 470 46,980,196 shares in 1996 and 1995 590,169 590,844 Paid-in capital 491,316 492,386 Retained earnings 1,198,305 1,260,050 Total Commitments and Contingencies (Note 2, 9, and 10)

TOTAL $4,153,817 $4,204,415 See Notes to Financial Statements.

ENTERGY ARKANSAS, INC.

STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1996 1995 1994 (In Thousands)

Retained Earnings, January 1 $492,386 $491,799 $448,811 Add:

Net income 157,798 172,080 142,263 Increase in investment in subsidiary 42 "

Total 650,226 663,879 591,074 Deduct:

Dividends declared:

Preferred stock 16,110 18,093 19,275 Common stock 142,800 153,400 80,000 Total 158,910 171,493 99,275 Retained Earnings, December 31 (Note 8) $491,316 $492,386 $491,799 See Notes to Financial Statements.

ENTERGY ARKANSAS, INC.

SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 1996 1995 1994 1993 1992 (In Thousands)

$1,743,433 $1,648,233 $1,590,742 $1,591,568 $1,521,129 Operating revenues Income before cumulative $ 156,110 $ 130,529 effect of accounting changes $ 157,798 $ 136,665 $ 142,263

$4,204,415 $4,292,215 $4,334,105 $4,038,811 Total assets $4,153,817

$1,423,804 $1,446,940 $1,478,203 $1,453,588 Long-term obligations (1) $1,439,355 (1) Includes long-term debt (excluding currently maturing debt), preferred stock with sinking fund, preferred securities of subsidiary trust, and noncurrent capital lease obligations.

1996 195 1994 1"3 1"2 (In Thousands)

Electric Operating Revenues:

Residential $546,100 $542,862 $506,160 $528,734 $476,090 318,475 307,296 306,742 291,367 Commercial 323,328 362,854 338,988 336,856 325,569 Industrial 364,943 17,084 16,698 16,670 17,700 Governmental 16,989 1,241,275 1,169,142 1,189,002 1,110,726 Total retail 1,251,360 Sales for resale 175,784 203,470 248,211 178,885 212,314 Associated companies 181,558 207,887 195,844 182,920 203,696 Non-associated companies 23,086 25,375 35,975 32,229 26,366 Other $1,521,129

$1,743,433 $1,648,233 $1,590,742 $1,591,568 Total Billed Electric Energy Sales (Millions of kWh): 5,102 Residential 6,023 5,868 5,522 5,680 4,147 4,067 3,841 Commercial 4,390 4,267 5,941 5,690 5,509 Industrial 6,487 6,314 231 230 248 234 243 Governmental 14,700 17,134 16,692 15,841 15,667 Total retail Sales for resale Associated companies 10,471 8,386 10,591 8,307 10,357 5,066 4,906 5,643 5,056 Non-associated companies 6,720 30,144 31,338 29,617 30,113 Total 34,325

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REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Entergy Gulf States, Inc.

We have audited the accompanying balance sheets of Entergy Gulf States, Inc. (formerly Gulf States Utilities Company) as of December 31, 1996 and 1995 and the related statements of income (loss), retained earnings and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perfor the audit to obtain Teasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis: for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the net amount of capitalized costs for River Bend exceed those costs currently being recovered through rates. At December 31, 1996, approximately $467 million is not currently being recovered through rates. Based upon the regulatory decision on this matter, a write-off of all or a portion of such costs may be required.

As discussed in Note 1 to the consolidated financial statements, at January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of'.

COOPERS & LYBRAND L.L.P.

New Orleans, Louisiana February 13, 1997

ENTERGY GULF STATES, INC.

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased in 1996 principally due to the $174 million netof tax write-off of River Bend rate defrrals required by the adoption of SFAS 121. This write-off was partially offset by the third quarter reversal of the Cajun-River Bend litigation accrual. Excluding the River Bend rate deferrals and the Cajun-River Bend litigation accrual, net income for 1996 would have increased slightly due to an increase in electric operating revenue and a decrease in other operation and maintenance expenses.

Net income increased in 1995 principally as the result of an increase in electric operating revenues, a decrease in other operation and maintenance expenses, and an increase in other income. These changes were partially offset by higher income taxes.

Significant factors affecting the results of operations and causing variances between the years 1996 and 1995, and between the years 1995 and 1994, are discussed under "Revenues and Sales," "Expenses," and "Other" below.

Revenues and Sales See -SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON," following the financial statements, for information on operating revenues by source and kWh sales.

The changes in electric operating revenues for the twelve months ended December 31, 1996 and 1995, are as follows:

Increasel (Decrease)

Description 1996 1995 (In Millions)

Change in base revenues ($60.3) $32.0 Fuel cost recovery 152.0 (29.6)

Sales volume/weather 65.1 35.0 Other revenue (including unbilied) 12.8 1.1 Sales for resale (32.6) 31.3 Total $137.0 $69.8 Electric operating revenues increased in 1996 primarily due to increased fuel adjustment revenues, which do not affect net income, increased customers, and increased customer usage. These increases were partially offset by rate reductions in effect for both Texas and Louisiana retail customers and increased base revenues for 1995, as discussed below. Sales for resale to associated companies decreased as a result of changes in generation availability and requirements among the domestic utility companies.

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