ML20012F327

1989 Annual Rept.

ML20012F327
Person / Time
Site:	Waterford
Issue date:	12/31/1989
From:	Lupberger E ENTERGY CORP.
To:
Shared Package
ML20012F319	List: ML20012F318 ML20012F327 ML20012F329
References
NUDOCS 9004110148
Download: ML20012F327 (67)

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_ _ . . . . _ _ _ - . . . . . . . . . _ _ __ IUNU (lballan on hfillenss, rurfoljn r Aharr nuumnts) linatuhl:

'Ibtaloperating scwnues $ 3,724 $ 3,565 4.4

'Ibtaloperating expenv n $ 2.724 $ 2,496 9.1 l'uct, ptu c hawd ix mrt & purt hawyl gas costs . $ 1,016 $ 983 3.4

k. Itate delerrals $ 149 $ 292 j Operating income $ l.000 $ 1,070 (48.9)

(0.4)

K Net income (low) .

$ (473) $ 411 (215.0)

Launings (1,m) pes conunon 6h.uc $ (2.31) $ 2.01 (214.9) f}i,'

llate oficturn on average ronunon equity llate of a cani n on mvrage capitalisation 2.50%

8.72 %

9.92% (74.8)

Qunmoncquitynitioat yeai-end 38.7 % 41.2% (6.1) teing-term debt nuio at >rar. cud . 55.0 % 52.1 % 5.6 u Net utility plant at >rai.end $11,000 $11,100 (1.0)

Ginstruction expenditinen $ 371 $ 3'io 6.0 Gononunr %kibata (atymerul):

f. Sux L price $ 23 8/, $ 16 45.3 l Ikiokvalue $ 20.68 $ 23.96 (13.7)

Manket prire to1xxikvahic nitio . I12,43 % 66.78 % 68.4

{&. Prire carnings nitio - 8,0 -

[ Stulhoklern ofirront 78,583 88,316 (11.1) i Shaic$ outstanding 203,991.592 2011 81,092 (0.8)

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ltetail electric customen at year.cnd . 1,706,579 1,693,592 0.8 L lletail electric energ) sales (million LWh) 54,007 52,575 2.7 f System peak kal(megawatts) . I1,485 11,442 0.4 f Emphiyees at yeai.cnd 13,190 13,145 0.3 4

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l TABLE Of C00fTEllTS i=

F. Chainnan's litter 2 l A Salute toInnovation 6 1%ur 10 Gut G>ntml I4 CustonurNmis IX s

ThrFntuur 22 HnancialItricirw 27 lhmt offbirutan 62 investorInjonnation 64 i

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to con stootnotsaRk What a difTerence a year makes.

The timeline below plots the progress we made in 1989 -which 1~ was a resoundingly successful year despite the earnings loss atuibuted to it. That loss, resulting fium the wiite-olrof the Grand Gulf 2 nuclear unit, is excess baggage fidling from a Company now thising with all due

( speed toward a stronger financial future. It is the weight of former circtunstances and longstanding problems now resolved. It is the cast-oft

. , remnants of a Company that is becoming tnmsformed.

Evidence of the year's progress is plentiful. Entergy's stock rose IUm t.up.w . above book value (equity divided by number of shares outstanding) by year end '89, up 45 percent fium last year. Cash flow is strong and rising, debt financing is down, and the year's dividends totaled 90 cents per share - compared with 20 cents in 1988, when the disidend was restuned after a three-year suspension.

Symbolic of these developments, and of our giuwing entreprenetnial spirit,is the pioposed creation of two new subsidiaries-Entergy Operations and Entergy Power. Entergy Operations, which would consolidate management of our nuclear fitcilities into one company, demonstnues our conunitment to improved efficiency and reduced costs. Entergy Power, which would create a wholesale generator fium the combined strength of two of our Arkansas Power & Light plants, signals our entry into the independent power-producing market.

These piuposed new subsidiaries are awaiting certain regulatory JANUARY FEBRUARY ORARCN IRP&L sempleh repeles 204 aporterly s*k  % lesha

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LPAL retains $193 million from 2 ges settlement; base rates stahllised let five years j

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. approvals befbre starting operation. Itoth testify to the increased financial stability achieved this year.

Much of the uncertainty shrouding our ability to collect rates has been climinated. We have extricated ourselves from a major portion of our costly litigation and moved our relationships with regulators to higher, more productive ground. Corporate credibility and public goodwill are rising as customers begin to associate new ideas and benefits with our new name and business attitude.

Our new entreprenemial spirit is key to the progress we are making toward financial success. It is clear to us that the methods and attitudes applicable to the electric utility industry of the '60s and '70s are no longer appropriate today. Two years ago we were on the biink of financial disaster, and at that point, the only progressive step one can '

take is backward. Management realized we had to try something else, to utilize our resources in new ways, to see ourselves and our constituents differently, in order to move beyond the controversy and discord that threatened to ruin us.

Our name change (from Middle South Utilities, Inc.) emixxlies our new approach. " Utility"is missing from "Entergy Corporation" because we have resolved to no longer think or act like a tradition-bound, regulated monopoly.

At Entergy Corporation, we're thinking like competitors because that's what our future success entails. Thinking like a competitor means APML MAY AME 8 e r ove

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Apodenumme keeping our eye on our customers, anticipating their needs, meedng l

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their expectations effietively and at the lowest pcmible cost, and ahvays looking - ahead and within - for new ways to get thejob done. ,

j 3,,, ud#, #$ Cost control, quality, innosadon - these are the watchwords of the new

.%* u m. spirit being culthated in the Middle South Elecuic System today, i nnanew mki h&d( h P@

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l Olive Bmnch agreement, stockholder approval of our new name, the j launch of a new mar keting initiative, the sale and leaseback of a second l nuclear unit, refueling outages that set efficiency records, the installation  :

l of a new, more }mwerful electronic dispatch system, grcater electmnic l integration of all of our subsidiaties, a common stock repurchase prognun, and the proposal of two new companies. These are impressive suides to have taken in a single year. But by far our most important accomplishment is our change in attitude. Enteryy Corporation's entrepreneuiial spirit will prmide the quality and innosution upon which onr future success depends.

" Wrestling alligators" the last fiw years has made us strong, it has given us the realization that we have what it takes to compete in a sometimes hostile emironment. It has also shown us that we can achieve

! more by staying flexible and pt rsuing mutual goals than hy narrowly

! insisting on our own way.

JULY 4000ff IIPTIIIBER shw esWendes -

8ah'er pw e a h m sad l hiepsa thher i emermer nok edened tahegy Poww - em pm,med gege,g g,,

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In the folk > wing pages, we share with you mme of the ideas that

spntx> lire this new attitude - hicas that helpe I us lesohr much of our l regulatory uncertainty, conunl costs, and improve our competithe j position - as well as our ideas for fhture excellence. The financial l statements and discussions, lx ginning on page 27, pluvide more l detailed information of the year's events.

j We are excited about the changes under way at Entergy i Cor}xsration - alx>ut the accomplishments of the past year, and more

! importantly, about the }x>wer of thonght that's being genemted here.

( We recognlic that the most successful companies are those that have l capitaliini on the power of their ideas. We kx>k to the ixiwer ofour own

( ideas to carry us successfully into the next century.

l Sincerely,

_s?

Edwin Lupbeiger Chainnan and1%nident blanh 12. JM 900NR m M

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Ther e is nothing inore 1x>werfhl than an idea, ideas, believed in and acted ulxm, have shaped our world since the first htunans discovered I

l liie, cicated tools, and painted on caves.

Ideas are the lifiblood ofindustry. Froin the idea that inan conhl

] fly to the idea that an elecuic current uupjwd in a glass bulb couhl dispel

- the daik, ideas have twen the fbundation upon which our economy is l built - and are the fuel that keeps it running, l Every successful business owes its doininance to ideas. Whether j ou, ,..,, i,,,u.ori<,,a about building a lwtter mousenup, imprming customer service, or l

,l2l,C((', anticipating fbture needs, ideas are, truly, a company's competitive edge.

l .uu,uwn,,,a spe,,,,A And innovations - new ideas - are its source of fhture excellence, j h";"' '#""'" In this annual report, Entergy unporation salutes the spirit of innovation and the ideas and individuals who have uansfbrmed our j l

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workl. Fium Thomas Edison to Thomas Watson (the fbunder of I i

ilB1), fium the Stadel T to the silicon chip, innovators and ideas have

carved new channels fbr history and redefined our rules in it. l l In this report, we also share with you our ideas and innovations fbr {

j the hilddle South Electric System. We at Entergy Qupomtion recognize  !

l that, though our product is electiicity, our business is ideas: ideas about  !

loweiing costs, improsing elliciency, building better relationships with  !

our regulators, and finding new inarkets. These ideas have transformed l l our Company in the last three years. }

l Our ideas also address the future: what future energy needs are, .

where fbture supplies will come finin, what tasks our product will  !

perform, and how customers will want our product delivered. These are i the ideas we're working on now, knowing that our future will be created l l by the ideas we hohl today.

l We dedicate our 1989 report to great thinkers, past and present., in i whom the spiiit ofinnovation lives! ,

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! The first peGe edes th==menasham ques eutteved hi 1900, but it took the levoetles of Lee Deforest's telode electron tube la 1904 to enable todWs development.

Commerdel redio broodiesting began in the U.S. In 1920.

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,y, , , .. m,7, pgggg, gg g g ggggg ggygygg Unquestionably, our most successful innomtion in 1989 was " Project Olive Branch"- our multifaceted approach to regulatory peace, in this hista:ic settlement, Enteigy Cor}x>mtion absorbed one of the biggest losses ever incurred by a utility- $!K)0 million invested in Gnmd Gulf 2

-in exchange for an end to a significant }mrtion of the lawsuits and controversy surruunding our collection of Federal Energy Regulatory Commission-approved rates for Gnmd Gulf 1.

Although seeking peace is not a new idea, achieving it is a ntrer n+w 06* h"4 accomplislunent. And the goal of Project Olive Branch was not " peace at is mutadng ma

,,*ai,,nsta,,,,p.m, any price,"which we might have achieved in the courtrocnn, but peace

"';'j"'pj'"#'"- that woukt ;dso satisfy our customers and regulators.

Project Olive Branch offered a " win" to all parties: the promise of lower rates for customers and regulators, and a reduction in audits, legal proceedings, and uncertainty for the Company, in the simultaneous sweep of half a dozen regulatory lwns, the 1989 settlement laiyely resoh'ed a decade of public controversy and regulatory conflict, and recast our public image as innovators rather than perpeuntors. Project Olive Bmnch also helped get us out of the cotutroom and into the financial pages - under headlines about stocks to watch and upgraded seemities ratings.

We are already reaping some of the rewards of our peacemaking overtures. Entergy Corporation stock rose $7 per share in 1989, in large part reflecting the reduced uncertainty that followed announcement of the settlement. Subsidiary company sectuities ratings were upgraded.

Sale and leaseback aethities and retirement of high coupon seemities saved the System some $50 million in interest and preferred dividend costs over 1988. Our improved financial position enabled us to buy back 589,500 shares of stock dtuing 1989, increasing the value of the remaining shares for stockholders. Financial stability also enabled our lx>ard of directors to approve a disidend reinvestment prognun, implemented in early 195K).

Just as important - although more difficult to quantify-is the improved public image Project Olive Branch has given us. Our 1989 regulatory settlement lias done much to tnuisfc,rm our reputation among customers. We will continue to demonstmte our openness to lo

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suggestion and comproinise and our intention to use our str ength to .---

l benefit our senice area.

j Our new corpointe identity cainpaign has helped in this 'f 7 - [d l

l transfonnation, distancing the Company fium the controversies of the

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f l l past and creating a clean canvas on which to paint a new image.

Stockholder approval of"Entergy Corporation" at the annual  %

meeting last May enabled us to gradually intmduce to the public our new name - and our new corponue outlook. Gur goal is to make l

Entergy Ccn]mtion synonymous with social resi onsibility. %'e want '

our whdtlanan fmvarn I l to extend the cooperation we,ve achieved wi th regulators to all y,,,s n n a,.,a n,nia j

l segments of the conununities we serve. '*r'dk""" a  ;

'hsrd of Ligid. ' '

! That is gradually occuning. Our support of clean air legislation '

j and industry deregulation is carning us a reputation fbr flexibility

} and fbrward thinking with policy makers in %'ashington. Our {

} cronomic development advertising has elicited more than 4,000 l responses from business decision makers exploring investment j opportunities in the Middle South.  ;

j M'e are planting the seeds of gooduill in many other ways: {

raising nearly $2 million for the United M'ay; dedicating lands to

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public parks and eagle nesting grounds in Arkansas; helping I entrepreneurs get their products to market through " Operation j j Ilootstrap," Louisiana Power & Light's award-winning economic

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i development prognun; and helping nuni Mississippians to read i

! through a computerized mobile learning labcnntory, one of several l l we plan to fund in our region. InJanuary of this year, President l

} Ihtsh honored our ongoing literacy efforts as a " Point of Light"- an l outstanding example of private sector initiative to address social ills.

l At Entergy Corporation, we consMer the goodwill of the people l we serve as important as money in the bank, in the style of Project  !

l Olive Ilranch, we have adopted a problem-sohing - rather than a j confrontational- approach to the challenges of the future in a j democIntic society, and in a competitive market, that is our most l promising course, t

l 13

! con towreet muovareem j i

i r For the past sevend years, costs fbr Entergy Coyoration's subiidiaries i i p have been on the high side of the inedian for sautheastern utilities. This l

, was due to a regional economic downturn that dowed electiic demand; i

) higher financing coi,ts associated with regulatory uncertainty; and the f y' ],

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investinents we've inade in generating capacity ami enviroiunental l

] } quality, which soine of our coinpetitors have yet to inate. l l All of these situations are changing. Our 19F8 U.S. Sulueine Court l l victory and the success ofI'roject Olive linmch substantially sesolved our i

//f erti ner maler uvo lo legulatoi y tiilcertaiilty. CloWth iil electricity consuinplioil will icquiie n,nwlulair ep notmm 997 cgggppgjggg gg hgy op hgj]d geg. genenuing sonices, while the i; noul animr unti at allthe

syle,n gmio,ulmi,,,, passage of more stiingent clean air legislation will requit e those sources  !

.wiml-m ma to be clean Finally, a growing economy, steadily tising electiic demand, [

\ lounung luulopvulovur j sinnn ih< tm stalmn. and our oWH illalketing efibrts will,in the next fiw years, narrow the gap  !

! between System capacity and sales. [

) in addition to these positive trends, the Company is taking  !

aggressive measures to sharpen our competitive edge. The year's most  ;

r significant producthity imosting initiative is the proposed consolidation l of the System's nuclear operations. [

Three System subsidiaiies presently own and operate nuclear plants, j liccause nuclear generation requires its own specially trained personnel, [

operates in its own regulatory fnunewor k, and involves technology j and safiguards substantially beyond non nuclear generation, we lwhere j it makes sense to consolidate nuclear operations management into one  ;

organization specialiting in this area, in fact, we believe it will save {

$22.7 million annually. j The System is working hard to gain final regulatory approval to  !

consolidate nuclear operations into a new subsidiary - Entergy  :.

Operations, Inc. With this approval we can move to achieve the i opemtional efficiencies and dollar s nings nuclear consolidation will  !

make possible. [

We are also exploring consolidation of our non-nuclear operations.

In 1989, a Company task fbrce fbund that greater consolidation of  !

System operations could save at least $10 million a year. Those s;nings (

that can be achieved without organizational reshufIling are in the process of being implemented.  !

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cutting, efficiency-bmsting achievements. At Gnmd Gulf, our Mississippi

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nuclear power plant, employees set an American recont for the fastest g{ -

refueling of a lxiiling water scactor since 1981, refueling in 43 days. 7 -

Their efliciency saved the System - and ratepayers - an estimated

$7.3 million.

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The confidence that we coukt achieve this kind of outage .

Irrfbrmance came funn an international nuclear exchange prognun we ,

began in 1987. Recognizing that Emupean refueling outages are a,u,umuyxuaan, r egularly accomplished m, 30 to 40 days, wheiras U.S,. ref.uch.ng outages s,,,y,,, ., ,m,,,u,,w ,,,

average 9(klays, our outage planners began an exchange prognun with coa their West German and Swedish counterparts.

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We learned that optimited plant design gives the Emupeans advantages not applicable to our plants, but that we could com]wns;ue in other areas. The result was a 25 percen'. improvement in Gnuul Gulf's best refueling time - achieved without saciificing safi ty or quality, in fact, Gnmd Gulf and Waterford 3 - our louisiana nuclear power plant

- earned the listitute of Nuclear Power Operations' (INPO) highest niting last year, in all areas of plant operations. Both plants also received excellent "SALP" ratings - from the Nuclear Regulatory Conunission's

' Systematic Assessment of Licensee Perfbrmance" prognun, The System's outstanding nuclear performance was hindered to some degree by a decline in opemtional performance at Arkansas Nuclear One. The System is responding by implementing positive action pbms to reestablish excellence at this generating station.

Our successfbl nuclear performance has boosted more than the lxittom line: it has lxosted the ambition of all our opemtions employees

-in nuclear and fossil fbels, as well. We have proven to ourseh*es that we can achieve goals of which others may be skeptical. Like the Wright hiuthers' first flight, our 43< lay refueling outage broke the mental banier between what can and can't be done. The ripple elrect grows with each performance banier broken, With these baniers down, there's no limit to what we can accomplish.

17

l i m uovanne O amettwiesse meses l j The world is changing for electiic utilities, aiul sening the needs of consumers is the creed of that new waild. When elecuicity was cheap ,

and technologyless sophisticated," meeting customer needs"was no )

moic mysterious than flipping a switch, if the elecuicity was fkming, all l l um nght with the world.  !

Iligher prices and modern technology have changed all that. l The times have made elecuicity mor e expensive, while technology has l

made it all the more essential. Now customers demand two things: j m u,, ,,wns,,c <>.,, competitive rates and a greater emphasis on service. l w n,u,;tu ,,,n ,,n ni,,uy.n. To a large extent, Entergy Cor;xnution welcomes the brave new i l

j g=r 8- compditive world Qunpetition has been good fbr other indusuies; we  !

l think it uilt be good fbr ours. Not that it makes sense to have duplicate j i disuihution poles lining city streets, but the notion of twingjudged  ;

j against the jwrfbrmance of one's competitors is a healthy one: it makes l l us a twtter Qunpany. j f Anticipating greater competition, Entergy Corixnation, in 1989,  ;

i enlarged the scope ofits quality elForts to encompass both the

! technological asjwcts of our operations and the more personalized i I components - the company-customer interface. l 1 For example, we have launched a new, customer-fbcused j j mai keting program, aptly titled "Wants and Needs." Based upou l l research into our own customer prefirences, "Wants and Needs" calls  !

fbr the development of specialized products and services to satisfy  ;

! System customers. Those senices include leasing and financing options l for customers purchasing electric equipment, incentive rates for .

i industrial customers trying to expand opemtions, and senice quality l prognuns fbr customers with sensitive loads. We are expanding our

) senice to the customers' side of the meter, offering our expertise i towaid the solution of their electrical problems and power supply needs. l

These prognuus are in addition to our longstanding tradition of

' partnership in area development. Customers know they can call on us l ihr assistance nmging from heating and air conditioning adsice to site  !

fi asibility studies, fium incentive rates to an indusuial mateiials library. .

Within Entergy Corlxnution, there is an acute awareness that our  ;

d customers' financial well-being is the lifiline upon which we depend.  !

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The source of Entergy Corporation's winning ideas is its 13,(XG phis employees. % create an emironment where new ideas flomish, the j i Company is nurtwing a new corpomte culture based on teamwor k, j innovation, and quality. ,

In 1989, the C(unpany instituted " pay fbr perfbrmance" and other . t 4 -

incentive compens;uion prugnuns. System Energy Resources,Inc.'s 1989 contract with lilEW employees is one of the fiw in the nation to include j an incentive com}wnsation clause linked to plant availability. When i Grand Gulf meets its "available for senice" goal fbr the year, employees

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will receive a 1 percent pay raise. Similarly, when Gnuul Gulf employees o,,, .f,,,,, ,,, ,,, yaff, i completed last year's refheling outage ahead of schedule, they were Am' rim'i'av iadumi i K, win Imsinen rutstinn \

f aWanled an eXtm holiday, s<,i,, int,w.utpssiNI,tain l' l In 1990, incentive pay prognuns are being spread Systemwide. '*' "#aa-j "reamShaiing"is an incentive compensation prognun that rewards i

employees for achiesing System and subsidiary company goals. The goals are based on the System's business and strategic plans. Achiesing l the goals will require teamwork, as well as speedy attaimnent of bottom. )

line initiatives. l

We m e also challenging our employees in other important ways.  ;

j in 1990, we are beginning a Systemwide " consciousness-mising" on l, J quality. Our goal is an environment where continual suising fbr i j improvement is the natural order of business. This is the culture of a successful competitor. It is the enthusiastic attitude held by members of l winning teams. l 4 A year ago, our energies were primaiily on sunival, rather than l l excellence. We had but recently been gnmted a sictory by the U.S. l l Supreme Court, and we were still tied up in negotiations with half a  !

i dozen regulatory agencies. Project Olive Ilranch has brought us a  !

! measure of regulatory peace, which has given us the time to pursue j j prosperity. Our competitive focus on costs and customers will bring us  !

2 - the Company and its stockholders - the prospeiity we seek.  :

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maas to powenGwtotus persas The Gimpany's vision of the futme is one in which both customers ant!

elecuic utilities will have much greater fi'ecdom - for customers, to

[ choose: for utilities, to comlx te, l_ike their customers, elecuic utilities will have a ihr greater number gg %

g, of supply options available to them: cogenemtion, "no genemtion,"

conservation and demand side stmtegies, and new genenuing technologies, to name a fiw They will also have greater flexibility to take g

$,$[l(((,I,b,a,,,, advantage of these options. Utilities will not necessaiily offer all three WER

&a,into.u,a,,,w,,,,. components of tnulitional senice: genemtion, transmission, and l'jh'j"(',",','['?"'"' distiibution. Instead, some may speciali/e in power generation; others in transmission of bulk power; and still others in local disuibution senice.

The fieedom to compete entails the obligation to compete, and utilities that are not successful competitors will be displaced by power providers that are. Entergy Onporation is positioning itself to compete successfbily- with ideas fbr loweiing costs, improsing senice, and capttuing new markets.

One of the most positive innovations introduced in 1989 is the g System's "short stopping coal" prognun, lly shipping the System's low-sulfur coal to a Midwest utility, instead of to Arkansas, the System saves nearly half of the coal's tntnsportation costs- and inms}x>rtation accounts fbr two-thirds of the cost of delivered coal. The Midwest utility sends the elecuicity genemted to us. Everyone benefits: the Midwest utility burns clean coal, our emissions are lowered, and the System saves on inmsportation costs.

Eiitergy Coipomtion is also proposing an "electiicity highway"

- the " Eagle Express"- fbr high-speed, long distance transmission of power. Eagle Express would connect the two main U.S. power grids-the Eastern Interconnection and the Western Systems Coordinating Council- fhr rapid, bulk power transfers. Such a tmnsmission system would not only give utilities access to a national power supply and national markets, it would enable demand side management on a national scale. Winter-peaking castern utilities could buy power from summer-peaking western ones, and sice versa. Supply-squeezed East Coast companies could have access to surphis power from the rest of the country, ik cause of the three-hour time difR rence between the East n

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and West Coasts, the two interconnected systems coukt even cover each other's jwak loads on a daily basis. >

The technology and economics fbr Eagle Express are proven and ,

curiendy available. The System is strategically k>cated to accomplish the interconnection. The jnimary hurdle is regulatory: encoumging #

local utility regulators to cooperate fbr the approval of a multistate ,y #

tnmsmission higinvay. We are optimistic that the success of prognuns .-

such as Project Olive Innuich will establish a fbundation fbr this type of $/

regulatorycoolwration.  %

in 1989, Entelyy Cm]x> ration also unveiled a new, high technology

n. ,,, ,yg,,p, g elecuicitydispatching system called lhilk Power hianagement System 11. many y:Ar m,ntruirauhat An achimced, second generation of our Ibrmer dispatching system, I'l'",""j,,'"",('" }

IlPhtS 11 is the bntin and nervous system that governs the 81 generating idan-n /=le. ti una units and 10,(XX) miles of tninsmission lines cominising the hiiddle M,7,,'$"f ,l'f,'b ,,

South Elecuic System, llPhis 11 will also facilitate off System sales- a

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^~ua n-S'ur. om/dv market we m e aggressively cultivating. "' #"'# " "" '"/"'"'"""

Entergy Corpomtion is also one of the first interstate elecuic utilities to be completely interconnected via filwr optics. In 1990, we will complete installation of our own fiber optic system, linking all our companies, oflices, and plants in fbur states llecause fiber optics can carry audio and video signals, electronic data, fax tnmsmissions, as well as voice, the system will greatly expand our integration in many communications media, while reducing our long-distance telephone charges.

The System has other ideas that will carry us forward into the year 2(XX). We are examining the feasibility of participating in a uranimn emiclunent project, located in northern louisiana, which could reduce our fbel costs. We are developing conservation and " demand-side" management prognuns to Incet customer needs without additional generating capacity.

Knowing that c.ar fbture success is created by the ideas we punue today, we are generating ideas with as much dedication as we generate elecuicity. We owe our stockholders and our customers nothing less, e

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BARAGREENP8 PINANClu DISCOS $ltu Amt ARMYlif Laten Onynatum and.%bsidianes ONRVWW lietlesoms ness)

Regulatory witlenwnts achieved in 1989 resolved much of In 1989, a consolidated net loss of $472.6 million was the uncertainty and litigation sunounding nite inues, reported, producing a loss per share of $2.31 due primarily therely strengthening the Middle South Electric System's to the IIRC Settlement and nuious related state and kical Iinancial outkx>k (we Note 10). Certain write offs stenuning settlements (Project Olive tiranch Settlements), These fnim these wttlements were reslonsible for the substantial settlements included, among other things, (1) the writemff net loss trported bekiw, Despite the loss, the System's of System Energy's imestment in Gnmd Gulf 2, resulting suong cash position was not materially affected. Most of in a pre-tax loss of approximately $900 million. (2) the 1989's cash requirements were met with internally generated $60 million write off of a Imrtion of MPkt 's pmiously funds, and future requirements air projected to be similarly defentxl Gnmd Gulf 1 related costs, (3) a $50 million ont-satisfied. Further, Entergy Corponition's quarterly common time ctedit by System Energy to the Sptem operating stock dhidend, resumed in 1988 after a thn e year suspen- companies (which was substantially refunded to miepayers),

sion, continued to be paid and was increasc d during 1989. (4) the $43 million write off by System Energy of Gnmd While financial stability has been achieved, erral Gulf 1 AFUDC equity, and (5) the nonncuning effect of Grand Gulf Nuclear Station related issues remain unn- kical settlements : ecorded by 1.P&L and NOPSI, which cahrd and may achersely affect the System's future financial mluced operating rnrnues by $18.4 million and increased condition. These relate to continuing litigation concerning operating expenses by $26 million. Excluding the effects of i Grand Gulf 1 in the fonn of NOPSI's $135 million pru the Pnject Olive linmch Settlements, net income and dence dis;dlowance and a challenge to the IIRGonlet ed earnings per share for 1989 wouki have been approximately alkication of capacity and energy, in addition, although $389.9 million and $1.91 per share, respectively, Entergy Corporation and the New Orleans City Council are The Sptem's 1988 net income and caniings per share discussing a negotiated buyout of NOPSI by the City of New increased over 1987, due primarily to NOPSI's $135 million Odeans, in the event this buyout does not take place, the write off hi 1987 ($72.9 million net of tax) of previously System's financial position coukt be affected by the outcome deferred Gmnd Gulf I costs. A reduction in System Erwrgy s >

of the council's considenition of the involuntary municipali- mte of return on common equity from 16% to 14%

ration of NOPSI's electric and gas utility pmperties (see effectiveJuly 1,1987, applied to a lower net unit investment Note 8). partially ofTset this factor.

Despite 'he net loss in 1989, ongoing operations saw progress in a number of areas. Revenues continued to increase, as did energy sides to retail customers, primarily in the industrial group. Further, the System's cost reduction

• progmm resulted in lower financing costs. A discussion of these and other selected fiictors ar e presented herein.

RESETS OF OPERAfl0ll$

,,1989 vs 1988 _1988 vs 1987__

increase / Increase /

1989 1988 1987 (Decreaw)  % (Decrease)  %

(lbollars in Milhann Net income (loss) $ (472.6) $ 411.0 $ 356.6 $ (883.6) (215) $ 54.4 15-Electric openuing revenues $ 3,633.6 $ 3,473.6 $ 3,327.1 $ 160.0 5 $ 146.5 4 Retail energy sales (million kWh) . 54,007 52,575 51,411 1,432 3 1,164 2 l Purchased power $ 186.8 $ 142.0 $ 96.6 $ 41.8 32 $ 45.4 47 Rate deferrals $ (149.3) $ (292.1) $ (468.5) $ (142.8) (49) $(176.4) (38) l Maintenance $ 278.8 $ 235.7 $ 256.2 $ 43.1 18 $ (20.5) (8) l Income taxes $ 5.6 $ 240.9 $ 274.6 $ (235.3) (98) $ (33.7) (12) l Project Olive linmch Settlements $ (1,105.2) - - $ 1,105.2 - - -

Miscellaneous income I and deductions- net $ 102.8 $ 113.8 $ 85.8 $ (11.0) (10) $ 28.0 33 j interest expense . $ 660.2 $ 699.3 $ 681.2 $ (39.1) (6) $ 18.1 3 i l

l 28

i l

8:I l Electris Operating Reveness and Retell Energy Sales inesawTeses Electric openiting revenues increased in lxith 1989 inc ome taxes dect cased significantly in 1989 due I and 1988 primarily as a result of increawd nites and in- primarily to tax benefits of approximately $242.7 million c eawd retail energy udes. The increaw in rates largely iecorded in connection with certain w1iteoffs assoc iated t eflects the step up pur,isions of AP&l, MP&l. and NOPSI's with the Project Olive linmch Settlements. The decrease in phase-in plans, which punide for girater cunent recostry of income taxes for 1988 is primarily attsibutable to a decline in Gnmd Gulf 1 triated msts. Retail energy udes incteased in pre-tax lxiok income and a r eduction in the federal corpo-1989 dte primarily to volume gnm th in the industrial wctor rate income tax nite from the 1987 blended nite of 40% to eesulting irom mrious marLeting incenthe plans. The 1988 the 1988 rate of 34% which wm effectheJanuary 1,1988.

increase in energy sden was attributable to increawd commercial and industrial sales. Miseebeneous inesame and Bodestions - Glot

Miscellaneous income and deductions- net decreased Perellesed Power in 1989 due primarily to AP&l/s discontinuance inJuly 1988 Purchawd power expenws incicased in both com- of defening a return on imrstment in alleged excess

, panuive periods. In 1989, scheduled and unscheduled capacity and tecauw of an $8.2 million gain from the sale of j outages at certain System genentting units resulted in the Associated Natural Gas Company (ANG) inJune 1988. The purchase of greater amounts of[xmtr off4ptem. The 1988 increase in 1988 comparrd with 1987 wm primarily attribut- I inct case resulted primarily from of1-Sptem ;xmtr pun haws able to increased interest income carned on temporary cash  ;

under long-tenn purchaw contracts. investments and to the 58.2 million gain.

Rete Dolerrels laterest Espense Rate defemds decreased in each comparable period as Interest exlwnse decreawd in 1989 reficcting the certain Sptem operating companies ermeird a larger Sptem's cost reduction pn>gnun whereby certain high-cost l [mrtion of their runrnt Gnmd Gulf I related costs through debt was retired or refinanced with lower cost debt.

j inct eased rates. Additionally, the 1989 decicaw was affected by a 1988 i settlement between 1.P&1., the Internal Revenue Senice, j Molotonense and the State oflouisiana that resulted in additional interest ,

Maintename expense increased in 1989 compared exgense of S10.7 million in 1988. I'urther, this 1988 with 1988 due primarily to scheduled refueling and mainte- settlement also contributed to the 1988 increase in interest nance outages at two of the Sptem's nuclear units and a expense over 1987, reduction in 1988 maintenance expenw resulting from the a capitalization of certain materials and supplies inventory that had Iren presiously exlwnwd.

4 Wleelesale Electrielty $sles to Systeel Retell Costeener

Adleining Utluty Systeurs <Mahmn y Ammitemn) Electrielty Usage </idhma yumiiA.n>

ltw9 /kV9 IMV  : 14VN 1%47 14V7 ,

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Entec Onporatwo and Aukudunnes

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?MARCIM C00mittell Capital and telleensing ' , '

Constmetion ex;wnditm es for the Sptem are esti.

Ligelepy mated to be $398.3 million, $310.2 million, and $430.5 l Tiw Sptem was genendly successful in geneniting million for the years 1990,1991, and 1992, t es;wrtively, adequate cash to meet its n quirements in 1989. Cash in addition to construction ex;wnditures, the System will icquirements stem primarily from operating expenws, base capital nvluirements in 1990 of $57 million in connec-  ;

constmetion, costs amiated with nue phaw-in plans, tion with the phasing of a gxirtion of Gnmd Gtdf I and t meeting debt maturitics, and sathfying sinking fund requins Waterford 3 costs into retail rates. Purwuant to the phase-m  !

ments. The majority of these needs were met with internally plans, in 1991 and !!D2, the Spiem will be collecting Grand genenued funds and with cash on hand at the twginning of Gulf I and Waterford 3 costs incurred but not collected in 19N9. Net cash pnnided by operations totaled approxi- presious) cart Timse collections constitute cash mstilable to mately $700.7 million. Increases in the amount of current satisfy constmetion expenditure requiwments.

Gnmd Gulf 1 related costs being recmered, resulting in a in addition to the alxnr capital requirements, the reduction in mte deferrals recorded, contributed to tlw Sptem will require $fd$.3 million of capital funds during Sptem's strengthening liquidity. (See the Statements of the [wriod 195KMl2 to meet long tenn debt maturities and to Comolidated Cash Flows.) satisfy sinking fund avluirements.

Imtsting activities for the 3rar irsulted in a net cash it is expected that a substantial [xirtion of the alxnr outflow due primarily to constmction expenditures of capital and refinancing trquirements during tlw period approximately $371 million. lW.KMi2 will be satisfied Innn internally generated funds and ,

Financing acthities resulted in a net cash outflow of cash on hand, approximately $7816 million. Among these aethities were Certain Sptem companies are proceeding with the s etirements of certain high cost debt or its refinancing arnmgements li>r the Ixmible redemption, purchase, or with lower cost debt. In this connection, the System retired other acquisitim of all or a portion of certain outstanding ,

approximately $1.02 billion of high cost first mortgage series of high-cost debt and preferred stock. Further, certain l bonds with proceeds received primarily from sale and System companies could ;xmibly enter into arnmgements leawback inmsactiom imuhing Gnmd Gulf I and Water- for the sale or sale and leaseback of propeny in which the ford 3 and from issuances oflower cost lumds. (Proceeds of pnicceds from such (nu sactions could be used to retire 3 approximately $500 million from the Grand Gulf I side and certain debt issues at par, Ilowever, only AP&l.currendy leaschack were included in cash and cash equhidents at the has plans to do so. ,

beginning of the period as such transaction occurred in [

December 1988). In addition, approximately $117 million  ;

of high cost preli rred stock was redeemed in 1989. This capital cost reduction program resulted in reduced interest  ;

expense and prefened dhidend requirements in 1989.

i CepltelI, / ^ Releted te CoeStrettlett liestrielty Generellen by feel type (Megrianto A<mn) Espeedlferes and Rete Delerf90s (Mdimen pflWlan)

< ikV9 m- ' -

. - 1%Y9 14% M - '

l%4N .

' +': .

ItW7 >' l%Y7 l

14%6 M - * ~ .. .

19N6 .

Im3 '

.. <t. . i x - ' 1%Y5 I t._._u._._ - '

w t....u._- a _.-._a.., J 25 % $0% 75 % l(MI% 21(I $(M) 710 1,(XXI  !,210 M Go E Gmstrwtum lhlwrulatures N 01 E llate1kfnwh .

E Nucimr D AllmmncetwIunas UsalItunng Gnutrwtum B Gwl M11L: tweentages avrpn nmp na tualh gnanatal enul not Qtnn ontmnts Nd geble neumnu ef hylnwlerInc gennatum are out [dnttal.

?

30

I l

l

$e in this connection, AP&L has filed applications with Ikmds Pt eferred Stock the APSC and the SEC requesting, among other things, ap.

prcnul to sell and transfer its interest in Inde[wndence 2 and cln AI,numi; Ritchie 2 to Entergy Power,Inc. (a pru;xned subsidiary of AP&l. $384 $2Gi Entergy Corporation that wuuld mar ket the Ielated capacity LP&L M)2 -

and energy to other parties, principally nort. affiliates, for hlP&L(1) - -

tesde), Other necessuy regulatory approwds base teen NOPSl(2) 17 -

requested. There is no auurance as to when or whether Spem Encryv 267 -

consununation of such transaction would occur, In addi-tion, AP&L has leen approached considering a possible sale (1) Al/VI.) Amd andpur/mni a=A nmdre nannan atIwemin 31, ofits retail operations in hliwntri. Preliminary discussionr. LWR une bd<w Incli numar) m /nwut Anuunner gadden<nud heuls (mefd have tren held with interested l>arties, but AP&L has made #""/""#"'##"'I9""I'"

$h0 nubm qjenwank defmni(

' d"' "Gidfl

1. "'l*"',?*d mn

• *"*rrhaalnun.

4'*#" # #"These # annagn neu no decisions with regard to this matter, if either or both of omanu,to #,.ap,emti,i A,imt,q An,ugugin, im these tnmsactions were consuminated, AP&l.could use all (21 AlA=seAWM) Amd mndre aanusn at them/w 31. JW9, or a portion of the proceeds to redeem all or a portion of ""#d A" l"""""' d' '""*"" a/ G##"'"" ^T"N i '""'""' V '"'"

umld mpurr mteun urgulat<n, affmneds, uvluding 9.Caffenal ihr MlC kou certain seties ofits outstanding first mortgage lxmds at hist < sui inpaned Aar Ar Nur gireder sn sent,rs Ante se pnef<irwin miso y specialIedemption prices at or near to par pursuant to and n,mm<= stwA npati to swal rafstatuatwn (enduding s4<wfarns rhet) yat Inns af in compliance with applicable provisions ofits mortgage and /* w ma d 30 % inkg4:VAWMi &w <u==m avati mtin d is untM that deed of tnnt. ^"M "'"'d *6'""' * '"/""d' "I'd'*"' af/"*"/' 5"'A l'""'a"K a' 4" 'i'"'

(we Nar <>.

Q3Ph alReseenes Additional mortgage bonds and preferred stock that in addition, AP&L, LP&l., AIP&L, and System Energy can le issued by the Sptem operating companies and had the ability at December 31,1989, subject to meeting Sptem Energy are limited to the lesser of amounts based certain conditions, to issue bonds against the retirement of on earnings costrage tests, available lxmdable property, lxmds without meeting an caihings coverage test. Also, and for hlP&L and NOPSI, the cumulathe Grand Gulf 1 AP&L may issue prefe:Ted stock to refund outstanding nite defemds recorded as assets andlable to support the preferred stock without meeting an earnings coverage test, issuance of additional G&R ikmds. lktsed u}xm the System Energy's charter does not presently prmide for more restrictive test at December 31,1989, the Sptem issuance of prefened stock, operating companies and Sptem Energy could have issued mortgage lmnds or preferred stock in the following approxi-mate amounts, at an assumed annual interest or dividend rate of 10L Operollag Revenees and tapenses (anunu glaam) aborliet Value to Sceli Valve (laam f, wes i . . ,

gg ,

l I ' 'I l ' II

I i 1 l /W9 1 1M  !

, ,, , = = , - - .. l__ _. . . .

JW7 m I  ! I l-p- -

! t 1*' .,. > ..

\ ,,, {

--.____a - _m i _ _ a _ _ _._L_. _ 1 1 2 3 4 3 10 15 20 29 R 10tal(1culingitenswa E Alarhett*udur n 11tal(ynatwgExp*wn E Ikmk t'ahu n 1;udurrdl'unhawlonen Gwi

)

' 31 -

, 1 l

l

l nantepasut's Huastl&L tescussieu Amt ANALYSES Tntern Owporanan and Subudsarm Short term lines of credit are genentily maintained to Ente rgy Q qmration has recched SEC authorization 1 pnnide ficxibility in meeting short-tenn capital require- to repurchase, fium time to time, up to 20,458,109 shares of ments. The available hemk lines of crnlit and amounts its outstanding common stock through Decemtwr 31,1991, outstanding at December 31,1989, are shown below. (For a Approximately 589,500 shares of common stock were repur-discussion of certain limitations with res;wct to short term chased and retired in 1989 at an aggregate cost of approxi-Imrrowings, see Note 4.) mately $13.2 million. Purchases are made depending upon i fmumble market conditions and authoriration of the Imard of directors. There is no assurance as to the actual amount Available Outstanding of purchases that will occur.

!- Ikmk1Jnes Ikmks Money Pool (in ihmaands) In Decemler 1987. FASilissued SFAS No. 96, i l AP&l. $62,465 - $27,000 " Accounting for income Taxes,* which was scheduled to be l I

1J%l. 73,950 - - effective for fiscal yean twginning after December 15,1988.

l MP&L 30,000 - - FASB subsequently issued statement numben 100 and 103, which delay the effecthe date of SFAS No. 96 to fiscal)vars  :

NOPSI - - -

System Energy. - - - trginning after Decemtwr 15,1991. During this extension period FASil will tw considering various requests for Entergy Q>qmration does not have any present plans amendments to SFAS No. 96.

to issue additional shares ofits common stock or to obtain ikued upon a preliminary study, the Company expects funds from external sources through issuances of securities that the adoption of SFAS No. 96 in its present fann would or other financings. Entergy Corporation's capital require- result in a net increase in accumulated defen ed income ,

ments derhr principally from the need to imest periodically taxes with a corresponding increase in tusets. It is not - ,

in the common stock ofits subsidhuies. Entergy Qigmra- expected that results of operations for Entergy Corporation, tion has no present plans to make significant additional the Systnn operating companies, and Sptem Energy would investments in cor.imon stock of the System operating be significantly impxted by the adoption of SFAS No. 96 in companies or System Energy. Entergy Cogoradon recchts its present form, funds through dividend payments on outstanding shares of  ;

its subsidiaries' common stock, all of which are owned by Entergy Coqmration. During 1989, these dividends totaled

$272.9 million.

t l -

l l sEtMeal Finemelag Activlty (AIdlunu offkilan) l I l

1989 1988 l 1987 l l ,

1986 li 1985

[

Std) 0 Sut) 1,lMX) I,$lM) 2.fMW) 2. $lX)

E Net Funds 1%undnt (luunnm fru 14*rrrrumtvlbstrmptuna)

E Gums Furuh 14msdal(luunnm)

NUID Netpnanangs pw l%48 undude $487.7 mulwn offni truntgnge teruh retimil@ stem I; rum un}muary 1%49 neth priumh from ks Grund Gdf1 mir arulinMwk en skrrmier i988.

8:

AUDR COMRfm8 Cll4IRMIPS L8778R The Atulit Q>mmittee disctmed with the internal The Entergs Corporation ik>ard of Directors' Audit auditor and the independent public accountant the overall Onnmittee is comprised ofihr directors, who are not oflicers scope and s;wcific plans for their respecthe audits, as well as of the Gimpany: William C. Ilattle khainnan), James 11. the Q>mpany's consolidated financial statements and the Gunpbell, John A. Coo [wrJr., lincke 11. Duncan, and adequacy of the Company's internal controh. The commit.

Robert D. Pugh. The committee held four meetings tee met separately with the Company's internal auditor and during 1989, independent public accountant, without management The Audit Committee mersees the Onnpany's finan- pi esent, to disetm the results ofits examinations, its evalu-cial reporting pnicess on behalf of the Enten;y Coqmration ations of tlw Company's internal controls, and the mrrall Ikurd of Directors, in fulfilling its responsibility, the conunit- <piality of the Company's financial relmrting. The meetings tee recommended to the Imaid, subject to stockholder were designed to facilitate and encourage any pris ate com-appnnat, the selection of the Company's independent public munication between the committee and the internal auditor accountant (Deloitte & Touche). Aho, the committee or independent public accountant.

oversees and coordinates the activities and golicies of the 37 subsidiary companies' audit committees, dr$ [ Rid-William C llattle,Chainnan 1 Audit Committec 88P011T 0f e---.=>

training of personnel. This system is also tested by a compre-Tlw management of Entergy Q>r}mration has prepan d and hensive internal audit prognun.

is responsible for the financial statements and related finan- Tiw independent public accountants provide an cial infonnation included in this annual report. The financial objective assessment af the degree to which management statements are based on generally accepted accounting meets its responsibiliiy for fairness of financial reporting, principles. Financial information included elsewhere in this They regularly emluate the system ofinternal accounting report is consistent with the financial statements, controls and perform such tests and other pnicedures as they To meet its responsibilities with respect to financial deem necessary to reach and express an opinion on the infonnation, management maintains and enforces a system of fairness of the financial statements.

internal accounting controls that is designed to provide Management belieses that these policies and proce.

reasonable assurance, on a cost-effectiw basis, as to the dures provide reasonable assurance that its operations aic integrity, objectivity, and reliability of the financial records carried out with a high standard of business conduct.

and as to the protection of assets. This system includes Q 3 communication through wiitten policies and procedures, an employee Oxle of Omduct, and im organteatLmal stnicture

-p9- p,d* Nm" Edwin Lupberger John L Q>wan that punides for appropriate division of responsibility and the Chainmm and President System Executive-Finance 11108P8119811T AUDIT 0lls'IISPORT esidence supporting the amounts and disclosures in the To the Stockholders and the lloard of Directors financial statements. An audit aho includes assessing the of Entergy Corporation: accounting principles used and significant estimates made by We have audited the consolidated balance sheets of management, as well as evaluating the merall financial Entergy Coqmration and its subsidiaries as of December 31, statement presentation. We believe that our audits punide a 1989 and 1988, and tlw related statements of consolidated reasonable basis for our opinion.

income (loss), retained earnings and paid-in capind, and cash in our opinion, such consolidated financial statements flows for each of the three years in tlw period ended Decem- present fairly, in all material respects, the financial position of her 31,1989. These financial statements are the resimnsibility the Company and its subsidiaries at December 31,1989 and j

of the Company's management. Our responsibility is to 1988, and the results of their operations and their cash flows  ;

express an opinion on these financial statements based on for each of ti e three years in the perimi ended December 31,  !

our audits. 1989 in confonnity with generally accepted accounting We conducted our audits in accordance with generally principles.

accepted auditing standards. Those sumdards require that we A

plan and perfonn the audit to obtain reasonable assurance ()M , [A j about whether the financial stmements are free of material Deloitte & Touche misstatement, An audit includes examining, on a test basis, New Orleans,Inuisiana February 14,1990 j 33

l i

comeumaise natants suits i 1.rar g G,pmawn aral hulautumes I i

tauemin 31, 1989 1988  !

m (In Tkmaandd ,

Utiliy11 ant (N<tes land 9):  ;

Electr;< ,

$12,760,886 $12,787,780  !

Ek ctric plant under leaw . , , 655,212 434,993 Property under capital icaw - clectric , , 115,075 120,766 ,

Naturalgas ,

97,875 94,942 .

Pro lwrty under capitalleaw-gas . 900 1,001 :

Ginstruction worL in progress , , , , 240,808 170,265 Nuclear fuel , 5,061 95,456 i Nuclear fuelundercapitalleaw .

420,125 396,052 i

Total 14,296,742 14,101,255 1rss- Accumulated depreciation and amortization 3,298,370 2,989,863 Utility plant-net 10,998,372 11,111,392 7

OtherPwjnyandimestmenu 92,S95 86,207 CunentAvts:

Cae 5,809 15,389 !

Tem lxinuy invesunents - at cost, which appmximates marke. (Note 2) , 932,384 1,366,555 Total cash and cash equinilents (Note 1) , 938,193 1,381,944 Specialde;xnits , , 14,647 13,510 ,

Notesreceivable .

9,968 2,916 Accounts reccinible:

Customer [less allowance for doubtful accounts of(in thousands) *

$8,412in 1989 and $7,596in 1988) 216,867 147,509 Other 33,619 34,483 Aconwd unbilled rnrnues (Note 1) . 54,009 54,726 Stateincome taxesiercivable - 2,859 1 Accumulated deferred income taxes (Note 3) - 38,598 Fuelinventory- at average cost (Note 4) 68,744 64,739 Materials and supplies- at average cost 226,548 179,534 Rate deferrals (Note 1) 82,812 91,229 Prepaymentsand other 79,444 61,538 Total 1,724,851 2,076,585 IbefnedlMib:

Ratedeferrals (Note 1) 1,646,405 1,559,724 Suspended construction project (Note 10 ) . - 901,984 Other 253,218 202,924 Total 1,899,623 2,667,632 Total $14,715,241 $15,941,816 S 4

i i

t O W e

• 1 Ente,p G9uwutum n,ut hulnuisanes 1,+  ;

linem w 31 1989 1988 Capitalisatkin ami Unhilities (#" U"*'aadd Cajutalnatiim:

Conunon atocL, $5 par valut , authoriwd 500,(XX),(XK) ,

shares; issued and outstanding 203,991,592 shares in 1989  :

and 204,581,092 shar es in 1988 (Note 5) , $ 1,019,958 $ 1,022,905  !

Paid-in capital . 1,563,313 1,567,781 Retained earnings (Note 7) . . ., 1,636,254 2,310,242 Total c<nnmon stockholders' equity . 4,219,525 4,90(),928 Sulnidiaries' prefen ed stock (Note 5):

Without sinLing fund 330,967 330,967 With sinLing fund 350,363 462,965 long tenu debt (Notes 6and 9) 5,991,084 0,187,442 Total 10,891,939 11,882,302 Nonamentlialilitin: <

Obligations under capital leases (Note 9) . 355,835 260,858 Other . 57,435 56,876 i

Total 415,270 317,734 ,

Cunrntlialilities: '

Notes payable (Note 4):

Conunercialpaper. - 26,000 Other. 667 21,657 Currently maturing long tenu debt (Note 6) . . 29,427 306,346 Accounts payable 339,500 286,989 Gas contract settlements-liability to customers (Note 8) 60,010 257,054 Deferred revenue-gas supplierjudgment proceeds (Note 2) . 33,802 -

Deferred fuelcost . . 2,465 9,535 Customerdeposits 80,069 73,880 Taxesaccrued. 199,645 162,485 Accumulated defi n ed income taxes (Note 3) 15,685 -

Interest accrued . 169,460 165,723 Preferred dividendsdeclared . , 16,472 23,454 Obligations under capital leases (Note 9) . 210,476 300,118 Other 81,111 52,209 Total 1,238,789 1,685,450

!kfmedCmlits:

Accumulated deferred income taxes (Note 3) 1,597,817 1,597,921 Accumulated defi rred invesunent tax credits (Note 3) 47,238 66,621 Gas contract settlemenis -liability to customers (Note 8) 168,782 225,329 Defen ed revenue - gas supplier judgment proceeds (Note 2) . 139,596 -  ;

Other . 217,810 166,459 Total 2,171,243 2,056,330 Commitments and Omtingencies (Nott 8)

Total $14,715,241 $15,941,816 Sv Notes to Omsolulated hnannal Statements. 00

[

y 1

1 ftAM W CONIOLMfD NItem (LSIS)

s. nmo n orjausan a,ut sulatua,us hn tani:ndat tw .Ar 3t. IM9 1988 1987 (in Thouwndst O/natingitesentes:

1lectric , $3,633,637 $ 3,473,552 $3,327,117 '

Natund gas ,

90,367 91,853 127,703 ,

Total 3,724,004 3,565,405 3,454,820 '

l O/natingthfnues:

Operation:

l'uel f or electric generation and fuel-related ex[wnsen 766,787 778,138 801,594  ;

Purc hased power 186,835 141,992 96,595 i Gas purchased for resale , 62,705 62,f61 83,800 Other , , 725,842 751,274 '686,400 i Maintenance , , 278,832 235,733 256,202  !

Depreciation , 406,011 390,554 384,374 Taxesother thanincome taxes . I85,660 172,135 169,696 Inrome taxes (Note 3) , . . . 211,973 152,638 161,817 Rate defernds:

Rate deferrals (Note 1) (149,330) (292,078) (468,49S Writeoffof prniously defert ed Gmnd Gulf I expenses (Notes 2 and 8) , ,

- - 135,000 Income taxes (Note 3) , 48,304 102,789 137,721 ,

Total 2,723,619 2,495,836 2,444,7M  :

O/cating/ncome 1,000,385 1,069,569 1,010,056 OtherInwmrandDedudiora: l Project Olive tiranch Settlements (Note 10) (1,105,185) - - e Allowance ior equity funds used during construction 6,052 7,818 7,901 Miscellaneous income and deductions- net . 102,844 113,845 85,849 income taxes-credit (Note 3) 254,680 14,549 24,918 Total (741,609) 136,212 118,668 Interestand OtherCharges:

Interest en long term debt 631,600 663,477 637,139 Otherinterest-net 28,607 35,826 44,095

• Allowance for borrowed funds used during construction (4,793) 8,680 (1,092)

Prefen ed dividend requirements of subsidiaries 75,947 86,770 91,978 Total 731,361 794,753 772,120 Netinmme(lou) $ (472,585) $ 411,028 $ 356,604 Earningi(lou)ferCommon Shair $(2.31) $2.01 $1.74  !

Dividends thrlamijer G>mmon Sharr (Note 7) $0.90 $0.20 -

AnnageNumlerofCommon Shares Outstanding (Note 5) 204,576,247 204.581.092 204.58l.092 <

s,v Now to o,astaantnnannat si<annnas.

i 36

St&18ElBIffl 0F C01100MDATID CAOIl PLOWS m .

Entegs Gnptnutum and hulnuluurus Iner)m faMIw/clL_. 1989 1968 1987 OperatmgAaivitus (In W uurrute Net income (km) $ (472,585) $ 411,028 $ 356,fol Non< ash items included in net income (km):

Ratedefemds (Note l) (149,330) (292,078) (468,495)

Write <>ff of presiomly defened Gnmd Gulf I ex[rmes (Notes 2 nnd 8) - - 135,(KK)

Depreciation 406,011 390,554 384,374 Defenrd inconw taxes and imestment tax credits (19,407) 209,219 2Gl.187 Pnsect Olive l\ ranch Settlemenis (Note ,10) . 1,047,565 - -

Allowance (or cquity funds uwd during construction (6,052) (7,818) (7,1K)l)

Amortiration ofdeferred revenue (25,64I) - -

Net gain on the sale ofANG - (5,350) -

Changesin worLing capital:

Recchables (71,970) (37,657) 59,887 fuellmentory , (4,005) 30,573 (1,9 16)

An ounts pa>uble 52,511 15,RKi (8,898)

Other warLing capital accounts 6,998 (43,687) (l1,898)

Pneceds from gu contract settlements (Notes 2 and 8) - 19ti835 20,091 Refunds to customers- gas contmet settlements (Note 8) (56,122) (57,152) (252,785)

Change in lxmding innt armngement - 101,202 (101,202)

Increase in decommissioning tnat . (13,314) (26,705) (2,744)

Other 6,051 191>02 30,516 Net cash flow prtnided b) operating actisities 700,710 101,162 394,7tK) investingActivities:

Constmetion expenditures . (363,788) (338,091) (351,227)

Alk wance for equity funds uwd during construction 6,052 7,818 7,901 Nuclear fuel sales (expenditures)-net 2,779 (40,123) (7,193)

Expenditures on stnpended construction pndert (7.175) (12.194) (10,403)

Proceeds received from the sale of ANG 27,095 f

Other property-net 1,319 1,724 -

Net cash flow uwd by im esting aethities (360,813) (353,771) (360,922) l Finana'ngActivities Pniceeds from issuance of:

Picferred suick .

- - 35,000 Fint mortgage txmds . . 73,282 75,000 375,000 General and refunding mortgage Ixmds 100,000 115,000 75,000 ILmL notes and other long-tenn debt (Note 9) 360,259 510,369 51,377 Retirement of firstinortgage bonds . .. (1,023,397) (106,603) (107,306)

Retirement of bank notes and other long-tenu debt (6,110) (381,250) (406,758)

Redemption ofpreferred stock (117,449) (30,420) (48,030)

Retirement ofcommon suick . .. .. (13,201) - -

Proceeds from sale and leasebacL of nuclear fuel 73,863 129,827 06,446 Conunon sux Ldividendspaid (183,834) (40,916) -

l Pniceeds from letter ofcredit escrow - 192,885 -

letter oferedit escrow payments .. .

- (84,323) (89,400)  !

Funds (held) relenwd b) first mortgage bond tnntee - 60,000 (G),0(K))  !

Changesin short-tenn borrowings (46,990) (208,010) I19,667 i Other (71) 99 _ -

Net cash flow pnnided (used) by financing aethities (783,648) 231,658 10,937 Net increase (decreaw) in cash and cash equivalents (443,751) 782,049 44,805 Cash and cash equivalen15 at beginning of perkxl 1,381,944 599,895 555,040 Cmh and cash equivalents at end of perkxl __$ 938,193 _$ 1,381,94;l_$ My,89g Supplemental Duclosures of Cash flow infonnatum:

Cash p dd during the perimt for: i Interest (net of amount capitalized) $ 702,668 $ 767,311 $ 745,608 Income taxes (refund) ... .. $ 16,301 5 4,mH $ (4,815) ,

SnyplementalSchedule ofNon-cash Investing andTmancmg Actrustics: i Gipital lease ol, ligations incurred ...... $ 581,792 $ 129,629 $ 71,088 Fint morigage txinds assumed in the sale of ANG - $ (3,780) -

her Notn to CorcolulatalHnanaalStatements. 1 37

ffAM C CONS SATED RETA11 IIB IAA115108 AIS palmi CaffTAL na,,e o,,pwu .a su6s ,.

& t4, rmn1.=datlurrs=/n 31, 19tI9 1988 1987 (in l'houwnds)

/&tairudI:aminojanuary1. , $2.310,242 $1,939,757 $1,583,402 Add-Net income (loss) (472,585) 411,028 356,604 Total 1,837,657 2,350,785 1,940,006 Deduct:

Dividends decined on common stock (Note 7) 184,123 40,916 -

Common stock retirements (Note 5) 5,738 - -

Capital stock and other expenses ,

11.542 (373) 249 Total 201,403 40,543 249 I&tainntl'arningIkwm/er31(Notd) $1,636,254 $2,310,242 $1,939,757

/ aid-in Capital,Jannary 1 , $1,567,781 $1,565,466 $1,565,889 Add:

Gain (lou) on reacquisition of preferred stock . 48 2,315 (423)

Deduct:

Common stock retirements (Note 5) 4,516 - -

l' aid-in Ospital,lhwmlerJl $1,563,313 $1,567,781 $1,565,466

= ..__;_..- -

%,v Notes to omaulatnikancud Atatmeas.

Fregesetly UsellTerens G&R Ik>nds General and Refunding klortgage Ikmds inued und luuable by hlP&l and NOPSI AFUDC Alkmance for Funds Used During Omstmction Grand Gulf 1 Unit 1 of the Grand Gulf Nuclear Station ANO AP&Ils ArLamas Nuclear One Stetun Grand Gulf 2 Unit 2 of the Grand Gulf Nuclear Station Electric Generating Station Indepen:lence 2 Unit 2 of AP&lls independence Station (coal)

APSC Arkamas Public Senice Onnminion June 13 Decision , An order luurd by FERC on June 13,1985, City City of New Orleans,Inuisiana relating to the Unit Power Sales Agreement and the System Agreement i Council New Orleans City Giuncil '

1J'SC louisiana Public Senice Onnmm, ,on i -

FASB Financial Accounting Standards Ik>ard j

h!PSC hiississippi Public Senice Onnmiss,oni i

February 4 The resolution adopted by the council Resolution on February 4,198H, disallowing NOPSI's NRC Nuclear Regulatory Ccnnm,m, ion recmen of $135 million of previously deferrell Grand Gulf 1 related costa Ritchie 2 Unit .: ofAP&l/s Ritchie Steam Electnc Generating Station (oil / gas)

FERC Federal Energy Regulatory Onnmission SEC Securities and Exchange Onnmission IT.RC Settlement offer filed with FERC onJune 9, i Settlement 1989, by AP&l, l.P&l, hlP&l, NOPSI, and SFAS Statement of Financial Accounting Stamdards j System Energy and apprcwed by FERC onJuly j l 21,19H9, to settle, among other things,certain System operating AP&l,1J'&l alp &l,and NOPSI, collectively pending Gnmd Gulf Nuclear Station-related companies inues, litigation, suul other rate matters Waterford 3 Unit 3 of1.P&l/s Waterford Steam i f Electric Generating Station (nuclear) {

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100ft 1. IlmmARY OF 9000NFICANT ACCOUNTN06 P90 Cit $ Uttity Plant and Vi l l

Utility plant is stated at original cost. Partial disallow-The at companying consolidated financial statements include ances of plant cost ordered by the regulators have twen the accounts of Entergy Coqx> ration (the Qnnpany) and its recorded as an adjustment to utility plant. The cost of addi-direct and indirect subsidiaries: AP&l.,1J'kL, MP&l., tions to utility plant includes contracted wo:L, direct laix>r NOPSI, Sptem Energy, Entergy Senic es, SFI, and Electer, and materials, allocable meiheads, and an allowance Ihr the Inc. The above companies iue collectively tcferred to as the comixisite cost of funds used dming construction. The costs Middle South Electric Sptem or Spiem. of units of property retired are removed f:om udlity plant and sin h costs, plus senumd costs, less sahage, are charged Systemasof Asseents to accumulated depicciation. Maintenance aml repairs of The accounts of the Gimpany and its senice subsidi- property and replacement ofitems determined to be less ary, Enten;y Senices, are maintained in accordance with the than units of proiwrty are charged to olwrating expenses.

Public Utility Holding Company Act of 1935, as administered Depr eciation is computed on the sintight-line imis at by the SEC. rates imed on the estimated senice lives of the various The accounts of tlw System operating companies are classes of property. Depreciation prmisions on average maintained in accordance with the sptems of accounts in es depreciable property approximated 3.1%,3%, and 3% in j scribed by the applicable s egulatory bodies, widch sptems of 1989,1988, and 1987, reslectively, accounts substantially conform to those prescribed by FERC. Substantially all of the utility plant owned by the Syn.

The accounts of the generating subsidiary, System Energy, tem is subject to the liens of the subsidiaries' mortgage bond are maintained in accordance with the system of accounts indentures.

prescribed by IT.RC. The accounts of the non utility subsidi-ary, Electec, Inc., are maintained in accordance with the Rote Deferrels sptem of accounts prescribed by the SEC. The Sptem operating companies haw in elli et various rate nuxleration or rate phase in plans to reduce the inune-lleveness and FeelCosts diate elfcct on ratepayers of the inclusion of Grand Gulf 1 Three of the operating companies record electric and and Waterford 3 costs in rates. Under these plans, certain gas revenues as billed to their customers on a cycle-billing costs are either permanently retained (and not accovered basis. Revenues are not accrued Ihr energy delivered but not from nuepayers), deferred in the early years of commercial yet billed by the end of the lhcal period, l.P&l. accrues reve- operation and collected in the later years, or s ecovered cur-nue for the non-fuel mrtion i of estimated unbilled revenues. rently from customers. These plans vary both in the propor-Unbilled revenues result from energy delivered since the tions of costs that each company retains, defers, or recovers period covered by the latest billings to cmtomers. Substan- and in the length of the deferral / recovery periods. Ily de-tially all of the operating companies' rate schedules include ferring costs associated with the rate moderation plans to adjustment clauses under which the cost of fuel used for gen- the future when they will be collected through increased cration and gas purchased Ihr resale above or below speci- nues billed to customers, the impact of the defernd aslwct of lied base levels is permitted to be billed or required to be these plans on the income statement has been removed.

credited to customers. Only those costs permanently retained and not recovered MP&L has a fuel adjustment clause which allows cur- through rates or through sales to third parties result in a rent recovery of fuel costs. The three other operating reduction of net income. Ilecause the actual collection of companies utilize a defernd methmi of accounting for those revenues to recover the deferred amounts will not occur fuel costs recoverable under fuel adjustment clauses. Under until the future, each company records a defi rred asset this methmi, such costs are deferred until related revenues representing the amount of the deferrals and, at the s;une l are billed. time, incurs additional capital requir ements associated with l The fuel adjustment factor for AP&l,contains these defernds. In most cases, the carrying charges associ-l an amount fbr a nuclear reserve estimated to cover the cost ated with *. unamortiied deferrals are recovered currently of replacement energy when the nuclear plant is down for from customers. During periods when deferred costs are scheduled maintenance and refueling. The reserve recovered, revenue collections will exceed, to the extent l bears interest and is used to redta e feel expense fbr f uel of such current recovery, current cash requirements for adjustment purpmes during the maintenarue and refueling these costs, j

period. With respect to permanently retained costs, AP&lls i

setained share (stated as a percentage of System Energy's share of Grand Gulf 1) nmges from 5.6% in 1989 to 7.92%

in 1994 and all succeeding years of the unit's commercial l lm l

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operation, in the event AP&l. is not able to sell ituetained construction. This piot edure :emoves from the income J shue to third parties,it has the ::ght to sell such energy to its statement the effect of the cost of financing the construction retail customers at a pric e equal to its avoided energy cost. program. It eficctntly iesults in treating the AFUDC In 1985, l.Pkl. agired to [wr manently abun b 18% of its c harges in the sune manner as construction talx>r and mate-IT.RGallocated share of Gnmd Gulf l related costs. IJ'&l. is rial cmts in that ca< h is capitalized rather than expensed.

allowed to recover 4.6 cents Iwr LWh for the energy related As non< ash items, these income statement credits have no to suc h r etained gx>rtion through the fuel adjustment clause, efh ct on current cash earnings. After the property is placed This iecovery amoant was temgonuily reduced to 2.55 cents in senice, the AFUDC char ged to construction costs is re-gwr LWh pursuant to a recent agreement between ll'kL coventble from customer s through depreciation prmisions and the !J'SC. (See Note 10,"Pnject Olive liranch Settle. included in utility senic e rates. FfTectiw comixisite rates i

ments.") 1.P&L retains the right to sell such energy to non- of the System ojeniting companies for AFUDC were I affiliated parties at } rices in excess of the fuel adjustment 9.3% 9.6% and 9W fm 1989,1988, and 1987, respectiwly. I clause recovery amount, subject to LPSC approval. At De-cember 31,1989, the net investment in Grand Gulf 1 Other IIeesertent Liabilities amounted to $3.1 billion. It is the lmlig of AP&L, LP&l., and NOPSI to record provisions for uninsured property risks, certain employee Pestrellroment Demolles benefits, and clainn fin injuries and d unages through The Q>mixmy and its subsidiaries have various instre. charges to operating expenses on an accrual basis. In 1989, tirement benefit plans cm ering subst mtially all of their pursuant to MPSC authorization, MP&L reestablished pnni-employees. The Imlicy of the Onnlany and its subsidiaries sions for uninsured projwrty risks and claims for injuries i is to fund pension costs in accordance with contribution and damages.

guidelines established by the Employee Retirement income Security Act of 1974, as amended, and the Internal Revenue Statement of Cash flows Qxte of 1986, as amended, and to fund and record other For purpmes of this statement, the Company con-lxntretir ement plan costs on a cash basis, siders rJ1 unrestricted highly liquid debt instruments purchased with a maturity of three months or less to be lasome Teses cash equivalents.

The Onnpany and its subsidiaries file a conwilidated federalincome tax return. Pursuant to an intm-System IlOTE 2. RATE AII0 IttGULATORY MATTER $

income tax allocation agreement, income taxes ar e allocated to the Sptem companies in pm;mrtion to their conuibution Proled Olive Bromh to the convilidated taxable income, in accordance with in an ellbrt, reien ed to by the System as " Project Olive SEC regulations, no System company is requir ed to pay linmch,* to settle outstanding issues and litigation surround-more income taxes than would have twen paid had a sepa- ing System Energy and the Grand Gulf Nuclear Station and

! rate income tax return been filed. Defined income taxes to stabilize retail rates in the System's senice area, the l are recorded based on differences I,erween lxxik and tax- System explored with the IT.RC staff, state and kical reguhi-able income to the extent permitted by the regulatory lxxt- tot s and ollicials, and other interested parties, methods of ies for ratemaking purgmses. Investment tax credits utili/ed resohing Gnmd Gulf Nuclear Station-related and other rate are deferred and amortized bawd ulmn the average useful matters. To that end, onJune 9,1989, System Energy and life of the relat(d pmperty, the System opemting companies file i with FERC an offer of settlement that would iesolve varium. 2RC-related issues.

Allowenes for Fonds Used During Construtlen The offi r of settlement was subsequently sup[mrted by the

'Ib the extent that the Company's operating compa- FERC staff, state and local regulators and officials, and other nies are not permitted by their regulatory lxxiies to recover interested parties and was approved by FERC onJuly 21, in cunent rates the carrying costs of fund < used Ibr con- 1989. (For a discussion of the FERC Settlement and of re-struction, they capitalite, as an appropriate cost of utility lated state and kical settlements, see Note 10," Project Olive plant, an allowance for f unds used during construction llrs h Seulements.")

(AFUDC) that is calculated and recorded as provided by the regulatory systems of accounts. Under this utility industry FERC's June 13 Dodslon pmctice, construction work in progress on the balance sheet FERC'sjune 13 Decision alkicating the capacity and is charged and the income statement is credited for the ap- energy from System Energvs 90% share of Grand Gulf 1 proximate net comimsite interest cost oflorrowed funds among the System operating companies continues to be and for a reasonable return on the equity funds uwd for challenged by various parties. (See Note 8, " Commitments 10 1

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and Contingencies- Omtroversin Omcerning Gnmd transcript of the pnicceding to the !J'SC for its considene Gtuf 1

• for mor e infonnation on this matter.) tion. Should this occur, the IJ'SC may take further action in accordance with the additional nidence. As pennitted by IFK RoteN Rete Order the hlarch 1989 onter, IJ'&l. is expending thejudgment On h! arch 1,1989, the IJ'SC issued an order that pr oceeds in the nonnal courw ofits Imsiness. IJ'&l. be-tddressed a genend retail rate application filed by IJ'&l. in linrs tlw intent of the hlarch 1989 order is that the !J'SC 1988 and the disposition of the IJ'SC'sjtuisdictionalJ ortion . ecognlics that IJ'&l. is entitled to an annual inrnue in-(approximately 97.4%) of $193.7 million of gas supplier cicase of approximately $45.9 million and tl1. such intent judgment proceeds terrived by 1.P&l. in October 1988 re- will be upheld by the courts. The matter is [wnding, sulting from litigation uith a gas supplier, The IJ'SC found in its order that 1.P&L ww entitled to an annual increase in 100P81 Prudenes Bleatowenes retail mies of approximately $45.9 million, based upon a On February 4,1988, after a lengthy prudence imesti-return on equity of 12.76% and an mrmll rate of return of gation, the council adopted the February 4 Resolution, 11.07E Ilowner,in lieu of a rate increase, the h! arch 1989 which required NOPSI to write off, and not recover from its i order prosided that 1.P&l. retain the 1J'SCjurisdictional reutil electiic customers, $135 million ofits prniously l portion of the gas supplierjudgment pniceeds (stated to delen ed Gmnd Gulf 1-related costs in addition to tlw l approximate $188.6 million) and, for the lwnefit of rutepay- $51.2 million of such costs that NOPSI absorbed as part ofits ers, begin immediately to amortire suchjurisdictional pro- hlarch 1986 rate settlement between NOPSI and the coun-creds plus interest thereon actrued through February 28, cil. (Tl e $135 million disallowance was written offin 1987,)

1989, pursuant to a mte amortization schedule that cun ently NOPSI is seeking reliefin federal and state courts extends over a 5.Sycar period. The unamortiied balances from this action by the council. NOPSI belie es that the of such proceeds will reduce I.P&l/s rate base until compk- Februay 4 Resolutinn is in siolation of the Fedend Power tion of the amortization. LP&L believes that the hlarch Act, applicable FEkd orders, and fedend law as interpreted 1989 order should ha v the effect of prmiding approxi- by the U.S. Supreme Court, and is contnuy to the nidence mately the same amount of additional net income available presented to the cotmcil, and will ultimately be so declared for common stock as would an annual rate increase of $45.7 by the courts. (For further infonnation legarding these is.

million (approximately the amount ofIJ'&Ils revenue defi- sues and the potential financial implications to NOPSI, see ciency as detennined by the LPSC) over the S.Syear period. Note 8, ' Commitments and Contingencies - C<mtrmrrsies The impact of the h! arch 1989 order wu to increase net Concerning Gnmd Gulf 1,")

income in 1989 by approximately $23.1 million. LP&L l agreed to a five year base rate frcere, at the then current Other NRC Metters  ;

level, stdiject to certain conditions. On February 1,1990, the APSC, Ll'SC, h!PSC,  !

On April 17,1989, the Ix>uisiana Energy Users Gmup hlississippi Attomey General, and the City of New Orleans  !

(IIUG), a gruup ofIJ'&l/s hirge industrial customers, and filed a complaint with FERC against System Energy and i the members of such group indhidually, filed a petition for Entergy Senices (as agent for the Company and the Sy stem appeal andjudicial rniew of the hlarch 1989 order in the operating companies) alleging that the rates run ently being 19thjudicial District Court for the Parish of East llaton charged to the System operating companies by System En.

Rouge, louisiana (distnct court). The IIUG contends that ergy for Grand Gulf I capacity and energy are notjust and the LPSC was withoutjurisdiction or authority to pennit :casonable. The issues raised by (1 e complaint imulve: (1)

LP&L to retain thejudgment proceeds. Furti er, the IIUG reducing System Energy's rate of return on common equity requests that LP&L be directed to keep and maintain in a from 14% (a reduction in System Energy's rate of return on sepamte account, pending a decision by the district court, common equity by 1% would cause annual revenues to be ,

thejudgment proceeds, or alternatively, the remainder of reduced by approximately $17 million); (2) placing a ceiling l the proceeds after payment of the initial amount required to for mtemaking purposes on System Energ>'s conunon eq- I meet the first year's revenue requirement of approximately uity :atio; (3) reducing System Energy's cash working capital

$45.9 million. Trial of the appeal had been scheduled for allowance; (4) investigating the tmnsfer of certain Grand h! arch 22,1990. Ilowever, the IIUG filed a motion with Gulf 2 assets to Grand Gulf it and (5) investigating plant the district court requesting continuance, without date, of costs related to income tax accounting issues. System En-these proceedings. IJ'&L will defend vigorously against the ergy has filed an answer to the comphdnt. In the ment appeal. The IIUG has stated its intention to offer a witness FERC decides to set these matters for investigation, FERC at the trial of the appeal, if this occurs Ll'&L intends and will establish a refund effective date, which under federal law the LPSC has stated its intention to offer countenniling wit- cannot be earlier than April 2,1990. Any adjustments to nesws. The trialjudge has stated his intention to send a System Energy's mtes found necessary by FERC pursuant to 41 !

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II0ft$ 0 CGII0000&fte PIIIAllCIAL f ATIMBIffl I. rep G9xantum arsd klauhana this complaint would be effecthe acumcthrly to the refund outcome of this matter System Energy lelieves that its in-eficcthe date With regard to incorne tax accounting issues, come tax accounting pnx edures are in compliance with the IT.RC Division of Audits is conducting an audit of SEC and IIRC requirements and that in the event the Sptem Energ) for the > rats 1986 through 1988 and has indi- IT.RC staff ieconunends adjustments or write ofis r elated to l cated that it may rennmnend certain adjusunents to Splem Sptem Energy income tax accounting procedur es, the ulti-Energy's lxx>ks and a ccords : elated to incorne tax account. mate resolution or setdement of any claims which may be ing p <xrdures. The IIRC staffs preliminary indications awerted by IT.RC relathe to this matter will not s esult in a iue that approximately $95 million of Grand Gulf I costs material achrrse impact on System Energy's financial posi- j rnay be at issue. The IT.RC staffs audit report is ex}wcted tion or results of o[wnitions, tometime in 199(t Entergy Corponstion cannot predict the IIOTE 3. IIICOME TAIE8 Income tax expene (credit) consists of the following:

1989 1988 1987 (luu lhwando Cun ent:

Federal . - $ 17,144 $ 10,138 Staue $ 25,004 14,509 295 Tot.d 25,(6 1 31,653 10,433 Defe red-Net:

Reclawification due to net operating loss (43,652) 227,278 32,078 Tax gain on sale and leaseback transactions . (78,980) (126,286) -

Itue neferrals 48,30l 102,789 137,721 Other deferred purchased power costs 2,316 (3,397) 17,396 Gas contract settlement 10,458 (69,201) 1,037 1.iberalked depreciation . 95.016 72,001 163,235 Amortiration of excess deferred income taxes (17,860) (22,644) (23,468)

Unbilled revenues (24,307) (20,455) (12,530)

Customer deposits . . (717) 18,735 -

Project Olive tiranch Settlements 14,319 - -

Nuclear refueling and maintenance . 1,991 11,827 (9,328)

Deferred fuel 898 11,498 (2,222)

Alternative minimum tax (1,808) (15,864) (32,302)

Other . (6,003) 10,554 (2,184)

Total (25) 196,835 269,433 Invesunent tax cr edit adjusunents - net (19,382) 12,390 (5,246)

Recorded income tax expense S 5,597 $ 240,878 $ 274,620

._. . m_m.m Charged to operations $ 260,277 $ 255,427 $ 299,538 Credited to other income (254f>80) (14,549) (24,918)

Recorded income tax expense 5,597 240,878 274,620 Income taxes applied against the debt component of AFUDC 556 (8,520) (2,545)

Totalincome taxes S 6,153 S 232,358 $ 272,075

= = , = . _ . _ = = = = - = = = = = = = = = - - - - - . . . _ . = . = . - . - .

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Total income taxes difler from the amounts computed by applying tlw statutor) federal income tax rate to income (low) lefore taxes. Tim scawns for the differetxes are as follows (dollars in thousands):

1989 _,_ 1988 1987

% of  % of  % of Pre tax Pre-tax Pre-tax Amount Ims Amount income Amount income Omnputed at statutory rate $(132,954) 34.0 $251,149 34.0 $289,281 40.0 lucreaws (icductions) in tax resuhing from:

Project Olive tiranch Settlements , 150,191 (38.4) - - - -

Amortiration of excess deferred income taxes . (17,860) 4.6 (22,644) (3.1) (23,468) (3.2)

Write ofIof1.P&l,'s state deferred taxes related to depreciation timing differentes - - - - (23,828) (3.3)

State income taxes net of federalincome tax effect (242) 0.1 4,833 0.7 16,251 2.2 Amortiration ofinvestment tax credit (7,747) 2.0 (17,758) (2.4) (5,157) (0.7)

Depicciation 23,790 (6.1) 17,262 2.4 20,337 2.8 Other - net (9,581) 2.4 8,036 1.0 1,204 0.2 Recorded income tax ex)wnse 5,597 (1,4) 240,878 32.6 274,620 38.0 Income taxes applied against the debt component of AFUDC 556 (0.1) (8,520) (1,1) (2,545) (0.4)

Totalincome taxes $ 6,153 (1,5) S232,358 31,5 $272,075 37.6 The net opemting loss carryfonard at December 31, amendments to SFAS No. 96. SFAS No. 96 expands the 1989, amounted to $280.8 million and is amilable to othet requirements to record deferred income taxes for all tempo-fedend regular taxable income in future years. Ifnot uwd,it rary differences that are reported in one year for financial uill expire in the p ars 2001 and 2001. Unused investment reporting purposes and a difk rent year for tax purposes.

tax credits at December 31,1989, amounted to $445.9 mil- This will require the recognition of deferred tax lxdances for lion after the 35% reduction required by the Tax Refonn certain items not previously reflected in the financial state-Act of 1986. These credits may be applied against federal ments, such as a deferred tax liability relating to AFUDC.

income tax liabilities in future years. If not used, dwy will Under the liability methm! adopted by SFAS No. 96, de-expire in 1992 through 2003. ferred tax balances will be based on enacted tax laws at tax The alternathe minimum tax (AhlT) credit at Decene rates that are expected to be in effect when the temponuy her 31,1989, was $29.8 million. This AhlT credit can Iw differences :everse, canied finward indefinitely and will reduce federal regular it is expected that reductions in deferred taxes result-income tax in the future. Ing from the lower corporation federal tax rates will be Cumulative income tax timing difleiences for which reflected as liabilities to customers since the regulators may defen ed income tax expenses have not been pnnided are require any such savings w he paued through to ratepayers.

$449.3 million, S452.8 million, and $459.4 million at Decenw Ilowever, based on a preliminary study, Entergy Coqxme her 31,1989,1988, and 1987, reslwctively, tion, the System oi.erating companies, and Sptem Energy In December 1987, FASilissued SFAS No.96, expect that adoption of SFAS No. 96 in its present fann will  ;

" Accounting for income Taxes," which was scheduled to tw result in a net increase in accumulated defened income efh cthe for years beginning after December 15,1988. taxes with a corresponding increase in assets. It is not ex-FASil subsequendy issued statement numbers 100 and 103, pected that results of operations h>r Entergy Corgmration, I which delay the effective date of SFAS No. 96 to fiscal years the System operating companies, and Sptem Energy would leginning after December 15,1991. During this extension be significantly impacted by the adoption of SFAS No. 96 in period, FASil will be considering various requests for its present fonn.

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l NOIN19t9W8WWDPa m St& M in @ tem wm and A lum "

M 4. M Of m M M ID m Sri has two bank cardit agreements for use in financ-ing its fuel oil and nuclear fuel imentories, respecthrly. The The System ojwmting companies and Sptem Energ ar e fuel oil financing agreement allom for ton ouings of up to authorised through 19901 9the SEC to eflect short tea m $30 million sutdect to a limit equimlent to 80% of the lower lonowings in an aggregate amount outstamding at any of cost or fair market value of its fuel oil imentory stored at one time of up to a specified dollar amount for each com- certain sites. *llw nuclear fuel financing agreement alk>ws pany (AP&le $125 million:1.P&1. $125 million; hlPhl- forionowings of up to $45 million, lkinowings under

$100 million: NOPSI . $30 mit! ion: and Sptem Ene:gy- these agreements are restricted as to use and are secured

$125 million), sulsect to incicase to a maximum of 10% of respectively by SITS fuel oil and nuclear fuel imentories each company's :eslwctive capitalization with further SEC and cenain accounts reccimble arising from the sales of cpproml. Ilowvver, the ability of each of the System operat- these imentories. In addition, AP&l, l.P&l, and System ing companies and Sptem Ency;y to lonuw is sulject to the Energ have agreed to purchase the nuclear fuel imentory cvailability of funds through bank lines and other credit in the event Srl is unable to fulfillits obligation under the enuites. HIP &l.and NOPSI are limited by the tenns of their related agreement. Fees are paid on the unused portion of res[wctive indentures prmiding for the issuance of G&R these agieements. At Decemtwr 31,1989, theic were no Ikmas to short-tenu Inrnmings in an aggregate amount not Imrrowings outstanding under these agreements.

exceeding, in general, the greater of 10% of capitalization or The short-tenn bonuwings (excluding money pool 50% of Grand Gulf I rute defermis mailable to support the tonowings) and the interest mtes (detennined by dividing issuance of G&R Ikinds. In addition, l.P&l, hlP&l, and applicable interest expense by the average amount lor-NOPSI are sutdect to an SEC order which prohibits incur- rowed) for the System were as follows:

ence of short-tenn indebtedness if common stock equity is, or wuuld thereby twcome,less than 30% of the e.um of total capitalization plus short tenn indebtedness. Due to the ram hinliwnn/w fl. 1989 1988 1987

$135 million write ofTin 1987 of previously defened Grand Gulf 1 related costs and the reduction of NOPSPs common etwan in hando stock equity caused thereby (22% of total capitalization as of Average Ikinuwing Decemler 31,1989), NOPSI is currently precluded from ef- ikmk kxms $ 6,023 $ 52,933 $ 12,665 fccting any short-tenu lorrowings, whether through lxmk Conunercial paper - $ 53,216 $ 72,738 loans or money gxml lorrowings, without further SEC ap- Other $ 2,097 $ 19,127 $173,558 proml, which is not likely to be obtained under the present circumstances, hlaximum ik>rrowing: j The System openuing companies, excluding NOPSI, ihmLloans $ 30,300 $100,805 $ 26,000  !

have lines of ciedit, not iequiring conuniunent fees, provid- Commercial paper - $ 65,000 $ 85,000 J ing for short-tenn torrowings of $166.4 million through Other $ 4,137 $ 32,667 $210,667 hums from banks within their senice tenitory. Additionally, the four System operating companies, together with Entergy Year end Ikirrowing:

Coymrution, System Energy, Entergy Senices, and SFI, are Commercial paper - $ 26,000 $ 65,000 authorimi to panicipate in a System money pool, whereby Other S 667 $ 21,657 $190,667 those wmpanies in the Sptem with mullable funds can ,

invest in the [xml while other companies in the System Average interest Rate:

(except Entergy Cor}mmtion) having short-tenn needs can During period-torrow from the pool, thereby reducing the Sptem's Bank hxms 11,1% 9.3% 8.1%

dependence on external short tenn lorrowings. The maxi- Commercial paper -

9.1% 7.8%

mum Imrrowing and avemge lorrowing by participants Other 9.0% 10.4 % 9.4%

from the System money [xml during 1989 were $92.1 million and $41.8 million, respectively. At Decemlwr 31,1989, the At end of period-  !

funds amilable in the anoney pool for terrowing aggregated Commercial paper -

9.3% 7.8% )

$693.7 million, in addition, Entergy Senices has a line of Other 10.5 % 11.0% 9.7%  !

credit (effectivejanuary 1,1990) with Entergy Corgmration l for $35 inillion through December 31,1991.

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Cicdit facilities (excluding % money pool) and bornmings thereunder of the System compamics weic as follows:

_1989 1988 1.987 Credit C: edit Oedit ram ixtattamin.11. Facilities llornmings Facilities Ikurowings Facilities Ikirrowings lin ThouwndQ Short-tenn:

System Energy - - - - $158,000 $158,000 S11 - - $105,(XX) $43,590 $105,000 $ 97,(KK)

Operating companies . $1f6,415 $r67 $140,588 $ 4,157 $220,800 $ 667 long-term:

Onnpany - - - - $ 60,000 -

System Energy - - - - $374,349 $374,349 i SFI $ 75,000 - - - $ 50,000 -

II0ft 5. PRAPEERED 4110 C01BMell STOCII The number of shares of preferred stock of the System operating companies as of the end of the htst two years was as follows:

Shans Authoriicd Shares Outstanding Call Price At lumin 31, 1989 1989 1988 Per Sharc Cumulative, $100 par value Without sinking limd:

4.16 % - 5.56 % 1,070,774 1,070,106 1,070,106 $102.50 to $107.00 0.08 % - 8.56 % 1,180,(XX) 1,180,000 1,180,(XX) $102.80 to $103.78 9.16 % - 11.48 % 795,(KX) 795,(XX) 795,(XX) $101.06 to $108.24 Total 3,045,774 3.015,106 _ _ 3,045 106, t With sinking fund:

8.52 % - 9.76 % 1,200,(XX) 1,200,000 1,200,(XX) $107.00 to $109.00 10.60 % - 12.00 % 317,700 317,700 373.000 $106.74 to $109.00 i 15.44 % - 16.16 % 169,495 169,495 266,995 - $111,58 to $112.12 Total 1,687,195 J,687,195_ _1,839,995 l'niwued 5,406,500 Total 10,139,469 Cumuladve, $25 par value Without sinking fund: i 8.84 % 400,000 400,000 400,(XX) $27.11 10.40 % 600,(KX) 600,(XX) 6(X),(KX) $27.30 Total 1,200,(XX) 1,(XX),(XX) 1,000,(XX)

With sinking fund:

9.92% - 12.Gl% 4,778,099 4,778,0!K) 5,276,063 $26.34 to $27.37 13.12 % - 15.20 % 3,056,697 3,056,697 4,645,823 $26.61 to $28.22 19.20 % - -

?,000]XXL Total 7,834,796 7,834,796._ _ 11,921,886 Unissued 15,572,482 l

)

Total 24d07,278 l Cumulative, $0.01 par value Unissued 15,(X10,000 Total 15/X)0,000 l

an j

I II0ftf 19 CGIIIGUMfle PillMIGE IMTIMIllfl a

inom naatwn asut wharus Changes in the numler of shares of preferred stock of the System o;wrating companies, all of which were with sinking fund, during the last three years were as follows Number of Shares 1989 1988 1987 i

Sales: l HIP &L 9.76% $100 par - - 350,000 J

Retirements:

APkL 9,92% $ 25 par . . (81,960) (137,043) (111,000) 10.60% $100 par (8,000) (18,012) (13,880) 11.04% $100 par (40,000) (35,325) (24,075) 13.28% $ 25 par (117,126) (200,175) (280,325)

LP&L 10.72% $ 25 par . (l16,004) (93,635) (480,000) 12.61% $ 25 par , (300,000) (165,130) (1S4,500) ,

13.12% $ 25 par (160,000) (291,390) (202,489).

14.72% $ 25 par (832,000) (900) (366,684) 15.20% $ 25 par (480,000) (119,880) (l19,960) 19.20% $ 25 par (2,(KX),000) - -

MP&L 12.00% $100 par (7.300) (5,000) -

16.16% $100 par . (90,000) - -

NOPSI

! 15.44% $100 par (7,500) - (18,000)

Total (4,239,890) (1,066,490) (1,401,513)

, n-..-. - . ., _

The mnounts of preferred stock of the System operat- Cash sinking fund requirements for the ensuing five ing companies as of the end of the last two years were as years for preferred stock outstanding at December 31,1989, l follows are as follows (in thousands): 1990, $22,250; 1991, $31,750; 1992, $31,750; 1993, $38,750; and 1994, $38,750.

Ianmin 31, 1989 1988 In 1989, Entergy Corporation receiwd SEC authoriza-t/s rimuwndo tion to repurchase, from time to time, up to 20,458,109 shares ofits outstanding common stock either on the open Without sinking fund: market or through negotiated purchases or tender offers i Stated at $100 a share . $301,511 $301,511 through December 31,1991. Purchases are made depend-Stated at $25 a share 25,000 25,000 ing upon favorable market conditions and authorization of i Premium 1,456 1,456 the hoard of directors. There is no assurance as to the actual amount of purchases that will occur. As of December 31, Total without sinking fund $330,967 $330,967 1989, Entergy Corpwation had repurchased and retired

~

589,500 shares of its common stock at an aggregate cost of With sinking ftmd: approximately $13.2 million. The effect of these transac-Stated at $100 a share $168,720 $181,000 tions reduced common stock, paid-in capital, and retained Stated at $25 a share 195,870 298,017 earnings by approximately $3 million, $4.5 million, and Premium 518 567 $5.7 million, respectively.

Issuance and discount expense (14,745) (19.619)

'Ibtal with sinking fund $350,363 $462.965 40

f i

e '

i N0ft6.10H64BAII NOT The long-term debt of the C(nnpany and its subsidiaries as of the end of the hist two >rars was as follows: )

twanic .51, 1989 1988 fin Thommndd First hlortgage Ikmds $3,830,313 $4,773,910 s

General and Refunding ikmds - due 199S97,10.95% - 14.95% 290,00() 190,000 l Other:

long-term Obligation - Department of Energy (Note 8) 82,393 75,733 hlunicipal Revenue ikmds - due serially through 2004,1 1/4% - 8% . 20,466 23,397 Pollution Control Revenue Bonds and Installment Purchase Contracts:

l Due serially through 2014,6.4% - 9.5% . 58,600 59,770 Due 1995 2010,5-1/2% 1/2% , 896,050 896,225 Purchase Obligations Under lmentory Supply Agirement 26,163 27,997 Gnmd Gulf I trase Obligation (Note 9) 500,00() 500,000 Waterford 3 trase Obligation (Note 9) . 353fdK) - ,

Total Other 1,937,272 1,583,122 Unamortiied Premium and Discount - Net (37,074) (53,244)

TotalInng-teren Debt . 6,020,511 6,493,788 Irss- Amount Due Within One Year 29,427 306,346 tong term Debt Excluding Amount Due Within One M ar $5,991,084 $6,187,442 m.m m hiatmities and sinking fund requirements for the On December 28,1988, System Energy entered ensuing five years on long-term debt outstanding at Decem- into amtngements for sale and leasebacks aggregating an her 31,1989, exchiding Gnmd Gulf I and Waterford 3 lease approximate 11.5% undivided ownership interest in Grand obligations (see Note 9, "Irases") are as follows: Gulf I for an aggregate cash consideration of $500 million. ,

On September 28,1989, IJWL entered into three substam-Sinking Fund tially identical, but entirely sepantte, ininsactions for the sale hiaturities Requirements (for an aggregate cash consideration of $353.6 million) and "

Cash Other* leaseback of three undhided portions amounting to ap-proximately 9.3% ofits 100% ownership interest in Water-un mumndo ford 3. The net proceeds from these arrangements were 1990 $ 28,527 $ !KK) $17,898 used by System Energy and 11%1, to retire in 1989 high 1991 $115,712 $30,800 $17,428 interest mte first mortgage bonds totaling $487,7 million 1992 $220,058 $30,800 $17,348 and SMO million, respectively.

1993 $406,155 $45,800 $17,928 1994 $260,606 $45,800 $17,148

• &nkingfund mpimnnnb nwy le mtujini by cntulimthm ofMarty utdatwru at tlw mir of167% of such mporrnwnb.

l l

47 l

)

110T8810 CellBOLit&ft9 FillAllCIAL 8 AflalBiff8 l

tua,mnap,,atum arut stuws The outstanding first mortgagt: 1xmds of the Gimpany's subsidiaries as of December 31,1989 and 1988 were:

Matmity 4-1/8% 7/8% 6% - 8 7/8% 9 % - 11 7/8 % 12 % - 14 7/8 % 15 % - 16 % Total

</n 7weruN 1989

!!00 $ 20,fdK) - - - - $ 20,fdX)

!!01 $ 27,(KX) - $300,(KK) - - 327,(KK) liO2 $ 8,(KK) - - $205,000 - 213,000

!!s3 $ 15,000 - $200,(KKI $100,000 - 315,(X)0 1WI $ 25,(KK) - - $200,000 - 225,000 1 0 52(K)4 $211,250 $505,960 $885,300 - - 1,602,510 20052014 - $ 40,000 $350,000 $150,000 - 540,000 20152017 - - $587,303 - - 587,303 Tbtal First Mortgage ik>nds $3,830,313

_ _.. ,- -.=____ _ . ,_ ,._. -

1988 1989 - - - - - -

1990 $ 20fdX) - - - $ 30,000 $ 50,000

!!01 $ 27,(KK) - $300,000 - - 327,(KX)

I!O2 $ 8,(KK) - - $265,000 - 273,000

!!03 $ 15,000 - $200,000 $100,(XX) - 315,(XX)

IWl-2003 $236,250 $461,560 $785,500 $215,000 $500,000 2,198,310 2(01-2013 - $ 85,000 $450,000 5250,000 - 785,000 20l+2016 - - $fdK),000 $190,(KK) $ 35,0(X) 825,000 Tbt;d First Mortgage Ikmds

= = . _ _ _ _ . _ a== -.

- ___ _ _ _ . _$,.4,773,910

__ m lleft F. RITAlllEDIARilllies The Public Utility llolding Onnpany Act of 1935 prohibits As of December 31,1989, $685.4 million of consolidated the Gimpany's subsidiaries from making h>ans or adumces retained earnings was unrestricted, including $208.8 million to Entergy Girixinition. The indenture and charter pnni- of unrestricted, undistributed ret:dned earnings of the Com-sions relating to the operating companies' long-term debt pany's subsidiaries. As discussed in Note 10, " Project Olive and preferred stock, respectively, and the provisions of firanch Settlements," consolidated retained earnings were Sptem Energy's indenture and reimbursement agreement reduced by approximately $862 million as a result of related to the Grand Gulf I sale and leaseback transactions implementation. Jthe FERC Settlement and related state j restrict the muount of consolidated retained earnings antil- and k> cal settlements. The unrestricted, undistributed re- '

able for cash disidends on common stock of the subsidiaries. tained earnings of any subsidiary of Entergy Coqx> ration ,

in additica, tnuisfers by the operating companies from are not andlable Ibr disuibution to the common stockhold-retained earnings to the stated utlue of common stock im- ers of Entergy Corporation until such earnings are made l Ix>se simihtr restrictions on the amount of consolidated mullable to the Company through the dechtration of dhi-retained earnings muitable for cash disidends on common dends by such subsidiary.

stock of the subsidiaries. GinsolicLued net assets consist i primarily of the net awets of the Onnpany's subsidiaries.

i 48 f

I

_ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ l

Il0ft 8. C0mmmRBim Allt C00ml19811 COB 8 trustee for NOPSI's G&R lxmdholders its opinion to the eflect that the Febnian 4 Revilution woukt materially im-A number of significant uncertainties which had twen pair NOPSPs ability to perfonn its obligations in t espect of achrrsely allecting the System for a numler of years wet e re. NOPSI's 5115 million of outstamling G&R Ikmds. As a sohtxt in 1989 as a restdt of the IIRC Settlement (see Note result, holders of the outstanding G&R ikinds had the right 10, " Project Olive linmch Settlements"). Seventi Gnuul Gulf to tender their lxmds during the lwrioct November 24,1989, Nuclear Station-r elated issues not t esolved by the IT.RC through December 13,1989, for purchaw by NOPSI on Settlernent cotdd affect the Sptem's financial gxnition and February 9,1990, at a pric e of 100% of the principal amount are discussed under "Conuoversies Con (crning Grand plus accrued interest to the date of pttrchase. The tender Gulf 1,* In addition, ahhough Enter);v Corporation aiul the gwriod expinxi without any of the G&R lxmdholders tender.

New Orleans City Council are discussing a negotiated ing their tx>nds for purchase by NOPSI.

Innuut of NOPSI by ti e City of New Orleans, in the event in addition to the above NOPSI pniceedings, theJune this buyuut ckws not take place, the Sptem's financial gxwi. 13 Decision alkicating the capacity arul energy from System tion could tw affected by the outcome of the council's con. Energy's share of Gnmd Gulf I among the Splem o;wrating sideration of the imuluntary municipalization of NOPSI's companies was reallinned by IIRC in its Novemler 30, electric and gas utility pni;wrties (see *NOPSI Negotiated 1987, oider. Ilowever, petitions fbr rniew of the Novender 1

Ilu>uut and Other Pni;msals"and " Potential NOPSI hiunici- 30 order were filed with the U.S. Court of Appeals ihr the palization" herein). District of Columbia Circuit (D.C. Circuit) by various parties.

On Niay 26,1989, the D.C. Circuit denied the petitions fbr Centroversies Ceaseralog Stand Self I rniew holding that FERC's action was both rational and i A disalkiwance by the council in the Fehntary 4 Res& within FIRC's range of discretion. InJuly 1989, separate I lution of $135 million of NOPSI's prniotuly deferred Grand motions for rehearing of the D.C. Circuit's 51ay 26,1989, Gulf 1 related costs is still twing litigated by NOPSI in loth order were filed by the City of New Orleans, and by the hii, fedend and state courts. NOPSI believes that the Febntary sissippi Attorney General and MPSC. On Augtnt 28,1989, 4 Resolution is in siolation of the Federal Power Act, appli. the D.C. Circuit denied the NIPSC and hiississippi Attorney cable IIRC orders, and ledend law m interpreted by the Genend's petition for rehearing and njected the city's peti-U.S. Supreme Court, and is contrary to the nidence pu - tion as not being filed in a timely manner. On December sented to the council, and will ultimately be so declared by 27,1989, the 51PSC and the hiississippi Attorney Genend the courts, filed a petition for writ of certiontri to the D.C. Circuit in the meantime, NOPSI is maintaining in eflect a seeking rniew by the U.S. Supreme Court of the hiay 26, ,

series of cash conwnution and other measures to mitigate 1989, decision of the D.C. Circuit. System Energy filed a i the negtuive effects ugxm its cash flow caused by the Febru- brief opposing certiorari in Fehniary 1990. The matter is ary 4 Resolution and to stabilize its financial condition. In pending.  ;

this connection, NOPSI has deferred and may continue to it is not possible at this time to predict the ultimate defer from time to time,in each case for less than 30 dap, its outcome of this matter, including possible realkication,if '

monthly payments to Spiem Energy fbr Gnmd Gulf I capac- any, or the effect thereof upon Sptem Energy and the Syv ity and energy. While the Fehniary 4 Resolution continues tem operating companies, including possible refunds, if any, to have an adverse effect upon NOPSI's financial condition Any material mcxlifictulon of the alkication established by and to constntin NOPSI's cash Ikiw and ability over the near. thejune 13 Decision could give tiw to additional litigation, tenu to raise funds from external sources, NOPSI now esti- disputes, and challenges in the affectedjurisdictions, mates that, even assuming there was nojudicial reversal of the february 4 Resolution, NOPSPs projected earnings and Potential 100PSIMenisipalliotlea cash ihms should be suflicient to permit NOPSI to meet its The council has been considering the imuluntary pnjected regularly scheduled debt senice obligations and municipalization by the City of New Orleans of the electric j to meet continuing preferred stock dhidend and sinking and gas utility properties of NOPSI. The ordinances under fund requirements fbr the foreseeable future (including its which NOPSI operates state, among other things, that the obligations with respect to principal of and interest on its city has a continuing option to purchase NOPSPs properties.

G&R ikmds). This estimate is based on the premise that no On hlarch 7,198.5, the council established a public power catasuuphic or other extmordinary event occurs. authority for the purposes, among others, of acquiring and ,

in siew of the fact that NOPSI was not able to obtain a openuing elecuic power utilities in the city. The council has timely court injunction staying enfbreement of the February also received mrious reports from legal, engineering, and 4 Resolution, an independent arbiter, acting pursuant to financial achisocs with respect to the [mtential municipaliza-the provisions of NOPSI's G&R hlortgage, certified to the tion of NOPSI's elecuic utility facilities. These regmrts have 49

NONS TO COWO@&TW PMANCIAL 81&MNf3 f.nu,p Gefantwn and huluulumn awerted, among other things, that such municipalization addition to construction expenditures, the System will have could le accomplished without the city twing ieqaired to capital icquir enmuts in 1100 of $57 mil 3on in connection asstune NOPSI's obligations with respect to its IT.RGallo. with the phasing of a portion of Gnmd Gulf I and Water-cated share of Grand Gulf I capacity and eneigy, NOPSI ford 3 costs into ietail rates. Pursuant to the phase-in plaos, believes that any attempt by the city to municipalise NOPS!'s in 1991 and !!92, the System willle collecting Grand Gulf I electric utility facilities in an attempt to enable elecuic cus- and Waterford 3 costs incuned but not collected in pinious tomers in the city to mxiid paying their federally alhicated years. These collections constitute cash available to satisfy share of Grand Gulf I ictated costs could ersult in extensive construction ex[wnditure requirements.

and complex pniccedings before various iegulatory authori- In addition to the capital requirements described ties and the courts, all of which could take many years to alxive, the System will require $699.3 million of capital funds t esohr, 'the February 4 Resolution, if not reversed, could during the period l!8092 to meet long-tenn debt maturities have the efTect of reducing the purchase piice under mu- and to satisfy sinking fund requirements.

nicipalii.ation by $135 million. Cert;dn System companies are proceeding with ar-nmgements for the possible redemption, purchase, or other NOP8190egotiated Boyeet and Odier Proposals acquisition of all or a portion of certain outstanding series of On March 29,1988, the council pro [xised to Entergy high-cost debt and preferred stock. Funhet, certain Sptem Girporation to discuss a negotiated buyout of NOPSI by the companien.re investigating and could possibly enter into city. Entergy Girponttion responded by indicating a willing- ammgemt nts ihr the sale or ude and leaseback of property ness to consider any ahernatives that the council might in which the pniceeds f rom such transactions could be used pro [xise if they are in the best intes ests of its stockholders, to reure certain debt issues at par, llowever, only AP&L customers, and employees. OnJuly 12,1989, the parties to cun ently has pl,uw to do so.

the negotiations conchuted discussions resulting in a con- In this connection, AP&L has filed with the APSC and ceptual pro [md that could have [xissibly become the basis the SEC applications requesting appnmd to sell and tnms.

for a negotiated buytiut. Additional meetings were held to fer its interest in Independence 2 and Ritchie 2 to Entergy further develop the proposal, but onJuly 31,1989, the nego- Power, Inc. (a proposed subsidiary of Entergy Corporation tiating parties separatelv announced that they had s cached that would market the related capacity and energy to other an impasse in fonnalizing the conceptual propos;d. On Oc- parties, principally non-afliliates, for resale), Other neces-tober 23,1989, the discussions resunwd in order to consider suy regtdatory approvals have been requested. There is no the ibliowing three proposals: (I) legal consolidation of assunince as to when or whether consummation of such LP&L and NOPSI, (2) the city's negotiated buyout of tnmsaction would occur, in addition, AP&L has been a[>

NOPSI whereby the city would initially purchase only the proached considering a [xissible s;de of its retail operations tnumnission and disuibution sptem of NOPSI and later in Missouri. Preliminary discussions have been held with acquire the generating facilities, and (3) a distribution sys. interested parties, but AP&L has made no decisions with tem purchase option in which NOPSI would continue to regard to this matter, if either or both of these tnmsactions provide bulk [xiwer to a cit ><nvned distribution sptem ihr were consummated, AP&L could use all or a portion of the  ;

15 to 20 years. These discussions cuhuinated in a pro [xisal pniceeds to redeem all or a portion of certain series ofits setting forth basic tenus and conditions regarding the nego- outstanding first mortgage bonds at special redemption tiated buyout proposal referred to in item (2) alxive. This prices at or near to par pursuant to and in compliance with propos;d could tw the subject of public hearings and could applicable punisions ofits mortgage and deed of tntst. i ibrm the basis for a negotiated buyout should definitiw documentation be develord. Ilowever, no binding or de- flodear " 4 -ta ma= dom finitive agreements have tren reached and consummation of inJune 1989, plans were announced whereby a any agreements with the council is subject to a number of sig- nuclear management company to be named Enter gy nificant uncertidnties. The eventual outcome of this matter Operations, Inc. (a pro [x> sed subsidiary of Entergy cannot be predicted at this time. Corporation) wouhl assume operating responsibility for ANO, Waterfbrd 3, and Gnuul Gulf 1, std> ject, respectively, Capital R+J  % and Finendng to AP&l, LP&L, and System Energy's oversight. Under the unntruction expenditures for the Sptem during the pmjxistd, AP&l, LP&L, System Energy, and the other years 1990,1991, and 992 are estimated to aggregate Grand Gulf I and Waterford 3 co<mners woukt retain own-

$398.3 million, $399.2 nillion, and S 130.5 million, resper- ership of their respective nuclear generating units. Further, tively, No significant cmts in connection with generating AP&l, l.P&L, and System Energy would retain their assmi-l lacilities are expected to be incurred, except for certain [xist- ated capacity and energy entitlements and would pay or commercial operation wm L on v;uious nuclear units, in s cimburse Entergs Operations, Inc. Ihr the costs associated j l

50 )

l l

4

,./ ,

with o;wrating these units in accoidance with applicable dinated achances in amounts that, when added to smy rules and regulations of the SEC that sequire such senit es amounts re< cited by Sptem Eiwigv under the Unit Power le rendeied at cost. Applications for approud of or mm- Sales Agirement or othensise, aie adequate to cover allof opposition to the proixiwd ammgements base tren filed the o;wrating exlwnws, inchuling depicciation and inteiest with the APSC, the IJ'SC, the council, the SEC, aiul the charges, of System Energy Sptem Energy has,with the NRC. An intenenor has icquested a hearing at the SEC consent of the Sptem operating companies, assigned its challenging the Sptem's awertions of elliciencies and cost sights to payment and advances fr om the Sptem openuing reductions from the pro [xisal. Apprmid by the NRC was companies under the Antilability Agirement to c criain received on December 15,1989, but such appnintl is not creditors.

eilecthe until all other irgulatoiy appronds have twen re- InJune 1989,Sptem Enerp and the Sptem ogwrat-cri ed and expires 180 dap af ter issuance, unless extended. ing compmics agiced, with the lwior conwut of such credi-Approud by the 1J'SC w;n received in February 1990, sut ject tors, to amend the Acailability Agierment so that the Gnuut to certain cosulitions that have twen accepted by 1J'&l. Gulf 2 w1itc<>ff woukt tw amortimt for Antilability Agiee.

Tlw matter is pending. nwnt puqxiscs over 27 )cais rather than in the numth the w1ite ofiis recogmied on Sptem Energyilxu>Ls. This Capital funds, limit Power Sales, Avellability, amendment was made so that the wiite ofi of Gnual Gulf 2 and Reallosellen W L in September 1989 wouki not cauw a payment by the Usuler the Capitad Funds Agreement, Entergy Coqxr Sptem o;wrating compmics to tw requit ed uinter the ration has agreed to supply or cau e to be supplied to Sptem Audlability Agreement.

Encryv such muounts of capital as may be required in order Res;xmsibility for any Grand Gulf 2 amortization to maintain Sptem Energy s equity capital at an anmunt amounts has tren allocated to 1J'&l, MP&L, ami NOPSI equal to at least 35% of Spiem Energy's total capitalitation under the terms of the Reallocation Agreement entered into I (exchuling short4enn debt), aiul such amounts of c apital as in 1981 AP&L is liable for its share of such amounts only if i shall tw required in order to permit the continuation of the other Sptem operadng compmies ar e unable to meet commercial opemtion of Grand Gulf I and to pay in full all their contmetual obligations. No payments of any amortua-  !

indebtedness for borrowed money of System Energy tion amounts will be required as long as amounts paid to j whether at maturity, on prepayment, on acceleration, or System Energy under the Unit Power Sales Agiecment, othensise. In addition, Entergy Corporation has agreed to together with other funds available to Splem Energy, exceed j make cash capital contributions to enable System Energy to announts required under the Amilability Agreement, whi< h 1 make payments when due on its long-term debt. Sptem is expected to be the ca e for the foreseeable future.

Energy has, with the consent of Entergy Corporation, av signed its rights under the Capital Funds Agreement to Shoreholder Litigation  ;

certain creditors. Entergy Corporation and certain other Sptem compa-System Energy Enteig Corporation, and mrious nics and individuals aie defendants in a consolidated pur-creditors entered into amendments to the Capital Funds p>rted class action suit. The initial complaint was filed on Agreement so that abandonment of Grand Gulf 2 could August 19,1985, by an Entergy Corporation sharehokler ,

pniceed without siolation of emenants in the Capital Funds (purporting to represent a class that purchased Entergy  ;

Agreement. Coqxnation common stock). Four similar complaints were  !

J Pursuant to the alk> cation slecified in the Unit Power filed on August 20,1985; August 23,1985: September 6, Sales Agreement among Sptem Energy and the System 1985; mul September 19,1985, respectively, by Enterg) Cm-opemting companies as ordered by FERC in theJune 13 poration sharehoklers (purporting to s epresent classes that Decision, System Energy agreed to sell to the Spiem opemt- purchased Entergy Corporation conunon stock). The five j ing compmies all ofits 90% share of the capacity and actions were conv>1idated in the U.S. District Court Ihr the l energy from Gnual Gulf 1 in accordanc e with specified Eastern District of Inuisiana (district court). The consoli-percentages (AP&L- 36%,1J'&L- 16, MP&L- 33%, and dated, amended, and supplemental complaint alleges siola-NOPSI- 17%). Charges under the Unit Power Sales tions of the disclosure requirements of the Securities Ex-Agreement, which are billed monthly, are based on System change Act of 1931 and the Securities Act of 1933, common )

Energ3% total cost of senice, including System Energ % o;r law fraud, and common law negligent misr epresentation in q cmting expen es, depreciation, and capital costs. connection with the financial condition of Entergy Cogiora-The System operating companies are alvi severally

]

tion and prays inr compensaton and punithe damages, legal  ;

obligated under the Amilability Agreement in accordance costs and fees, and other pmper relief against Entergy Cor-with stated percentages (AP&L- 17.1% LP&L 26.9% piration System Energy, LP&l, MP&l, AP&l, and NOPSl; MP&L-31.3% NOPSI- 21.7%) to make payments or sulx>r- certain members of Entergy Corporation's Ikiard of Directors.

51 I

I Oft 8 C COIIBOLIDAftt fillAllCl&L ffAflMllif$

Im nqman wut uusmv

< entain cunent officen s and fornwr ollicers of Entergs being prosided usules a contract with ajoint ventur e operut-Qu]x> ration, System Energy,1J'&l., MP&l, AP&l, aiul ing aimther mine in the State of Wyoming. Coal supplied NOPSl; the irulegendent auditor of Entergy Girporation under thiuontract is expected to punide for the pn>jected and ccriain urulenoiters of Entergy Corporation c ommon requirements of the Indeirndence Station until approxi-sux L. On Manh 14,1986, the plaintills in the convilidated mately 2015. The Sptem beliem therefore that it will have action filed a motion for cl.ns action detennination. On adequate supplies of coal for its generating needs for tlw April 18,1986, Entergy On]x> ration and certain other Sp- foreseeable luttu e, tem companies and indisidual deferuiants (System defen- 1.P&l. has entered into a long-term inin base agrees dants) filed a motion to dismiss or, in the ahernative, a mo- ment with the owner of a hyduwlectric genentting facility, tion for summaryjtuigment. OnJanuary 12,1987, the dis- (oinisting of eight sepanne generating units, to purchaw, at trict niurt enter ed ajudgment granting deferulants' motions specified prices, certain lwicentages of the energ) genenued for summaryjtuigment and dismissed the suit. On February and made antilable from the pl.mt in the years 1989 through 6,1987, the plaintifts in the convilidated action filed a mv 2031. To date, l.P&l. has not l urchased any energy twcause tire of ap[walin the U.S. Court of Apgwals for the fitth the pnijected commercial opemtion date of the fin,t gener-Circuit (Filth Circuit). Onjuiw 7,1988, the l'ifth Circuit ating unit is schedulext for May lWO with all eight units sendered a decision vacating thejtuignwnt of the district schedukyl to be in commercial ojeration by Augmt IWO.

court, based, in part, on the coru:lusion that the disuict Assuming IJ'&l. purchases the maximum [wrcentage (9F7e) court had not adextuately explained the bases for its deci- of the energy made antilable to it, and ha ed on ciinent sion, in remanuling the raw to the district court for further pnx.luction projections, required payments muler the con-proceedugs, the fitth Clicult suggested that the district tract ar e estimated to be $19.8 million, $47.2 million, $47.2 court could again comider ilm merits of the defendants' million, $47.2 million, arul $46.7 million, for IWO through motion for summaryjudgment aiul determine, with the 1991, respectively, ami a total of S3.7 billion for the years benefit of certain guidelines as to the inteiptetation of gov-  !!%2031, l.P&l. recovers the costs of purchased energy eming law articulated by tlw Fifth Ciiruit, whether the des through its fuel adjmtment clause lmrsuant to IJ'SC orders.

fendants aie entitled to summaryjmtgment as a matter of law. The disuict court was directed,if it makes such a deter. Ilesleerinsuranee mination, to in mide a detailed analpis supgxirting its con- The Price Anderson Act pnnides for a limit of public cimions that would facilitatejudicial resiew. Ahernatively, liability for a single nuclear incident. As of Decemler 31, the filth Circuit noted, the district court could decline to 1989, the limit of public liability for such type ofincident was j rule on the defendants' motion for sununaryjudgment until $7.741 billion. AP&l,1J'&l, and System Ene gy are pn>

l further development of the case has taken place and the tected against this liability by a combination of piimte insur-l issues have been nanowed through the imdlable pu~ trial ance (currently $200 million) and an indusuy assessment l tec hniclues. Based ulum the fif th Circuit's decision, the prognun. Under the assessment pn>gnun, the maximum l district court allowed the parties to ebrief the motion for amount AP&l, IJ'&l, or System Energy would be required l summaiy judgment, and onJanuary 17,1989, the System to pay, with respect to each nuclear incident at a licensed l l defi ndants filed a renewed motion for sununaryjudgment nuclear facility, would be appmximately $66 million per l and a verilled amwer to the consolidated, amended, and s cactor (such amount to be indexed every five years for supplemental complaint. OnJuly 20,1989, the plaintiffs inflation and includes a 5% surcharge in the event the total filed a memonuulum in opposition to the senewed motion public liability claims and legal costs approach or exceed the for summaryjudgment. On Septemtwr 29,1989, the System limit of protection othensise established), payable at a ntte deh ndants filed icply papers to plainti!Fs op;xisition. The of $10 million per licenwd reactor per incident per year. As district court hamheduled the trial to conunence hlarch 4, a co-lic ensee of Grand Gulf I with System Energy, South IW1. The outrona of this pending matter malits impact Mississippi Electric Power Awiciation (SMEPA) isjointly on the System's finamJul condition cannot be predicted. and sewndly liable to share in this obligation. The Sptem has a total of four licensed seactors.

F ; L. Centrerts AP&l,1J'&l, and System Energy on behalf of them-AP&l. has long-tenn contracts hit the supply of coal selws and other insured interests (including, in the case of for the White illull Station and the hulependeixe Station. System Energy and 1.P&l, the coowners of Grand Gulf I Coal for the White illull Station is supplied under a contmct amt Waterfbrd 3. respectively) aie memtwrs of certain insur-pnniding Ibr the deliveries of coal h om a mine twing ance pmgrams that pnnide coventge for property damage, operated in the state of Wyoming in amounts suflicient for including decontamination expeme, to memlers' nuclear the olwration of the White 111u11 Station thmugh genemting plants. At Decemler 31,1989, these companies approximately 2002. Coal for the Independeine Station is were insm ed agaimt such losses up to $1.675 billion.

l 1 52 l

l l

$1.875 billion, and $1.875 billion, res[wetiwly. (Ellective tw adjusted in tlw futme to asstu e full cost sennriy, AP&l,,

January 1,1990, IJ'&l/s amount was increased to 1J'&l, and System Encryv consider all costs incun ext or to

$2.035 billion.) In addition AP&l,l.Pkt MP&l, and le incurred in connection with disposal of spent nuclear NOPSI aic members of an insunmcc prognun that punides fuel to le pro [wr com[xinerits of suiclear fuel ex[wnse arid insunmce onrrage for (crtain costs oficplac ement power punisions to recover such costs have teen or will be made in incuned due to certain prolonged outages of nuclear units. applications to regulatory authorities.

Under the pro [wrty damage and replacement [xnver insur. Ily law, the DOE was to begin accepting >[wnt fuel in ance pnignuns, these System companies could be subject to 1998 and continue until the diSxisal of all fuel Irom icactor assessnwnts iflosws exceed the accumulated funds available sites is accomplished. Ilowever, the DOE's icpository paw to the insurer, At Decemler 31,1989, the maximum gnun has twen delayed, liased on the DOE's cunent sched-amounts of such assessments were: AP&L. $12,92 million; ule for acceptance of spent nuclear fuel, AP&l,1J'ki, and 1.P&L. $30.11 million; MP&L. $.42 million; NOPSI . System Energy's initial shipments of s[wnt fuel to the DOE's

$.21 million; and System Energy- $34.73 million. Under its stomge facilities will occur in 2011,2016, and 2016, res[wt.

agreement with System Energy, SMEPA would share in tively, in the meantime, these companies will le ecs[xmsible System Energy's obligation. for storage of spent fuel. AP&l,1J'&l, and System Energy The amount of pro [erty insurance piesently canied estimate that on-site spent fuel storage capacity at ANO, by AP&l, LP&l, and System Energy exceeds the NRC's Waterford 3, and Grand Gtdf 1, respectively, will be sulli-minimum requirement for nuclear power plant licensees of cient to store fuel from normal operations ur.til the mid-

$1.06 billion per site. The NRC regulations further provide 1990s,2000, and 200 l, res[wctiwly, it is expected that any that the proceeds of this insurance must first le tned to additional storage capacity required due to, among other place and maintain the reactor in a safe and stable condition things, delay of the DOE re[xisitory prognun will have to le and, second, be segregated in a tmst administered by an punided by the affected companies, independem trustee and be used to complete requinxl de- AP&l, IJ'&l, and System Energy ar e recovering de-contamination operations. Only af ter proceeds are uwd or conunissioning costs for ANO, Waterford 3, and Gnmd dedicated for such use and appropriate regulatory approval Gulf 1, respectively. With respect to AP&L and System En-is obtained would the balance of these proceeds, if any, tw crgy, these amounts are de[xisited in external trust funds available to plant owners or their creditors. On October 27, that can only tw uwd for future decommissioning costs.

1989, the NRC pro [xised an amendment to its property LP&L expects to establish an external fund for this purpose insurance regulations to eliminate the independent trustee byJune 1990. AP&L, LP&l, and Sptem Energy will regu-requirement. It is anticipated that the proposed nde will be larly review and u[xlate estirnated decomunissioniing costs to finalized April 1,1990. reflect inflation and changes in regulatory requirements and AP&l, l.P&l, and System Energy are unable to pre- technology. Decommissioning costs for ANO and Water.

dict what effect the NRC's regulations would have at the ford 3 are estimated to be approximately $399A million (in time when insumnce proceeds would be made available. 1986 dollars) and $203 million (in 1988 dollars), respec-tively. AP&L and LP&L have been authorized to recover Spent Nedeer Fooland i ' . Costs through rates amounts which, when added to estimated Under the Nuclear Waste Policy Act of 1982 (NWPA), trust investment income during the collection penicxt, will le the Department of Energy (DOE) is required to construct suflicient to meet estimated decommissioning costs.

storage facilities for and dis [xise of all spent nuclear fuel and With respect to System Energy, an outside engineering other high level mdioactive waste generated by domestic finn completed a new decommissioning study for Gmnd nuclear power r eactors, for a specified fee. The NRC, pursu- Gulf L Based u[xiin the cornpleted study, System Fnergy ant to the NWPA, alm requir es operators of nuclear [xiwer estimates that approximately $248.7 million (in 1989 dol-reactors to enter into spent fuel disposal contracts with the lars) will tw required to fund the estimated costs of decom-DOE. The affected Sptem companies have entered into missioning System Energy's 90% interest in Gnmd Gulf 1, such contmets with the DOE whereby the DOE w31 furnish in a petition filed with FERC on September 29,19d9, System disposal senice at a cost of one mill per kilowatt. hour of net Energy requested an increase in annual decommissioning genemtion after April 7,1983, plus a one-time fee for gen- expense collections to $9.7 million per year to become ofrec-eration prior to that date. AP&l, the only System company tivejanuary 1990. FERC accepted the pro [xised rates for which generated nuclear [xiwer prior to that date, has filing and suspended the proposed rates for five months, to elected to pay the one-time fee, plus accrued interest, no earlier than 199M, and recorded as a liability at December 31,1989, approximately $82A million (including accrued interest) for this payment. The fees payuble to the DOE may 53 1

11MN N C01100MhaftD PII6AIICIM St&TMBiffl I uam 0+ntum at slum ,

the esctow wuuki gwrmit. h1P&L answered United's I become ellectivejune 1,1990, $ulject to selund. The APSC, 1.PSC, hiPSC, the c ouncil, and the hiinissippi Attorney Gen- counterclaim, as amended, denied that United was entitled end have filed notices of intenrntion with ITRC wheie the to any of the telief <laimed, and sought instead that the  ;

matter is pending. Ilearings are sciwduled to twgin in monies held in escrow tw [xdd to htP&L The hlPSC has Septemler 1990 intentned in the case on Iwhalf of h!P&l/s customers and J in opiosition to the clainn of United.

Settlesment Agressment witti e tes Seguer inJanuary 1987 United submitted an imulce to A dispute twtween a gtw supplier aint IJ'kL arising htP&l. in the muount of approximately $21 million for im hom the gas supplici s claimed inability to deliver the full anmunt allegedly owed United for htP&L's f ailure to take qu,mtities of fuel gas due 1J'&L under newnd natund gas certai". whunes of gas during 1986 under the Gas Sales contracts was settied by the execution of a settlement agiec. Agreement. In Februaq 1987, h!P&L filed a declaraton 2 ment in 1982. The settlement agreement pnnides for the judgment suit against United in the U.S. District Court for payment of $1.087 billion in cmh plus a guaranty of smings the Southern District of htississippi,which seeks a declaru-of at least $585 million in certain gm acquisition costs be- toryjudgment that h!P&L does not have to pay theJanuary tween 1982 and 1996. In 1983, the I.PSC ontered 1J'&l. to 1987 invoice from United twcause 51P&L is reliemt ofits refund the settlement pioceeds to custonwrs mvr the pe- *take or pay

• obligations under the Gas Sales Agt eement as a riod 1983 93. At Decemler 31,1989, the remaining liability result of United's improper billing practices. The suit also  ;

to rintomen was appr oximately $225.2 million (of which scels a declaratotyjudgment that htP&L is entided to cer- ,

$56A million was (lassified as a current liability), tain credits under Article Vill of the Gas Sales Agreement due to force majeure conditions or maintenance shut <lowns tes Centreet uligellen that its generating stations haw experienced or may experi .

In Decemtwr 1967, htP&L and United Gm Pipeline ence in the future, in htarch 1987 United filed its enswer Gunpany (United) entered into a Gas Sales Agreement, and counterclaim ihr the muount of theJanuary irnoice, ,

under which United agiced to sell mul deliwr, and h1P&L pha interest, costs, and attorney's fees.

agiced to pm chase and receive, large volumes of natund in February 1988, United sulunitted an invoice to l gas, h1P&L med the gas m fuel in generating elecuicity at hlP&L in the muount of approximately $190.6 million for an "

i two ofits genemting stations in hiississippi. The Gas Sales muount allegedly owed United inr htP&1ls failure to take l Agreement expired December 31,1987, certain vohunes of gas during 1987 under the Gas Sales l In October 1986, h!P&l. filed a suit against United in Agreement Accordingly, h1P&L amended the suit filed in the U.S. District Court for the Southern District of htissin. February 1987, to include issues ndsed by United's second i

sippi contending that United's billing practices violate invoice, in April 1988, United filed its amended answer and 5 l Article XW of the Gas S; des Agreement, as amended, which counterclaim Ibr the muount of the 1987 and 1988 imnices, l sets fbrth the procedmes under which United may calculate plus interest, costs, and attorney's fees. The hlPSG has also the price of gas to hlP&L cach month. This complaint was intervened in opposition to United in this action, amended in Augmt 1987, in this amended suit, h1P&L in the event the courts ultimately hold that United seeks nestitution of all monies heretofmc wrongfully over- did not overcharge h!P&L during 1986 and 1987 and that a charged and billed by United, and other telief, deficiency occurred in the amount of gas taken by h1P&L Pursuant to its claims in the suit concerning the ind during those yea s aller all credits have been applied, it proper billing pmctices by United, h1P&L withheld approxi- would be h1P&lls intention to take and pay as taken for the mately om third of the amounts billed to h1P&L by United gas comprising the deficiency, or to pay United Ihr the defi-i on Augmt and September 1986 statements from United and ciency and to take the gas paid ibr during the year following paid the mnount withhekt (approximately $8 million) into such finaljudicial ruling. h1P&l/s right to take the gas could escrow with a bank inJackson, hiississippi, be contested by United, htP&L recovers purchased gas costs in November 1986, United answered h1P&l/n com- from its customers unc.er a ibel adjustment clause, plaint and filed a counterclaim (which uns amended in in addition to questions of whether h1P&L was excused August 1987) seeking a declaratoryjudgment, which woukt from its obligation to United under the Gas Sales Agreement in interpret the Gas Sales Agreement to permit United to ex- 1986 and 1987, and whether or not United overcharged htP&L clude the purchases of its marLeting alliliates in calculating under the agieement, the court will addreas issues such as htP&l/s imuice each month, in addition, United sought n (1) the amount of any credits muitable to h1P&L under the judgment agaimt alp &Lin the amount of approximately agreement, (2) the method of calettlation, the timing and

$12.9 million with interest, attorney's fees, and other costs, the manner of any payment due to United, and (3) the and an m der of the court requiring the escrow agent to pay method of accounting for takes of gas after payment under United so much of the amount of thejudgment as funds in the agreement. The matter is pending.

M

8:

Il0ft9.LRA888 maturity of the curient arrangements, bawd on the paitirte lar leswe's inulear fuel requirements. If a lewer cannot General arrange for alternative financing upon the segul uly whed-In accordaine with SFAS No.13. " Accounting for uled matuiity of its luirrowings, the particular leswe nnat leases," the Sptem rec oids the assets and related obliga- initchaw mulear inel in an amount equal to the amount tiom applicable to capital leaws as s equired by SFAS No. 71, s equised by the lessor to active such luiriowings. All piior

'Arcounting for the IJIects of Certain 'lylws of Regulation." nuclear fiiel leasing arnmgements wer e clicctively canceled At December 31,1989, the System companies had with the start of the new nuclear fuelleaw arrangements.

capital leaws and noncancelable o;wrating leaws (excluding Irase pa>1nents aie based on nuclear fuel uw, Nu-nuclear fuel leaws and the sale and leaseback transactions clear hwl lease exlwnses of $188.9 million, $219.7 inillion, disctnsed heicin) with mininnun rental commitments as and $ltK).8 inillion were charged to o[wrations in 1989, follows: 1988, and 1987, reywctively. The uniecmeied cost base of the leaws was $ 120.1 million, $396.1 million, and $397.9 Capital 0;wrating million at Decemlwr 31,1989,1988, and 19S7,iespectively.

trases leaws Solo end laaaahaa fransediens (in Thmmd0 Ar ratigements for the sale and leawbac ks of an aggre-1990 $ 30,558 $ 56,153 gate i1.5% muihided (m1wrship interest in Grand Gulf i 1991 . 30,131 43,597 aiul of three tuulhided jortions of Waterinrd 3, equindent 1992 29,796 40,218 on an aggregate cost basis to 9.3% of Waterfont 3, were en-1993 21,201 36,638 tered into by Sptem Eneigv on Decemtwr 28,1988, and 1991 18,705 33,391 1.P&l.on September 28,1989, for aggrega,e cish considend Years thereafter 124,207 150,507 tions of $500 million and $353.6 million, res}wctively. The sales were made to owner trustees under trust agreements Minimum rental conuniunents 257,598 $360,501 with owner participants. System Energy and 1.P&l. are leav

~~"

less: Amount representinginterest i11,411 ing lxu L the sold interests on a net lease basis mer 261/2 year and 28 year basic lease terms, reslwctively, lloth System Paesent udue of net Energy and 1.P&l. have options to terminate the leases and minimum lease payments $146,187 to repurchase the sohl interests in Gnuul Gulf I and Water-

- = = = = = = = = = =

ford 3 at certain intervals during the basic lease terms. Fur-ther, at the end of the basic lease terms, both companies Rental expense for capitad and operating leases have an option to renew the leases or to repurchaw the (excluding nuclear fuel leases and the s de and leaseback interests sold in Gnmd Gulf I and Waterford 3.

tnmsactions) sunounted to approximately $80 million, in connectim with the equity funding of System En-

$85.3 million, and $77.6 million in 1989,1988, and 1987, ergy's s:de and leasdiack arrangements, letters of ciedit are iespectivdy. required to be niidnit;dned to secut e certaisi ainuunts (xiy-able by System Energy under the leases. The initial letters of Blodear Feelleeses credit which were obtained by Sptem Energy (amounting to Thice subsidiaries hme nuclear fuel leasing arnmge. $130 million at December 31,1989) are scheduled to expire ments. As of December 31,1989, nuch ar fuel leases aggre- on December 28,1991, and it is expected that such letters nf gated $505 million. On December 22,1988, AP&l.cntered credit will either be s enewed, extended, or r eplaced prior to into a new nuclear fuel lease which permits the lease of up expiration.

to $195 million of nuclear fuel. On February 3,1989, and in connection with IJ'&l.'s 6:de and leaseback February 21,1989, l.P&l. and System Energy also entered arnmgement,ifIJ'&l.does not exerciw its option to repur.

into new nuclear fuelleasing arnmgements permitting the chase the undhided interests in Waterford 3 on the lifth lease of up to $125 million and $185 million of nuclear fuel, anniversary of the closing date of the ude and leaseback res[wetively. Each lessor finances its acquisition and owiwr- tnmsactiom,1J'&l.will be required to pmvide collateral to ship of nuclear fuel under a credit agreement and through the owner participants Ihr the equity portion of certain i the issuam e ofintermediate term notes. The credit agree- iunounts payable by 1.P&1. under the lease. Such collateral '

ments all have terms of five years and the intermediate term requirements are to be in the form of either a inmk letter of ,

notes have varying maturities of 1 1/2 to 10 years. It is con- cr edit or new series of first mortgage Ixmds issued by 1.P&l.

templated that these arnmgements will be extended or under its first mortgage bond indenture.  !

alternative financing will le secured by each lessor uixm the 9 i

1 55 i

__ . .. . _ ____ _ _ - _ _ _ _ _ _ _-_______2

WWW 99 mitm'MW PMetttAL 99&M tw,o e,pmm. . d wwwi in htay 1988 TANilinuect STAS No. 98, *Auounting awniated with the Grand Gulf 2 cancellation, equipment for traws.* l'nder SI'As No. 98, Sptem linerg and 1J%lls and materiah of approximately $26 million pmiotnly res tranuttions meet the uiteria for having *c ontinuing imx his (orded as Gnind Gulf 2 <osts were deterininni to be ca ment.' Ccmutinendy, tle sale and leaw4m Ls are acmunted nomically and let huohigitally siable for use in Grand Gulf I for as financing tranuttions in the financial staternents even and wrr e therefore retaincxl as inventory, plant in nervic e, or tinaugh the wdd interests of Grand Gulf I and Water ford 3 plant held for future uw related to Grand Gulf 1; ate no longer owned by Spiem 1.nerg) and IJ'kl. ree[xt. (2) Without prejudict to the right of any party to pur.

intly. l'or financial rcluning inigioses utilit) ; dant includes sue a pruderu c diallowanc e in pnx redirigs at ITRC with the interests of Gnsnd Gulf I and Water ford 3 that werc udd, respec t to (onstrtu tion c osts and other expenus of Grand are no kmger owrux! tn Sptem I;nery) and 1J'&l, and are Gulf I incuned by Sptem 1 ner gv afterJune 9,198tl, and currendy under leaw, Ikith uirnpanies haw retired stu h without prejudice m further prosecution of any prudence property Irom their continuing property reunds as formerly decision inesently onjudicial appeal, all parties to the ITRC 5

owiwd p.operty releawd from and no longer subjn t to etth ment agreed not to pursue any prudence dialkneance Sptem I;nerp and 1J'&lls nattgages und deeds of trust. of Gntud Gulf I amstruction cmts and opnating and main.

The leawd pro lwrty is being amortired (nrr the life of the tenance expenws conded throughJune 9,1989, theieby basic leaw terms. The tranuctions are trcated as une and permanently rewshing all prudence questions with reslwct leawbac L tramactions, amp;xiwd to financing tranuctions, to all suc h rnoided Gnmd Gulf I costs and ex}wnws, and for income tax poquiws, and c omtitute sales and leaws thereby climinating tre threat of a prudence puxceding by under applicable luuisiana and hiiwiwippi law. certain gcntrnmentallxxlies,inchiding the AtLanus Attor.

At Dnemtwr 31,1989 Sptem I;nergy and IJ'kl. had ney Genend, the 13'5C, the hiiwiwippi Attorney General, the future minimum leaw payments (reflecting (nrrall implicit htPSC, and the council:

rau a of 9.80% and 8.769, reslectively) in connection with (3) Allinues relating to a ITRC audit of the lamLs the ute and leaschac L tranuttiom as followv and records of Sptem 1;nergy (untring all y ars piior to 1955) and other Sptem nunpanies were revihrd generally in the following mannen Sptem I;neryv wmte cut System 1;ncrgy 1J'kl. $43 million of AlYDC equity acconini as of Decemler 31, A husaw 1985, alkicable to its imrstment in Grand Gull 1 and n-IRO $ 49,333 -

tmn nl certain recoverable income taxes (future tenefits

!!O1 49,333 $ 32,571 related to AIUDC) from its net unit imestment in Gnmd IW2 49,333 32,Mi9 Gulf 1; Sptem l'.nergy aho inade a one-time credit to the

!!O3 49,333 32,564 Sptem operating companies' bilh in an agpegate amount 1101 5',295 32,568 of $Wnillion, which wanilocatal among the Sptem oper-Years thereafter 1,248,122 875,729 ating < ompanin in accontance with their irspem percent-age alkications of Grand Gulf I capacity and energy Total $1,496,749 $ 1,(06,(05 (we Note 8, %unmitments and Contingenics ,- Capital

_. m. ~~ '

FM 'd rr Ndes, Availability, and Realkication Agteements"):

(4) No other modifications to the Unit Power Sales IBMI 18. P90AIO SUVI DRAIBCal $fm8MBiff8 Agreement relating to sain to the Sp:em o;wrating compa-nics of Gntnd Gulf I capacity and energy or to the books in the iTRC Settlement, Sptem I;nergy and the Sntem and records of Sptem l'nergy were made as a result of the operating companies agtred with the l'IRC stu nete and ITRC Settlement; however, %ptem linergy and all other kaal regtdators and officiah, and other intereste< parties to parties to the FI;RC Settiruwnt remain free to seek iuture rewehr a numtwr of Grand Gull Nuclear Station .6ted c hanges to the Unit Power Ndes Agrectnent or to the books mattns that had been achersely afh cting the Spiem for a and records of Sptem I;nergy not inconsistent with the number ofyears. Implementation of the ITRC Settlement ITRC Settlement, in au ordance with I'!;RC reg >.dations; and has iesulted in, among other things, the f<dlowing: (5) The iTRC Settlement chus not prejudice any (1) Sptem linergy cancehxl and wrote ofIin Septem- party's right to continue to appeal ITRC's orders with re-her 1989 approximately $9(O million of its $926 million spect to the alkication of Grand Gulf I capacity and energy imestment in Gnsnd Gulf 2 (comtruction on which had and related c osts among the Sptem operating companies, been smpended since September 1985) without seeking (See Note 8,

• Commitments and Contingencin - Contro-rate reuntry from its cmtomers, th: Sptem operating corn- sersin Concerning Grand Gulf 1,*)

panies. lkswd on a Sptem I;nergy study of the cmts 56

2 I Notwithstanding the agreernents staird in (1) and (2), through 1991, except under $;wrific circumstanc es, if (a) any party to the l'I.RC proceeding were to wel to Iliccthenen of this stipulation and wetlement agreement is bring a proc reding lefore IT.RC c hallenging the la udenc e contingent uixm AIN'ap;mnul. Certain industrial retail of Grand Gulf I corntruction nuts or ojenating and inainto customers of APAl. hint intentned in the inoc ceding.

nanc e ex;wnws inorded throughJune 9,19H9, and IT.RC Certain of thew intentnors have indicated oppraition to were to institutr stu h a ing reding, or (b) any other getwin unne Juinisions of the stijndation and wttlement agico a entity were to wel to tving suc h a yucx ceding, IT.RC ment, and there is no auumnc e that AIN: apprcnal will wrie to institute suc h a in oc n ding and IT.RC were to disal- ultimately be obtained. These matters are pending, km any suc h unts or ex;enses becauw of imprudenc e, then Implementation of the ITRC Settlement (including Spiem Energy wtndd have the sighno wel renntry of the can(cIlation of Grand Gulf 2 and the : elated write ofi) l Gmnd Gulf 2 abandonment or cancellation onts frorn any suul of the related state and local wetlements has reduwd

$ntem o;wrating comiumy incniding wnice in dw retail convilidated net inunne and retained earnings by ap;nuxi-Jurivliction awaiated with suc h par ty, perum, or entity, and mately $wi2 milli n and has reduc ni car nings [wr share by tu h S)uem o;wrating unnpany would have the right to ap;noximately $42 As a result of suc h wttlements, the renntry of suc h IT.RGap;ncntd nau in retail rates. Sptem seixirtal a net has of apinoximately $473 million in addition to wttlement of IT.RC related inues em- and a low per common shave of $2.31 for the 3rar 1989.

lxxtied in the IT.RC Settlement, agreements on other iuucs While 19M9 carnings have ocen acherwly afhtted, Entergy afin ting indhidual Sptem ojerating c ompanies wrre Coqxinition and Sptem EnergW cash [xnitions have not reac hed with reprewntathrs of state regulators and officials been materially impacted. l'urther, the implementation of in Louisiana and blialuippi and with kical regulator s in New thew witlements has not afhtted Entergy Onrjunation's Orleans. Thew agreements have sesulted in, among other ability to continue to declart and pay dhidends on its com-things, the folkasing: (1) 1J'kl. has temponuity reduc ed its mon stoc L at the nurent kW).

rennery from retail ratepayers of witain Grand Guli 1 Recapped below ate the significant com;xments of related una through the f uci adjmtment clauw until suc h the c harge te other income and deciuctions resulting fican time as the inluction has punided unings m IJ'&lls the Ps oject Olive lirant h Settlements.

ratepayers of $14.5 million on a net picent value basis (L.P&l. secordal the full impac t of this tempomry s eduction 1989 in 1989). Aho, pursuant to a hlarc h 1989 rate order,1J'&l. g,, 7%,4 has in efhtt a lhr >rar haw rate frecre at the current level; Sptem Enngy's Gnmd Gulf 2 write <>ff (2) hlPkl. has written off, in September 1989, $60 million of (including net demobilitation its deferred Gmnd Gulf I naa and has agreed, exc ept in and disposition cosa) $ (907,932) limited circumstanws, not to wel to c hange in retail rate Sptem Energy's AIUDC cc;uity write off (43,orKp) r tructure through 1991; and (3) NOPSI has tevnporarily Sptem Energy a one-time nedit . (50,(Kio) thun bed a [wrcentage of its IT.RC alkicated share of Grand 1.P&lls efh ct. (18,350)

Gulf 1 s elated una until suc h time as the present value s:n* SIPkils write off of Gnmd Gulf I deferrals . (60!K10) ings to NOis!'s tetail ratepavers shall total $23.5 million NOPS!'s efht! - (25,965)

(NOl%! recordal the full impact of these additional nests in Miscellaneous items 62 1989). In addition,it was agrent letween NOl$1 and the council that the IT.RC Settlernent and the indhidual *ibtal (1,105,185) agwernent with the council woukt not settle the litigation income tax credin . 242,702 nmccrning the february 4 Resohnion and wouki not afhti the buyout discumions between NOl$1 and the City of New Net c harge $ (862,483)

Orleam (see Note 8, *Crunmitments and Contingencies - == == .= == m=mc _ m= m Contrcnersies Concerning Gumd Gull l'and *NOPSI Negotiated llu)uut and Other Pro;xnals").

APkt., the staff of the APSC, and the At Lanwa Attor-ney Gencial have entert d into a stipulation and settlement agirement requesting, among other things, AlsC appnnal ot'the comolidation within the Sptem of openiting respomi-L'lity for the Sptem's nuclear geneniting units, the sale and tnmsfer of AP&lls Independence 2 and Ritchic 2 to Entergy Powrr, Inc., and AlsC appanni of a rate c hange morato-rium whereby AP&l.wouki not seek (hanges in etail rates 57

1. a. ,r e a u,,,w n .

l

- n . == w === n ,e fund. uu n .f d, m .m p.en , o n w.,,p m, .e pl.ns m e.n,u, Si .19~,o . w., as h .il_

1he bicin unnpanin h.nr vanous pintretnernent benefit plan. oitiing sulatantiath all of then einplinen The pen- 1 sex 9 19e sm plain aue non< untohuton 4:ul provide pensuin benefits , j,, f y,,,, wro that are hawd on the emphnni < uxhted wmc e arni mer- ktuarial prewnt value of age onnpensatuni, generath dunng the last five stais tu fore .u cuamdaitxt pernion retn ernent The +m.hn of the ( anpain aint its udnidiann is plan t=1mfitt u,imul ju1nuin u na in au of daru e with u mtntuitim Vnted $337,')00 $390.477 g iuleinws ntahinhed in the 1.inplinec Retnernent hu utne Numruted 27,045 29.135 hn unn Aci of 1974 aint the Inter:6al Rest 1uw-(eule of 19Vi, imeth as anwnded At eumulatul tu1wfit

1. fin th e Os u dx1 1.198%, NOPNI icinunated in de- ohhgatu en $364.345 $ 119,612 hiuvi trurfit pensuin plan aiul as of that ume date adoptnl.

en a partu1pating emphnri, a deliimd tonefit pensuin otan Pro rted benefit spmwnnlin ljW1.. Ihn uu c nwu plan punidn emph nen obhgation $ 478.9(h $51N,3hD wuh sulatantiath the s.une tonefit piogram wuh no h.w of Plan awets at fan valac 57A 602 t 23,179

.u ined Irnefin as punidnt muln the termitiatt dI dari lii januan 1989, the .u rumulated benefit ohhgatit ni of die Man aswis ni ru ns of trinunaird plan was witled in puu hanug annum connat a pnpsled f onctit As a inuh NOPsl in oidnt a witlement gam, net of apph. obhgation 99A94 IO4,M19 i able tases of appioumaich $8 4 nnthon in the fir st quartn I 'su n ognved prior senu e ont 5,164 4,634 of 19st9 in au nidanc e with the punisons of M AN No ss, t 'meu sgin/cd tranution awet 90.971) t 122,96f h

• l. mph noi An ounung foi Netthanents and ( .urtailnwnts of l'nt eu gnved net gain 159,672) (25.039 Ik fined ik nefit Penuon Plans and for lennination Ikw fin * (inJanuan 31,1989. N( >PNI was ref unded approu- A(erued penson habihn $( 45.945) $ds,545) match $16 7 inilhon turt of a IW4 cuiw tau hum the ter-minated plan in eu eu of amounts icquned to pun haw the annum omu.u is, p.n < ci t un plan partu ipants a pn.-iata lhe weightui mvrage diuoutu rate and rate of m-porunn tapprosunatch $1.3 milhon) of eu ew plan awen as uraw in f uttu e mmpenutum uuxi in deta minmg the 1999 icquned in law. .uul utnh othn related una and expenws and 19Ss actu.uial prewnt value of the pro rted henefit ionnn ted wnh the witlement. ohhganon wrie 9% and 's 69, ropa teveh. The eyus text l otal !989.19ss, and 1987 penuon ont of the ( e nn- long-tenn rate of icturn on plan awen for 1989 and 19x8 p.un and its *ntnidiann, im ludmg amount < apitalved. was 8.5% Transition awets air being amortired int ; the nu huled the following unnponentv g catn of the renuining wmce pentulof a(tive participants or 15 years 19 9 l9sh 19X7 lhe hysteln corlipa:Nt's also [ntnide (crtani he.dth

. /,, t i,,,u ,o,d o care and hfe inuu~arxe tenefits for retinti empknen.

heni( e ( ost - Irnt'fils t'af twd huIntantialh alI t' mph nrn inas Ireofne Cllgible fol these during the penod $ 16.291 $16,391 $ I N,501 henefin il thn rea(h rethement age while still wo: Ling for Interest o at on pioin ted the blem o unpainct The ont of puniding pnuctire-tu1mfit ohhgatio' 36,6W 40,501 M280 toent health < at e atid life itnuriuu o hetwfits is in of ded on Actual actuiu on plan awen i105.12(4 (67,791) t 19,554 ) a < ash hast The oest of puniding thew benefits for retiren Net amortiratum and delen al 56.517 5.167 1 M71 % is not wparable irom the o nt of puniding lenclin for aetht' Inss 1.1WI . N( >Phl cas h emphneet The total unt of puniding thew benefits and r etir ement pn egiam -

12.150 -

the numina of aethe emphnen and retiren for the hat three scais were as followt Net penson ont t nu ome > $ 4,36% $ 6 418 $(l Asta 1989 19ss 1987 1otal cost of heahh raie and life inunauu r The inwis of the planuonsnt pnmanh of <onnnon and (in thouwuuh) $ 11,100 $35,730 $32.133 pieleitext suu Lt fixed ira ome w< untin. min ni m a monn Numtu, of a(ine emphnees 12,854 13.049 13,560 mat Let f und, and unut atu e o mtrat tv Nmntx1 of ictiren 3,528 3,(08 3.322

$w

8:

R$fl11,45AtTS$4YB00EflWtettiftD)

Cowdidated operating temlts for the four ciuarters of IW.I and 1988 were as folkm:

Quarter Operating 0;roudug Net l'.arnings (lem) 1.nded Wwnna s incorne Incorne (!em) Per Share sis ihmsuwlunaute s%er erwwr,b>

1989:

Mart h . $ 836,690 $217,872 $ 97,03'l $0.47 Junc $ 9013N2 $243.110 $ 91,Mi6 $0,46 Septvinter $1,103372 $312,679 $t6N357F $(3.32F thscinier $ M 2,820 $196,724 $ 15,073' $ 0.Os*

19 %

l Marth $ 766,5K17 $258/19'l $ 92,i67 $ C.45 l Junc $ 819,M1 $249,790 $ M,845 $ 0.43 l Septemter $1,035.335 $345360 $ 171,755 $ 0.84 thsemtr: $ 863,4N2 S2Hi 125 $ SN361 $ 0.29

• lk purw rwiest %pomla, M 195U, oncluda revenn vmWp s,Juvel > 1%pret (New isauruk 'lk pa:w smdatlIsr<rneles .ti, IwV, orthu IJVI aent Mnft nom.

muerty vmpute m <f the n,wuroyfuture emp,w of thoss enjutnv settlenormn t%v %r lo,'fwyt W lesare.-h %santemu 's

[ De hminen of the Sotem h suleits t to scavmal fluctuadom with the leak period m euning during the $mnmer months, Acmrdingly, eat nings inkunnadon fin any thiec month period should not le tunsidered m a tw.is kn estintating sesults of opent'bm for a full year.

SILICTID phi &Ml&L DAfA - flVI.Yl&R (tapatil0N 1989 1988 1987 1986 1985 gin 1kmmrals, enrept je starre newmrin)

Net openai sg revenues $ S,724,004 $ 3,565,405 $ 3,454,820 $ 3,485.912 $ 3,238,459 Net inc oir .- (km) $ (472,5N5) $ 411,028 $ 356,604 $ 454,4f4 $ 215,598 l'arnings ,hm) per share $ (2.31) $ 2.01 $ 1,74 $ 2.23 $ 1.08 Dhiden a declared per nhare $ 0.90 $ 030 - - $ O.89 Iksol mlue ger share, year end $ 20,68 $ 23.96 $ 22.13 $ 20.39 $ 18.19 Total awets $ 14,715,241 $15,941,816 $15,156,832 $140,N1,431 $13,390,0l $

log-tenn debt (culuding cunent maturities) $ 5,991,0k4 $ 6,187,442 $ 5,945,054 $ 5,983,029 $ 5,640,590 Pacienett stoc L with sinking fund $ 350,363 $ 462,965 $ 496.405 $ $08,165 $ 467,293 1

bo

4000009M99 ansaamW C) Matemt ;8petMMON iw,c,c ,..,,..a 5,a.4 .m 1999 1988 1987 1986 11~2ric/Menun (11wusands):

Residential $ 1,331,154 $1.2ML472 $ 1.239,877 $ 1,228,556 Onnmercial , 950,345 877,09

. 814,586 799.256 Industrial 1,021,456 95ti,106 938341 936,573

_ Gnvrninental ._,, 121,912 121,983 121,234 118,3f()

Totairetailrustomers 3, 0 4,867 3,240,619 3.114,238 3,082,745 Municipals& cocia 95,018 93,995 MI,757 117,288 Ad 81,996 91,260 81,f64 102,788

__. Ot{ ier_ joining utility systenn 51,756 47,643 31,468 36))J Total $ 3,633,637 $ 3,473352 $ 3,3/7,117

==.=t= =======w.. .=======.===c===a ===.:=.===.--- $ 3,339,13,2 D,ng .%In thfillwru ef kinh):

Residential 17,145 17,155 17,053 17.118 Quninertial 11,533 12.192 II,RO 11.539 Industnal 21,396 21,282 20,615 19,460 pnyrmyental 1,833 1,9 66 2,050 2,016 Total actailcustomers 54,007 52,575 51,411 50,133 Municipals k cocja 1,816 1,934 2,397 2,780

_.$!,I"iI S"E

! ".Uli.'LT'C.na 3,041 3,562 3,823 4,894 Total 58,864 r===.=n=~... ===.n=w==.== .x.=w ~ ===

58,071

.==.,===u=

57,631

-_57,807 ,

Nunde <f Custonem (AtiMernla 31):

Residential 1,485,102 1,475,022 1,462,917 1,456,594 Onninertial 183,666 181,054 178,504 177,054 Industdal . 28,412 27.801 27,379 27,468 Garrnmentil 9,399 9,715 9,484 9,293 Wholesale . . .

16 17 18 21

== = =.= ?fb =r=.=.= = =.=.=.==..m-- - u=h706,595.= w=.J,Gl3,G9 16]p,%==l[pgt4 h mmpuntameuenamnem tat twmre 31>

lhniAwte l'tility plant . $14,296,742 $14,101,255 $13,955,459 $13,193,137

_14 u- Arcurnulated depreciation and amortiration . 3,298,370 2,989,863 2,715.314 2,386,723

.=======Db""' K"L'== .== === ===5 I?'?*IE. :- ?).:..) 0?2 -. III'2.??== _I)0'800'AI A Capitalhation:

Common equity $ 4,119,515 $ 4,900,928 $ 4,528,128 $ 4,172,196 Preferred sto(k (including premium and luuance expenw):

Without sinkingiund 330,967 330,967 330,967 330,967 With sinking fund . 350,363 462,906 496,405 508,106 long-term debt (excluding currently matunng debt) . 5,991,084 6,187,442 5,945,054 5,983,029

,==_--._ Total = - . - . - - . . .

-... $ 10,991,939

$11,

_ =._882,302 _$11.300,554 .,. .$.10,99_4,357 Gpitalization IMiac Onnmon equity . . . . . 38,7 % 41.2 % 40.1 % 38.0 %

Preferred stock (including permium and i luuance expenw) . . .

6,3 6.7 7,3 7,6 i Inng-term debt (excluding currently.

rnatunng debt) 55.0 $2.1 52.6 54.4 i I

8u ,

1985 1984 1983 1982 1981 1980 1979

$1JIMS,865 $ 1,034,940 $ 958,540 $ 926,645 $ 874,505 $ 732.202 $ 553,272 702,318 (di0,337 590,380 506,656 533,721 443,940 356,757 965,648 1,022,873 931,369 954,195 925,413 718, % 8 528,611 111,922 115,755 108,H05 107,79l 97,042 7,6,746 ,6_9J116 2,863,793 2,833,905 2,589,094 2,M5,287 2,430,fel 1,971,246 1,501.066 78,795 84,106 84/Kf2 87,740 89,575 132,799 138,258 92,244 6,291 6,718 8,219 38,421 51,54i1 18/162 50,045 35.268 36,515 22,926 24,101 23,226 13,515

= ===. --- -$ 3,084,877 $ 2,959.570 $ 2,716,329 $ 2.6 U,572 $ 2.582.778 $ 2,179,232 == $ 1,67-

= 1,491 m .: = = =_ =  :.===_=r====:=====_  : . = = _.-. = .= -

16,748 10,000 15,4f6 15,596 15,172 16,006 14,f/Ki 11,235 10,516 9,776 9,620 9,396 9.277 8,754 21,2(Ki 22,494 21fl84 22,092 23,462 22,876 22,329 2,043 2,059 2,025 2,045 1,5K12 1,837 1,790 51,232 51,138 48,350 49,353 50,232 50,0$$ 47,479 1,460 1,697 1,942 1,969 2,259 4.244 5,074 3,571 155 130 134 544 855 394 52,99 . 53, u.= = . 56,26 _3. . .

-. - - -_0 - . - .. . . -.50,4 --22. .-.. . . . . . 51,4 56-. -. - .035 _5,5,154. .- - . . . _$2,94_ 7 1,447,121 1,432,022 1,409,022 1,387,389 1,372,106 1,351,838 1,327,515 176,050 172,f62 1fe.f62 106,460 164,070 161,841 1$9,536 27,957 26,637 26,134 24,390 24,631 23,880 23,996 9/Ki2 10,370 9,989 9,f65 9,444 9,079 8,941 22 25 32 30 43 72 154

. . _ . - 1,060,212 . ._ 1,6.11,716 ....

1,61_3,8.29.

_. .1,586,90_4._.- . 1,570._,294_.-.- . 1,546,733.- ..- 1,520,1. 42

$ 13,8f6,838 $ 13,294,825 $ 11,942,417 $ 10,464,188 $ 9/180,436 $ 7,893,636 $ 7JK12,052 2,078,900 1,856,279 1,004.475 1,551,7(K) 1,407,584 1,264,525 1,139,161

_ .. . ., _ .._$.1_1,7._87,8_78 .___ $_11_,4 38_,546. .... _$.10. 2_47,942. .

- .._$ 8,9_12,4_8._8___$.. 7._,672,8. 5_2_ _ ._$ 6,629.,_111

... _$ 5.,.862_,888_

$ 3,721,7f6 $ 3,472,246 $ 3/Kil,542 $ 2,481,916 $ 2,185,546 $ 1,901,204 $ 1,659,736 330,967 330,% 7 330,967 330,967 330,5Ki7 330,967 330,967 I 467,293 476,928 429,001 351,957 300,219 283,165 193,507 5,680,590 5,865,304 5,032,175 4,429,447 3,8tKi,370 3,392,3(0 3,017,816

.. $ . . . .00_,6._16.. .... $.10_,1_45._,445 , .. $ _8..,_E94,2_85___$ 7,5U_5..'E_87 __...$_

._10,2. . .

_$..._6,7_13,102 5,9_07..,.645. ___ $ _5,202.,0. 26 1

1 36,5 % 34.2% 34.1% 32.7% 32,6 % 32.2 % 31.9 %

7,8 8.0 8.7 9.0 9,4 10,4 10.1

$5.7 57.8 57.2 $8.3 58.0 57,4 58.0 61

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The !!00 Annual hiceting of Stcx Lholden will be held The Sliddle South 1;lectric Sptem 1989 Annual at 10 a.m. (CDT) on May 4, !!OO, at the New Orleans liilton Regon to the Snurities and I;u hange Gmuniwion on ilotel. A h.ulge for adminion may be obtained at the l'orm IG K (including financial statement sc bechdes) is registration dest at the meeting. Sicw Lholden whow shares available to Stoc tholden upon request. To setche a copy are held in

• street name,* i.e.,in the name of their bioler, without c harge, M1 or write to:

must prewnt a letter from their broker indicating owner ship Dan l'. Stapp, Secretary of the Gunpany's common sicuk as of Marc h 19, !!00. Enterp Girporation ',

P,0. Ikm 61005 .j Olddends and tha*===a NewOricans,IA 70161 s l'our conwcutive quanerly conunon stoc L dhidends (501) 52!L5262 were paid to st(x Lholden in 1989. Dhidends of 20 <ent$ per \

share wrie paid on Marc h I andJune I, and dhidench of 25 Pleendeland Stonedsed Revleer  ;

cents gwr Shatc were paid on Septemtwr 1 and Dec ember 1, Ilistorical statistics and financial infonnation supple- '

folkming ajuly 28 decision by the Enterg Cogoration mental to the 1989 annual report and l'onn ISK are ,

Ikiard of Disciton to inricase the quanctly payout, availaule in the Gunpany's 1989 l'inancial and Statistical At its Dnember 1 meeting, the l'nterp board guted to Rniew, which will be available for disuibution inJuly, adopt a dhidend reimrstment and stoc L purchaw plan. Q> pies of the rniew may be obtained by contacting Sptem  ;

Detaih of the plan wric mailed to stoc Lholden of inoid in Imtstor Relations at the address given in the next section.

Januaq 19!O.

y h h h s of Record Enterp Girporation conducts an activei mtstor At the c hiw of 1989, thric wer e 78,583 Stoc Lholden of elatiom prognun to communicate the Sptene's petkrm-record of Entergy Coqxuation. A total of 203,991,592 ance to imtitutional investon, security analpts sv@n d shaies were outstanding. representatives, and indhidual imeston. Spiem Imtstor Relations may he contacted by wiiting or calling:  ;

Tremeler 49 est and togleteer Enteip Giguation The Chaw Manhattan Rank, N.A. is the tramfer System Imtstor Relations ti agent, registrar, and dhidend disbursing agent for the P'.O. Ikm 61005  !

common stock of Enteim Cogoration. All conesponce er NewOrleam,IA 70161 L concerning stoc tholder records, or the issuance or transfer (800) 292&J60 of common stoc L certificates, shoukt he directed to:

The Chaw Manhattan ILmL, N.A. Bastienge Llellags i New WL Plaia - 14th I'loor The common stock of Entergy Corporation is listed New % L, NY 10081 and track d on the New \brk, Midwest, and Pacific sicx L .

(800)5260801 exc hanges. The ti(Ler symbol for the Company is *I'TR.* l1 Newspaper stoc L table listing is Entergy,* ,

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