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Entergy 10-Q 2011 Documents found in this filing:__________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
__________________________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether Entergy Corporation has submitted electronically and posted on Entergy's corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy Resources have submitted electronically and posted on Entergy's corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2010, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2011
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2011
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2011
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "will," "could," "project," "believe," "anticipate," "intend," "expect," "estimate," "continue," "potential," "plan," "predict," "forecast," and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management's Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
FORWARD-LOOKING INFORMATION (Concluded)
Certain abbreviations or acronyms used in the text and notes are defined below:
DEFINITIONS (Continued)
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through its two, reportable, operating segments: Utility and Entergy Wholesale Commodities.
In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization. The prior period financial information in this Form 10-Q has been restated to reflect the change in reportable segments.
Income Statement Variances
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2011 to the first quarter 2010 showing how much the line item increased or (decreased) in comparison to the prior period:
1
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Refer to "ENTERGY CORPORATION AND SUBSIDIARIES -SELECTED OPERATING RESULTS>" for further information with respect to operating statistics.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the first quarter 2011 to the first quarter 2010.
The retail electric price variance is primarily due to a base rate increase at Entergy Arkansas effective July 2010 and rate actions at Entergy Texas, including a base rate increase effective August 2010. This was partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010. See Note 2 to the financial statements in the Form 10-K for further discussion of these proceedings.
The volume/weather variance is primarily due to an increase of 911 GWh in weather-adjusted usage in the residential and industrial sectors. Despite favorable weather in first quarter 2011, the weather effect declined compared to the near-record-setting cold weather experienced in the first quarter 2010. Weather-adjusted residential retail sales growth reflected both an increase in the number of customers as well as higher usage per customer. Industrial sales have realized sustained growth since the beginning of 2010 and the first quarter 2011 continued the trend. Entergy’s service territory has benefitted from the national manufacturing economy as well as industrial facility expansions. Industrial customers in Entergy’s service territory also have benefitted from the need to re-stock inventory and export trends.
The net gas revenue variance is primarily due to milder weather as compared to last year.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the first quarter 2011 to the first quarter 2010.
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $40 million, or 7%, in the first quarter 2011 compared to the first quarter 2010 primarily due to lower volume resulting from an increase in forced outages for Entergy Wholesale Commodities’ nuclear fleet in 2011 and lower pricing in its contracts to sell power. Included in net revenue is $11 million and $12 million of amortization of the Palisades purchased power agreement in the first quarters 2011 and 2010, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements in the Form 10-K. Included in Other in the table above is a decrease of $5 million in net revenue from the Harrison County plant, which was sold in December 2010.
2
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the first quarter 2011 and 2010:
Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 10,519 GWh in the first quarter 2011 and 11,128 GWh in the first quarter 2010, with average realized revenue per MWh of $56.98 in the first quarter 2011 and $58.31 in the first quarter 2010.
Realized Price per MWh
See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $59.16 in 2010 from $61.07 for 2009. Entergy Wholesale Commodities’ nuclear business is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 96% of its planned nuclear energy output for the remainder of 2011 for an average contracted energy price of $53 per MWh. In addition, Entergy Wholesale Commodities has sold forward 87% of its planned nuclear energy output for 2012 for an average contracted energy price of $49 per MWh.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $435 million for the first quarter 2010 to $448 million for the first quarter 2011 primarily due to:
These increases were partially offset by a decrease of $7 million in fossil expenses resulting from more outages in first quarter 2010 and an increase of $6 million in nuclear insurance refunds received in 2011 as compared to the same period in 2010.
3
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Depreciation and amortization expenses decreased primarily due to a decrease in depreciation rates at Entergy Arkansas as a result of the rate case settlement agreement approved by the APSC in June 2010.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $260 million for the first quarter 2010 to $209 million for the first quarter 2011 primarily due to:
Other income decreased primarily due to a decrease of $11 million in realized earnings on decommissioning trust fund investments and a decrease in interest income earned on loans to the parent company, Entergy Corporation.
Interest expense decreased primarily due to the write-off of $37 million of debt financing costs in the first quarter 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy's decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.
Parent & Other
Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.
Income Taxes
The effective income tax rates for the first quarters 2011 and 2010 were 39.3% and 40.3%, respectively. The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2011 is primarily due to state income taxes and certain book and tax differences for utility plant items. The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2010 is primarily due to:
These factors were partially offset by:
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.
4
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table.
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and subsidiaries' preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.
As discussed in the Form 10-K, Entergy Corporation has in place a revolving credit facility that expires in August 2012. Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of the facility. As of March 31, 2011, the capacity and amounts outstanding under the credit facility are:
Entergy Corporation's credit facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation's credit facility and in one of the indentures governing the Entergy Corporation senior notes is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility's maturity date may occur, and there may be an acceleration of amounts due under certain Entergy Corporation senior notes.
See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries' credit facilities.
Capital Expenditure Plans and Other Uses of Capital
See the table and discussion in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital,"> that sets forth the amounts of planned construction and other capital investments by operating segment for 2011 through 2013. Following are updates to the discussion in the Form 10-K.
5
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Acadia Unit 2 Purchase Agreement
See the Form 10-K for a discussion of the agreement Entergy Louisiana signed to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer. Entergy Louisiana acquired the plant on April 29, 2011.
Summer 2009 Long-Term Request for Proposal
As discussed in the Form 10-K, the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal were included in the 2011-2013 capital expenditure estimates in the Form 10-K. In addition to the self-build option at Entergy Louisiana’s Ninemile site noted in the Form 10-K, in April 2011 two Entergy Utility operating companies announced that they have signed agreements to acquire the other two resources, the 620 MW Hot Spring Energy facility and the 450 MW Hinds Energy Facility.
Hot Spring Energy Facility Purchase Agreement
In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation. The purchase price is approximately $253 million. Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million. The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. Because Hot Spring represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hot Spring facility. KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011. Closing is expected to occur in mid-2012. Entergy Arkansas expects to initiate its request for approval for the acquisition and cost recovery from the APSC in June 2011.
Hinds Energy Facility Purchase Agreement
In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation. The purchase price is approximately $206 million. Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million. The acquisition is expected to require investment in Entergy’s transmission system, and studies are currently under way to estimate the cost. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. Because Hinds represents a substantial portion of KGen Power’s remaining assets, Delaware law requires KGen Power to obtain shareholder approval prior to selling the Hinds facility. KGen Power intends to mail a proxy to its stockholders with a vote expected to be held in mid-June 2011. Closing is expected to occur in mid-2012. Entergy Mississippi expects to initiate its request for approval for the acquisition and cost recovery from the MPSC in Summer 2011.
Waterford 3 Steam Generator Replacement Project
See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project. With regard to the delay in the delivery of the steam generators, Entergy Louisiana is working with the manufacturer to fully develop and evaluate repair options. Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011. The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators. Entergy Louisiana is required to report its findings to the NRC through a report made 180
6
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
days after plant start up. At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated. Entergy Louisiana expects to file a special LPSC monitoring report in second quarter 2011 that will reflect the updated project cost and schedule. Entergy Louisiana also expects to resume the revenue requirement proceeding before the LPSC in Fall 2012. Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.
Dividends and Stock Repurchases
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities. At its January and April 2011 meetings, the Board declared dividends of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.
Cash Flow Activity
As shown in Entergy's Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2011 and 2010 were as follows:
Operating Activities
Entergy's cash flow provided by operating activities decreased by $351 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, primarily due to an increase of $147 million in pension contributions. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS – >Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding. A decrease in deferred fuel cost collections, a $42 million increase in incentive compensation payments, which occur annually in the first quarter, and the decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed to the decrease, as well as several other individually insignificant factors.
Investing Activities
Net cash used in investing activities increased by $381 million for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, primarily due to:
7
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Financing Activities
Financing activities provided $6 million of cash for the three months ended March 31, 2011 compared to using $212 million of cash for the three months ended March 31, 2010 primarily because long-term debt activity provided approximately $133 million of cash in 2011 and used approximately $58 million of cash in 2010. For details of Entergy's long-term debt activity in 2011 see Note 4 to the financial statements herein. In addition the Entergy Gulf States Louisiana and Entergy Louisiana nuclear fuel company variable interest entities borrowed on their credit facilities to finance nuclear fuel acquisitions in the first quarter 2011. Offsetting these increases in sources of cash, Entergy repurchased $54 million of its common stock in the first quarter 2011 and none in the first quarter 2010. Entergy’s share repurchase programs are discussed in the Form 10-K.
State and Local Rate Regulation and Fuel-Cost Recovery
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
On May 2, 2011, Entergy Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $43.1 million net rate increase to reflect adjustments in accordance with a previous LPSC order relating to acquisition of Unit 2 of the Acadia Energy Center. The net rate increase represents the decrease in the additional capacity revenue requirement resulting from the termination of the power purchase agreement with Acadia and the increase in the revenue requirement resulting from the ownership of the Acadia facility.
Federal Regulation
See the Form 10-K for a discussion of federal regulatory proceedings. Following are updates to that discussion.
System Agreement and Independent Coordinator of Transmission (ICT)
As discussed in the Form 10-K, in November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures. In addition, in December 2010 the FERC issued an order that granted the Entergy Regional State Committee (E-RSC) additional authority over transmission upgrades and cost allocation. The E-RSC, comprised of one representative from each of the Utility operating company retail regulators, was formed in 2009 to consider several of the issues related to the Entergy transmission system. The Utility operating companies expect that the E-RSC will review the cost-benefit analysis the Utility operating companies will submit in May 2011 to each of their respective retail regulators comparing the ICT arrangement to joining the SPP RTO or MISO.
8
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Also as discussed in the Form 10-K, in February 2010 the APSC issued a show cause order opening an inquiry to conduct an investigation regarding the prudence of Entergy Arkansas’s entering a successor pooling agreement with the other Entergy Utility operating companies, as opposed to becoming a standalone entity upon exit from the System Agreement in December 2013, and whether Entergy Arkansas, as a standalone utility, should join the SPP RTO. The APSC subsequently added evaluation of Entergy Arkansas joining MISO on a standalone basis as an alternative to be considered. In August 2010, the APSC directed Entergy Arkansas and all parties to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of MISO.
On April 25, 2011, Entergy announced that it proposes joining a regional transmission organization. After comprehensive review and analysis, Entergy concluded that joining the Midwest Independent Transmission System Operator (MISO) will provide meaningful long-term benefits for the customers of the Utility operating companies. The Utility operating companies will provide analysis in May 2011 to their retail regulators supporting these conclusions. Entergy Arkansas’s analysis filing is due May 12, 2011, and the APSC’s procedural schedule includes an evidentiary hearing scheduled for September 7, 2011. The Utility operating companies also expect to make filings in the third quarter 2011 with their retail regulators regarding the transfer of control of their transmission assets to MISO. The target implementation date for joining MISO is December 2013.
Commodity Price Risk
Power Generation
As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy Wholesale Commodities, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of Entergy Wholesale Commodities nuclear power plants’ planned energy output that is sold forward as of March 31, 2011 under physical or financial contracts (2011 represents the remainder of the year):
9
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2011 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $13 million in 2011.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At March 31, 2011, based on power prices at that time, Entergy had liquidity exposure of $26 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commodities segment) transactions, $20 million of guarantees that support letters of credit, and $6 million of posted cash collateral to the ISOs. As of March 31, 2011, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $97 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, based on power prices as of March 31, 2011, Entergy would have been required to provide approximately $70 million of additional cash or letters of credit under some of the agreements.
As of March 31, 2011, the counterparties or their guarantors for 99.8% of the planned energy output under contract for Entergy Wholesale Commodities through 2015 have public investment grade credit ratings and 0.2% is with load-serving entities without public credit ratings.
In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is currently sold forward, and the blended amount of Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward as of March 31, 2011 (2011 represents the remainder of the year):
10
Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC has established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The lessons learned from the events in Japan and the NRC review may affect future operations of U.S. nuclear facilities, including Entergy's, and could, among other things, result in increased costs and capital requirements associated with operating Entergy's nuclear plants.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets and trust fund investments, qualified pension and other postretirement benefits, and other contingencies. Following is an update to that discussion. For updates regarding the impairment of long-lived assets discussion concerning Vermont Yankee see Note 11 to the financial statements herein.
Nuclear Decommissioning Costs
In the first quarter 2011, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $38.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
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