Entergy puts Katrina-related costs at $1-bil, straining utility

Washington (Platts)--20Sep2005

Entergy Corp early Tuesday said an initial estimate of restoration costs
following Hurricane Katrina is in the range of $750-mil to $1.1-bil and the
company noted that expenses and reduced revenue at Entergy New Orleans in
particular may cause liquidity contraints at the utility.
     The reduced revenue at Entergy New Orleans stems from the destruction of
homes and businesses of about 130,000 customers, making them unable to accept
gas or electric service for a period of time that cannot yet be estimated.
About 20,000 to 40,000 customers of Entergy Louisiana--most residents and the
remainder commercial customers--are in the same situation.
     Entergy Corp said it believes it has sufficient liquidity to meet its
current obligations and fund its restoration efforts, but various alternatives
are being considered for maintaining acceptable liquidity at its Entergy New
Orleans utility unit, including seeking bankruptcy protection.
     "Entergy believes this option should be considered to determine whether
or not it is the most appropriate course of action to protect any future
investment in [Entergy New Orleans] and to preserve legal rights while
achieving business continuity" at the utility.
     Other alternatives to maintain liquidity include advances to Entergy New
Orleans and assigning Entergy New Orleans contracts for purchased power to
other Entergy companies to reduce cash requirements at Entergy New Orleans and
provide attractively priced power to other Entergy system customers. In
addition, Entergy is evaluating the options of additional debt issuances, the
expansion of short-term borrowing capacity and/or infusing equity into Entergy
New Orleans, the company said.
     Breaking restoration costs down by company, Entergy said Entergy Gulf
States is facing a maximum of $45-mil; Entergy Louisiana, $400-mil; Entergy
Mississippi, $100-mil; Entergy New Orleans, $475-mil; and other units up to
$80-mil.
     Entergy also updated restortation efforts, noting that limited access to
heavily flooded areas continues to hamper its ability to fully assess the
extent of damage to certain portions of its infrastructure. Thus the initial
restoration estimates are subject to change, the company said.
     As of 9:00 pm CDT Monday, Entergy had restored power to about 874,000 of
the 1.1-mil customers who lost power at the peak of the storm. Entergy expects
to restore power to all those customers who can take service in the
non-flooded areas of New Orleans and surrounding parishes within two weeks.
     The company noted that reduced revenues from the hardest hit areas
partially could be offset by potential sales growth in other Entergy service
areas. This growth could come from evacuees moving into neighboring cities in
Entergy's service territory such as Baton Rouge, Louisiana, and Jackson,
Mississippi, or from temporary facilities constructed by federal and local
agencies.

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