安特吉 (ETR) 2003 Q1 法說會逐字稿

Good day, everyone and welcome to the Entergy corporation first quarter 2003 Earnings Conference Call. Today's call is being recorded. At this time for introductions and opening comments, I'd like to turn the call over to Miss Nancy Morovich. Go ahead, ma'am.

Good morning, everyone, and thanks for joining us. We will begin this morning by noting that forward-looking statements made during this call may involve risks and uncertainties.

A number of factors could cause actual results to differ materially so we refer you to the full text of our release and our other SEC filings for more information. Also, during the call today, we will be using non-GAAP measures to describe our financial performance. These measures are reconciled to the comparable GAAP measures in our release and also on the website.

In a moment, I will turn the call over to Wayne Leonard our CEO, and then John Wilder, our CFO will review results for the quarter. At the end of the call, as always,we will open it up to take your questions. Wayne?

Thanks, Nancy. Good morning, everybody. Financial and operational performance is off to a good start for Entergy, already exceeding expectations in many ways.

John Wilder will provide a detailed financial review later in the call, but that good start financially has been tempered by the overhang of the recent PERC reports citing possible wash trades at Entergy co-trading and subsequent actions by the CFTC and SEC, seeking additional information about both Entergy -- Koch and Entergy Power Marketing core, in existence before Entergy -- Koch.

So, I'm going to spend some time this morning reviewing where we are, to shed as much light as I can on the situation. I will caution you at the outset that I will not be able to tell you everything we have learned or believe to be true at this point.

Obviously, even though we don't know what the next steps will be at first, we consider it as a suggestion that certain trades, regardless of the underlying motivation or business purpose may negatively impact our reputation to be a very serious matter. Our review goes beyond trying to explain what went on with the 61 pairs of trades identified or what the business purpose was.

Our objective is to identify any questionable trades or activities whether at EK or Entergy's predecessor, EPMC and to help ensure that if any improvements or desireables or control systems that are identified and implemented in our trading activities are free from any characteristics to cause regulatory concerns or reputational damage in the future.

Our view is being run in a sequential and inter[inaudible] manner with both experience from outside attorneys and inside attorneys, interviewing the parties, including management and reviewing all of the documents involved which are obviously voluminous.

For example, when logical and reasonable explanations are received and verified, the review teams don't release the information to others who are still to be interviewed or to those whose trades are not fully verified.

This is one of the many ways we're trying to ensure that we have a clean review process where information is not made available that could lead the other traders to corroborate each other's explanation or withhold other information which may or may not be significant. That's for the review team to decide.

In other words, until we complete our review and share the results with the various regulatory bodies who have initiated formal and informal inquiries, we will not piece meal the release to the parties to keep the integrity of the review is preserved.

I understand you want to know everything we've learned, but at a minimum, we very much would like to know what we think the business purpose was behind the 61 pairs of trades that PERC identified. Especially, given that PERC stated that they appear to have been done at market and obviously no direct profit resulted from the transactions since both sides of the transactions were apparently undertaken by EK.

I can assure you that nothing would make us happier than to be able to put that to bed right now. Or provide comfort you are speaking with some degree of negative assurance.

But again, our overriding purpose is not just to determine and resolve the questions behind the 61 pairs of trades, but to confirm that our control system prevents and detects inappropriate trading activities that may cause us to be surprised again in the future and moreover, that our credibility and confidence not called into question in this way again.

In that regard, it does not serve any of our long-term interests to get out ahead of our review and our discussions with the regulatory agencies.

To review the situation in this report issued March 26, first identified 61 potential wash trade pairs made by EKT through Enron online involving gas transactions at Henry Hub. Subsequently, EKT received a subpoena from the Commodity Futures Trading Commission to provide documentation dating back to 1999 before Entergy - Koch was even formed.

We received an informal inquiry from the Securities and Exchange Commission related to "what they called pre-arranged round trip or wash trades" in 2001 and 2002. What was received from the CSDC is a very broad subpoena, which appears to be similar to ones used for others than in the industry in given the generic nature of some of the questions.

The inquiry from the SEC likewise, appears to be similar to contacts the commission made with other trading market participants. Frankly, we were surprised that the 61 pairs of trades mentioned in the first report. But as a result, we were not surprised that other regulatory bodies immediately followed up.

Let me tell you what I can tell you so far. With regard to the FERC report and the 61 pairs of trades cited in that report. One, we know that EKT was not one of the 20-plus companies FERC named as having engaged in possible market manipulation. Two, we know that FERC indicated in its report that all 61 pairs of trades occurred in highly liquid, short-term markets at or near market prices.

Three, we know that these trades represented a minimus portion of EKT's overall trading volume, less than half of a percent for the period under review by FERC and they are even smaller when compared to EK's gross revenue.

Furthermore, EKT has reported revenues on a net basis, since December 31, 2001. More than six months before it was even required by general accepted accounting principals.

And Entergy has never consolidated EKT's revenues or expenses into the financial statements because Entergy accounts for EK using the equity method of accounting. As a result, the trades that FERC cited have not impacted the audit income statements of EK or Entergy.

Four, we have found no evidence to indicate that the 61 pairs of trades were prearranged with Enron or any third party. Five, and we believe we are close to getting to the bottom of why these trades were not identified in earlier reviews of EKT trading activities that were conducted on our own outside of FERC's request.

During 2001, EKT did not itemize individual day-ahead gas trades or time stamp each trade in the trading database, but rather aggregated all purchases and all sales and enter those total figures at the end of the day. Secondly, our earlier views emphasized trades that might have inflated revenues or volumes.

As such, we didn't target trades with less than 30 days. This approach was based on the assumption that only long-dated trades could be used to inflate volumes and mislead the equity markets as to the scale or growth of your trading platform. Short-dated trades would not.

But again, we weren't reporting volumes and revenues ourselves, anyway. But as all of us in the industry learned over the headlines in the last year, there are examples of traders at other shops being far more creative than we ever imagined and concern about wash trades has evolved and expanded over time. Which means this time we need to be more creative or thorough ourselves when reviewing our trading history before declaring we're done.

Turning to what we know about to what lies ahead in the response to the CFTC and the SEC, we know those requests from both agencies are voluminous and it will take us time to get through them. We know at this point while we don't expect to find anything material, when you start digging through mountains of data without benefit of hindsight, you can expect that not every single transaction will look perfect, either.

In many cases we have to consider actions by former employees, a company that no longer exists like ETMC and keep in mind the CFTC request goes back as far as 1999. The simple fact is that neither memories or human judgment are ever perfect. Years later, our memories of a specific event may fail us, leaving open to the question of why.

In hindsight, judgments made in the fast-paced world of energy trading may not look or sound as logical to any of us or to 20 attorneys sitting around a table for a week debating a specific trade may conclude and no system of internal controls is designed to be 100% infallible or to read what lies in a person's mind or their heart.

That's why the controls in the organizations lies in the total separation of duties. While these kind of short term trades have had less scrutiny, we take comfort in other controls, like the kind of people you hire, how you compensate the people, the management oversight supervision and the kind of culture you create and foster.

While we can't close this out today, we can commit to you that regardless of what we find or don't find, we will continue to do many of the things we're already doing, like pursuing continuous improvements in our controls simply because it's good business to do so.

Like advancing the culture of high integrity, openness and humility at EK, like focusing our time and attention to succeeding in the marketplace. By applying legitimate, legal and ethical business strategies and practices. In short, as bizarre as it may sound and as frustrating as all of this has been to everyone, we do see all of this as a necessary slap upside the head because you can never be aggressive enough about staying on top of these issues. It's like safety in our utility business.

Things can be going perfectly and the slightest inattention to a small detail or an error in judgment can have severe consequences. For example, we're well aware that being included in the PERC report has, at a minimum, cast suspicion on us in some of your mind damaged our most valuable asset, our reputation. Something we take as seriously as being contacted by any government agency.

As difficult as this situation is, I know Kyle and his team will continue to earn the trust of customers and counterparties, regulators and investors by participating in the markets day after day with integrity and discipline.

Ultimately, actions speak louder than words and you will see in its actions that EK's commitments to the high standard of ethics and responsibility remain undiminished and again the EK folk, Kyle in particular, and David Sobotka, who is the President of EK, could not possibly be more responsive than they have been in the process.

Despite all attention on Entergy - Koch in recent days, we remain focused on our goals in all of our businesses and would like to spend the remainder of my time on key issues in the utility and nuclear business where we're making significant progress during the first quarter. In the utility, significant milestones during the first quarter included the completion of two RFPs for power, which were initiated in the fall of 2002 and just last week we kicked off the spring RFP. We also made filings at Entergy New Orleans and Entergy Louisiana to get approval for our supply plan.

As many of you know, our resource supply plans and resource selections have become the source of rumors and concerns and even an inflammatory news article or two, that in our view grossly misrepresented the facts. The good news is the codes were actually attributed to real people at real companies, not some anonymous source. It's always good to know who's saying what, particularly behind your back.

So, I wanted to spell some of the information that's out there. The resource plan and associated procurement processes were designed to meet significant needs for generating capacity to serve Entergy's utility customers.

Several filings with both FERC and state regulators since the beginning of the year, we've detailed various proposals to buy power from affiliates to meet our customer's needs, but there is no need to detail nonaffiliate transactions in the FERC filings because we are not required to file them.

That doesn't mean there are none. For those of you who did not see the recent wire service story, one named source was quoted as saying, and this a quote, "the first bidding under the new rules resulted in 100% affiliate deals." That is absolutely false.

In fact, about 1500 megawatts of bids were chosen as a result of our RFP process so far and nonaffiliates represented about 80% of the total. There is a pretty big difference between 0 and 80%.

Further, a portion of our supply requirements are from coal and nuclear generation that are owned by a regulated operating company and not supported by retail rates. These sources were identified as possible sources benefiting our customers because of the long-term price stability of solid fuel authorities.

We saw proposals for solid and other stable field price capacities compete with these, but reserve the right to reconsider our own sources in the events that they were more attractively priced at market offers. That was clearly identified as necessary and appropriate in the commission orders setting up the rules of the bid process.

Historically, utilities have always retained that option in order to protect its customers and ensure the least cost options were available to them. The resources provided by affiliates will represent less than 30% of the resources we need for the next few years. So, there is still a lot of power we need to acquire from nonaffiliate generators.

More broadly, you've heard a number of claims that Entergy engaged in uneconomic dispatch and that our actions resulted in higher costs for the industries retail customers or we are trying to drive merchants out of business. These kinds of claims are not only not true, but they flagrantly and recklessly distort the facts regarding the manner in which economic choices are made between incremental generation on the Entergy system and all system purchases. Or the value of load following characteristics of the unit or its location on the transmission grid.

Entergy dispatch is economic. It produces substantial savings of over a billion dollars a year for our retail customers versus the alternatives.

Market prices are low but that's due to excess capacity with reserves exceeding 50% in our region, not due to lack of transmission or lack of opportunity. Merchant generation has a higher operating cost on existing base load units. Most of the merchant generation in our territory was built around payload generation.

But our base load dispatches, about 50% of our total load, is base load. It dispatches at $5 for nuclear and $14 per megawatt hour for coal, while a new combined cycle gas plant with a heat rate of 7200 at current gas prices, would dispatch at something like $40 a megawatt hour. In short, our first priority isn't for payload generation, but believe me, no one came close to 5 to $14 per megawatt hour for long-term power.

But what we do have is an immediate need for low [inaudible] resources since our low varies by almost 10,000 megawatts in a single day. We've worked relentlessly with the market participants to design a process to acquire power to the daily load following need.

A process we have had in place for over a year now. And for all the allegations and for all the complaining, only 5% of the available merchant generation our region is even bidding into the weekly auctions they helped design. Only 5%.

What is clear to us and we hope clear to you, that is, the full story is not being told. That is not helpful.

It's not helpful to encourage more participation in a process in the future and hopefully our comments today will make it clear we have set up a fair process and we want maximum participation by all potential bidders.

For example, in response to the recent, and in our view, very misleading news article in one of the wire services I previously mentioned, our independent consultant, who was hired to ensure the RFP would be conducted in an independent, impartial manner said, and I quote, "it's as though the reporter ripped up her notes for the 40 to 60 minutes I spent her on the phone."

I know these he-said-she-said allegations don't necessarily persuade anyone as to who to believe, let me refer you to the independent parties who represent the actual decision makers. In this case, a couple of our regulators who can be tough on us at times. The city of New Orleans and the Louisiana Public Service Commission.

For example, the advisors to the city of New Orleans after a thorough review have already concluded that the purchases are in the customer's best interest. And Louisiana Public Service Commission's outside expert witness in sworn testimony has said as to the RFP process and the bids awarded in the process, these are all quotes, "first of all, the market-based mechanism order permits both a self-build option and affiliate purchases."

Secondly, "interested parties have had full opportunity for input on the RFP design and resource acquisition issues." Third, "as a further protection over the integrity of the bid process, Entergy retained the services of an outside consulting firm. This additional monitoring function was not even required by the end market-based mechanism order." Lastly, as to the process, the staff was quote "fully informed on progress." As to the selection of affiliates, again, these are quotes, "there was no indication of any preferential treatment of any affiliate bid. The affiliates were required to follow procedures, deadlines, et cetera and to my knowledge was granted no access to information not made available to all other bidders." And lastly, based upon a review of ETR's economic analysis, I, quote, "fully agree that these are the lowest cost bids". The bottom line is that we have been very disappointed in both the IPP's lack of participation in the weekly auctions and the [inaudible] in some cases absence of offers in the RFP for the products we clearly indicated we were interested in and the prices being bid which were clearly out of line with the market and with our own point of view.

We're well beyond disappointed at the allegations that essentially IPPs never had a chance or there were preferential treatment given any of the affiliate resources. With that said, we agree with the [inaudible] expert witness when he said the fall 2002 RFP was a learning experience for Entergy, market participants and the commission staff.

We also agree with his assessment that was it was conducted successfully and hope over time to repeat this kind of success for the benefit as of our customers and in fact, all of our stakeholders.

Turning to other utility matters, we also made progress on an important rate issue during the quarter. Entergy New Orleans is close to a constructive resolution on the severe revenue deficiency with the city council in New Orleans,which would provide for a $30.2 million base rate increase and an ROE midpoint of 11.25%. As you know, a rate increase in New Orleans is a high priority.

Excuse me. I think I got too excited over the RFP process.

As you know, rate increase in New Orleans is a high priority. Entergy New Orleans recorded a loss for both 2001 and 2002 and it faces a potential downgrade from Moody's. So, this is a critical event. We expect to have final resolution on the settlement from the council in mid-May.

Turning to nuclear, let me begin with an issue on many of your minds, the situation at Indian Point. During the past few months, we continue to make progress on the Indian Point emergency plan certification process.

We've been working on several points to address issues raised by FEMA in February, the most important is relating to obtain information from counties surrounding the plant from the state. I can report to you today, three of the four counties are cooperating with FEMA representatives to review relative materials.

We have several legal avenues, including the Free Moon Information legislation that we may pursue to induce the cooperation of the fourth county but are hopeful it won't be necessary. We're increasingly optimistic that the emergency plan will receive approval from FEMA.

It's important keep in mind that legally, plants can't get shut down because various parties refuse to provide information or do their duty under the law. The NRC is the only agency with the authority to close Indian Point and FEMA had no issues and the NRC noted no deficiencies during the fall 2002 emergency drill at the site.

All attention has been focused at the e-plans for Indian Point, our nuclear plants continue to maintain very high levels of operational performance throughout the quarter, even though we had a few unplanned outages that did occur. The fleet turned in the capacity factor of 94% for the quarter, despite unscheduled outage of the [inaudible] facility.

In addition, Indian Point 3 began a scheduled reviewing hour before the end of the quarter on March 28th. That outage was completed in 25 days on April 23rd, a day faster than our last outage and 15 days better than the best outage under previous management. That's 25 days versus 40 the way the plant used to be operated.

We won't go into the level of detail that Don Hintz can provide and Don is with us today, I will also note that in this outage and others we have visually inspected the bottom of our pressurized water reactor vessels, that's out of our normal routine outage inspections and found no problems to date.

More importantly, we continue to make progress on selling output for 2004 and 2005. We continue to reduce our positions in pursuit of our stated hedging goals. Having executed 9 separate contracts since acquiring plans to counterparties other than the original sellers of the plant.

During the first quarter, for example, we sold 20% of the output from one of the plants in our northeast portfolio for about $10 above the price in the original contract. And we expect that contract to be approved shortly.

And in the first quarter, we sold 50 to 150 megawatts, depending upon the year, to another counterparty at a price that was about $6 above the original contract. We expect to continue to make progress like this throughout 2003 with the goal of having more than half of the 2005 output sold by the end of the year.

So, as you can see, while we have diligently pursued answers in response to the regulatory inquiries we now face, we have not lost and we will not lose focus on delivering tangible results against our strategic objectives.

Now I'll turn it over to John Wilder for a detailed review of our financial performance for the quarter. John?

Thank you, Wayne and good morning. I'll focus my remarks today on a review of our first quarter results, some details on trading and finally a review of our liquidity positions and earnings guidance.

I will begin with slides 2 and 3, that reflects the strength of results achieved this quarter. We delivered 40% operational earnings growth with impressive increases coming from the utility and competitive businesses.

We strengthened operation net margin by more than 30% while return on invested capital on an operational basis increased by 11% and return on equity moved to a new high of 12%. Our net debt ratio is nearly 2 percentage points lower than one year ago, and to date, we've refunded or provided cash for more than 77% of all '03 utility maturities and started to work on '04.

We move to slide 4, which shows the first quarter '03 earnings rose sharply over first quarter results a year ago. Reported earnings of $1.73 while operational earnings were $1.12 per share. A record quarter.

As reflected on slide 5, as reported results benefited from the implementation of the new accounting standard, SFAS 183. It resulted in a resulted in re-evaluation of decommissioned assets and liabilities for both our utility and non-utility plants. It produced a cumulative effect in the accounting change that added 61 cents to earnings, which was recorded as a special for the quarter.

The main contributors to the strong operational results achieved in first quarter were the utility and energy commodity services as seen on slide 6. The utility increase operational earnings by 24% and energy commodity services by 105%.

Slide 7 shows improved utility results driven by sales growth combined with lower O&M expenses. Let me confirm that actual O&M did decrease even though costs increased a per megawatt hour basis. This per unit increase reflects lower levels of generation as we increase the amount of power purchased from third parties.

Extra sales show the clear improvement in the regional economy compared to last year's difficult economic conditions. Slide 8 reflects Entergy Nuclear's contribution, which decreased slightly due primarily to a significant increase in amortization and refueling expenses from $10 million in the first quarter '02 to $24 million in '03.

The increase in amortized costs reflects the timing of refueling outages with three refueling outages being completed in fourth quarter '02, compared to none in the same period of '01.

The amortized costs and in addition of Vermont Yankee, a client with higher costs than others in the northeast fleet, drove per-unit production cost higher. However, we expect to achieve higher capacity factors and $25 million cost reduction this year which will drive us toward our '03 production cost target of $21 per megawatt hour.

Energy commodity services performance is illustrated on slide 9. Looking first at Gulf South Pipeline, we achieved lower results this quarter, driven by lower gas throughput even though we experienced temporary periods of extremely high weather-related demand. The trading business, on the other hand, achieved outstanding results for the quarter.

As reflected on slide 10, volatility was quite high in first quarter with volumes up as well. We did benefit this quarter from the disproportionate sharing of income, which I again remind you, is designed to bring Entergy's capital count up to the 50% level by the end of this year.

You will note in our release that one of Entergy - Koch's primary measures of risk, daily earnings at risk, increased during the period by $11 million. This increase is not surprising to us given significant gas and power volatility as evidenced by several days with price moves three or more standard deviations from the mean.

Slide 10 also shows a relationship of deer to reported earnings for trading. With the first quarter '03, this ratio was 4.3. A 13% is improvement over first quarter '02. This improvement demonstrates we didn't simply take on more risk to make more money in the quarter. Rather, we pursued opportunities which allowed us to deliver more return per unit of risk.

Operating cash flow for the first quarter was considerably lower compared to first quarter '02 as reflected slide 11. While there are always a number of variables to the fact OCF, the primary driver to this decrease was rising gas prices in '03. In the first quarter '02, average fuel costs were about $18.50 per megawatt hour while we collected around $20.50.

Conversely, in '03, our costs were about $32.50 per megawatt hour and we collected 26. This swing in fuel prices can be seen in our higher deferred fuel balances, accounts receivable and accounts payable on our balance sheet, all of which impact operating cash flow during the period.

On slide 11 you'll note we expect 15 fuel recovery mechanisms to allow us to recover most of these costs by year-end as was the case when gas prices spiked in '01. In fact, since then, we obtained regulatory approval to convert one annually resetting fuel mechanism to quarterly and also are allowed to earn a return on the deferred balances in Mississippi. Further, our current cash forecast shows we expect to generate approximately $1.9 billion in OCF this year, consistent our long-term liquidity plan.

Finally, our treasury team has been actively engaged in the renewal process of our bank facility and we have made excellent process. We've requested $1 billion and to date we've secured bank commitments for more than that amount on very favorable terms. We anticipate completing the process in early May between 1.3 and $1.4 billion.

We've had no banks currently in the revolver for participation. We've added one new bank and have several more potential additions. With our success to date, we're confident we will secure participation at a level exceeding our investment and overall liquidity needs.

Slide 12 reflects details of our '03 guidance of 3.75 to $3.95 in earnings per share on an operational basis. The very strong results achieved in the first quarter are clearly encouraging to us.

However, with just one quarter of the year behind us, we recognize that events beyond our control could impact bottom line results in a material way. Weather, as an example can have a dramatic impact particularly in the second and third quarters. Our data shows that over the past 36 quarters, negative weather impacted earnings more than a third of the time and that impact has been as high as 10 cents per share.

The lesson for us is the prudence, reinforced by our admittedly conservative view, dictates that we hold full year guidance firm. As in the past, we will re-evaluate this range and each successive quarter of the year.

Our senior team is available and we will now open the call to your questions.

Thank you. The questions and answers session will be conducted electronically today. If you would like to ask a question, please press star 1 on your touch-tone phone.

We'll take as many questions as time permits and proceed in the order that you signal us. Additionally, if you're joining us using a speaker phone, be sure your mute function is turned off to allow your signal to reach our equipment.

Once again, if you would like to ask a question, please press star 1 and we will pause for just a moment. Our first question will come from Raymond Niles with Smith Barney.

Good morning. Thank you. My question is just to go into a little further in terms of the daily earnings at risk given the volatility in the quarter. How do you anticipate that you'll see that developing over coming periods? Was this really a function strictly of volatility, or will you be investing that much in terms of, you know, earnings at risk going forward?

Okay, Ray, this is Wayne. Now, we have a number of people here. We have Curt Herbert here, we have Rick Smith here from the regulatory side, we have Rick Smith here from the jurisdictions and Don Hintz from nuclear and we also have Kyle here from EK and we're going to restrict Kyle's comments with regard to questions regarding his ongoing business. It would be very difficult to put Kyle in an awkward situation having to respond to questions in regard to the review process we're under, but in this case, Kyle can adequately respond this one.

Hi, Ray. First of all, the first quarter, as you know, is a -- there's a lot of volatility and we also had a very strong point of view. And so we had fully employed the -- the authorities that we had during that first quarter, particularly in January and February.

After that period of time, once the market pretty much played out after January and February, we reduced our capital employed down below our, you know, our prescribed authorities. As far as where we go forward, Ray, depends a little bit on our point of view, how strong it is and where the volatility is. In the short-term, I think you will see lower capital utilized.

As it turns out that things would materialize where we could utilize more later and profitably we will do it. Not as high as you saw in the first quarter at this point.

And this is basically natural gas we're talking about?

It -- it's more natural gas, but also power. Natural gas and power. We were -- we certainly involved and our strategies to involve power and weather, but predominantly gas and power.

Okay. Thank you.

Thanks, Ray.

We'll take our next question come from Devon [inaudible] with Luminous Management.

Hi, guys, thanks for the time today and congratulations. I just had two questions. The first one was surrounding the throughput on the pipes. Can you tell me why the throughput was down over last year despite normal weather? -- or despite abnormal weather?

Kyle -

Good question. First of all, if you look at the data -- first quarter of last year, was actually kind of an unusual quarter. We were pretty much in a lower energy environment and actually had pretty much full gas utilization by industrials and even power plants.

What we were looking at here the last few months, particularly the last quarter, we saw a much higher priced gas environment and we were seeing were a lot of people starting to at least switch away. Industrials were backing away from natural gas or certainly looking at reduced throughputs.

We also even saw less power plant usage of natural gas in the first quarter of this year versus the first quarter of a year ago. So, overall it was -- I think it was predominantly driven more by I will call it switching and lower demand. We're very stable at the point we are right now. I think this is more of the low side.

If gas prices were someday to kind of go back to more moderate prices or whatever, you'd probably see some of that demand pick up. Generally, our interruptible demand swings a little bit.

Our firm demand, you know, does stay firm and the marginal demand also tends to be the one that also has the smallest margins. Even though the demand comes and goes sometimes it has a relatively minor effect on the profitability.

Okay, great. And that makes sense. The second question is you guys mentioned the capital accounts issue regarding EK. My understanding is that you guys should be up to 50% by the end of this year. Can you update me just on where the capital counts are? And how I can track this mechanism?

Devon, this is John. We don't disclose that, but right now they're below our capital count is below 50%. Our forward-modeling indicates that it will stay below 50% for the balance of the year and at the end of the year we have a reset mechanism that even if they are out of balance will reset them in our partnership agreement.

So, the critical thing for to us watch is to be sure they're not getting out of balance and if they are we would make an adjustment before the end of the year, but right now, everything -- frankly, with performance we've had out of this business this quarter that, just helps us because it makes our business more valuable.

Okay. Thank you very much. I appreciate it.

You're welcome.

We'll hear from Merrill Lynch and Steve Fleischman.

Yeah, hi, guys.

Hey, Steve.

Hey, Steve.

On this -- you spent a lot of time highlighting the RFP process and I assume that's just a fact that there's been some complaints to FERC and the like and news articles, et cetera. In terms of actual issue for the company and financial risk, what -- what are your main concerns and I guess on the same topic, can you just talk about why you're only seeing 5% of capacity -- I can't recall the exact number you provided.

Yeah, 5 is the number. The -- from the overall company standpoint, I mean you kind of hit it, Steve, it has found it -- these allegations have found their way into other types of complaints, like our generator operating limits and the imbalance agreements of that nature at FERC.

They've eluded to this kind of scheme that Entergy may have intentionally or unintentionally have stumbled across that would put them out of business. And would raise rates to its customers and -- and we find that to be pretty offensive given that it attacks our reputation it puts our regulators on the spot.

Our regulators in Louisiana, for example, this week, felt the need to disclose prices, to ask us to disclose the prices to make it clear to the marketplace that these bids were the lowest cost bids.

A couple of -- at least one of the winning nonaffiliate bidders, I think is going to issue -- is going to complain to the commission to be sure they don't get named and their price doesn't get disclosed.

So, there's allot of issues not just with regard to us, but with the winning bidders also, they don't want the information in the marketplace and the more this information that you start posting into the marketplace, the more it disrupts a fair bidding process going forward. It sets a price for other bidders that they can bid to because they know what the lowest bid was in the last auction or what the next lowest bid that wasn't accepted. That's not in the interest of our customers or in the purity of the process.

So, we're trying to make it clear to the regulators and everybody else that the process needs to be done fairly. It has been done fairly. In terms of risk to the company, I think there's always a risk that when you have parties that did not win, who were unsuccessful, that they may initiate a lawsuit or initiate a complaint.

We have been for the last, ever since the -- we started showing up, we've been documenting relentlessly the entire process, the bidding, the way we do things and possible response to a complaint that may be filed someday in official manner. So, the reason we went into some detail is because the complaints are now starting to get more vocal and more, frankly more outrageous. And before you all hear things that just are not true, we wanted to head that off.

With regard to the 5% number, why aren't they bidding? That's a really good question. We can hypothesis a lot about that. It's certainly not good for the marketplace when people withhold capacity from the bid process. Reasons that they may not be bidding, I mean I can't speculate.

It could be selling gas instead of power because it's a better product for them at this stage. They -- one of the things that has been hypothesized, these are guesses, because of the merchants being pushed down the curb to the low filing portion of the curb because they can't compete with $5 nuclear power. When you're bidding into this marketplace, you're essentially bidding a minimum and a maximum.

So, because it's low filing. And -- and the kind of the number you need to -- to be successful is a 6:1 ratio. Your max needs to be 6 times the minimum low because that's how much you need to be able to ramp depending on the weather and other units. So for example, if you were one of these high BPs and you're in the low following portion and you have 50% reserved, in order to win the bid, you're going have to be probably right at your marginal costs.

So, you're right at your marginal costs for the minimal load and already gave away a call option to go up to six times that number at the same price. So, a price is run up because of weather or because of units go out, you've already given away the option to the utility.

So, they may feel like there's not enough profit in bidding into the load in order to give the call option to the utility at the existing price. But I'm guessing, I'm just guessing on logically what would cause a person not to want to bid into a marketplace they helped design. You will have to talk to them.

One other question to the degree it can be answered. On this review of the trading activities, can you give any general sense of timeframe, ie months or year-end or how long it's going to take before you can provide more detailed commentary to us on what you're doing?

Well yeah --

Or what you did?

Yeah, you know, obviously, you know, Steve, we'd love to be able to say it's going to be sooner versus later, but -- but we can't do that today because -- because the -- the -- the requests are -- are voluminous, the day it goes back four years or so for these companies, you're talking about some probably somewhere between 750,000 and a million trades in addition to other documents that we've asked for.

You know, how quickly they can get through the information that we've given them is -- you know, it's somewhat out of our control. So, you're probably talking months, you know, you're probably talking months, that's our best guess.

It's just a voluminous request and there's just no way to know how thoroughly they're going to keep going through these documents until they decide that they have a conclusion. I'm sorry I have to tell you that.

Okay. Thanks.

Thanks, Steve.

Let's hear from Paul Rizdon with the McDonald Investments.

Good morning, I had a quick question about the timeline you expect for New Orleans resolution on the rate increase. Second question would be if you could give us any indication as to whether the parties involved in the -- the wash sales, was that one trader or was it confined to a small group of traders? And lastly, for John, with trailing 12 earnings of 413, kind of what you anticipate could, you know, impact your 28 cents to get to the mid point of guidance at this point?

Okay, let me first -- this is Wayne, let me first address the last -- the question with regard to the traders, then I will turn it over to the other people. What we know today, the 61 trades, that FERC identified involves three specific traders, all who are obviously trading on inner physical gas on Enron online, so, three traders. Rick, you want to talk about New Orleans?

The Entergy New Orleans rate case, we look to have an order by mid-May '03.

But -- Paul? Yes, this is John, I'll answer your last question. I don't have anything. Nothing at all. I mean we -- if you look at our guidance table, table 16, I'll point out a couple of key areas for you to consider.

Under conservative commodity trading, we have 6 to 9 cents. Our average in '01 and '02 for the second, third and fourth quarter has been 38 cents. So, that is a very conservative number and then if you look at the bottom of the table, we put adjustments for conservativism and early portions of the year, 15 cents. And that is quite simply just a plug.

We debated whether we should increase guidance. We see nothing in our business or our plan that would cause us to think that that negative 15 is going to materialize. We see nothing in our plan or our business that would indicate that we're not going to perform in the final three quarters of the year. Similar to how we performed the last two years in EK.

But we just felt that one quarter into it, it would be a practice that we didn't want to get into to start amending our forward guidance. Third quarter's a big quarter for us in terms of weather impact, canceling at about 10 cents down, about 15 cents up.

And that's really the only thing we, and I also would add -- we see nothing our weather models to indicate that that might materialize. So, the -- the direct and honest answer I can give you is it's just being conservative.

Thank you very much. Can I just have one more question. Maybe a comment from Wayne or John on what you're seeing on the bid asked on generation assets and whether that's still attractive and, you know, when that could unfold?

It's still -- Paul, it's still pretty wide and it will -- it's probably going to unfold a little slower than we anticipated, you know most of the companies that we thought would be needing to sell their generations to generate liquidity have had their bank facilities renewed.

That's giving them a breath of life, at least for a couple of years. And we think the bid ask will probably be fairly wide, at least for the next, you know, six -- six to eight quarters. But ultimately, you know, there -- we think that we're clearly natural owner for either fossil or nuclear assets.

We can prove that to either the companies or the bank groups that will ultimately own those assets and we think our stressed assets strategy will work. It's just going to take a little longer than we anticipated.

You know, John, on that question, I probably need to make this somewhat clear, you know, in terms of natural owner for these -- for these assets, if it's in our service territory, the natural owner is the utility. It is not the nonregulated portion of our business. It is the utility.

The utility has RFP in process, the utility will be using those and it is locating our territory, it is going to be utility that bids for those. Outside of our territory, that will be the nonregulated group.

Is there any sense of urgency given the potential delay on generation to maybe redeploy capital elsewhere or do something else with it?

Well, we don't have a sense of urgency from the stand point of making a mistake or doing something intentionally dumb. I mean we're working as diligently and as rigorously as we always do to try to invest in these core businesses that we have that we think we're distinctive in.

We've got some very interesting ideas we're pursuing in nuclear that we can't go public on that look attractive. We continue to work on the merchant side on gas transportation as well as some of the distressed regulation, but, you know, we don't have anything to report now. We're still hustling, but we're not going to panic.

We can meet our 8 to 10% growth expectations over the next several years with the assets we currently have. We can generate some very substantial incremental operational income out of the -- the power price environment that we're seeing in the northeast with our nuclear fleet as we renew our contracts as well as cost reductions in nuclear. We also continue to -- you know, despite some of these issues, we're -- we're currently managing and trading.

We continue to see, you know, keen interest from our customers and derivative sales and asset management agreements. We think these base businesses we have are going to produce 8 to 10%, at least through '05 without re-deploying any capital.

So, deploying capital is just -- just icing on the cake. We won't make a mistake and we won't make an intentional mistake. We will still continue to see mid-teens kind of returns. If we can't get that, we will find ways to get the capital back to the shareholder.

Thank you very much for the update.

Thank you.

We'll hear from Andrea Feinstein with [inaudible] Gordon.

Hi, just a couple of questions. First, at the regulated utility, can you give is a sense of timing with regard to the OCF decrease, when we start to see the lag made up on the gas costs?

It will be in the fall, Andrea.

Okay. And then on the unregulated businesses, a couple of questions. First one, can you -- on the same topic, the OCF decrease at the competitive industry, can you give us more detail on that? And then can you also address the decline in game off days? And whether or not the current level is where you think things will be stabilizing, there's been a there on the downside?

I will answer the OCF. On the competitive businesses, our principal OCF is generated from dividends from EK. Because we account for EK as the equity method, we only generate OCF if we get the dividend. We chose not to get a dividend this quarter. We wanted to keep the balance sheet in EK strong.

We have the net debt to total capital net business down into the low 20s now, coverage ratios up about 12 times or so, and we continue to keep an A rating in the business. We will get a dividend from that business by the end of the year, but we didn't need the cash, Koch Industries didn't need the cash and we just kept it in that business.

Last year we -- we still had our game head creek plant and that generated OCF for us. So, that's the real swing in the competitive businesses' OCF.

Do you think we will see a similar level of OCF or dividending up from Koch for the full year as we did last year? Or is this going to be kind of a permanent change from the perspective of the full year outlook?

We will very likely get more cash return from the EK than we did last year.

Thanks.

And on gain loss, Kyle?

Gain loss days, Andrea, it's been -- I think the market is the best way to describe it. It's been more choppy in the last really several months than they were, I think part of that has to do with the fact that there's a lot of players exiting the market and new players coming in.

There's also been a lot external -- let's just say factors that have affected price movement, mainly what's going on in Iraq and a few other things. So, that being the case, it's created more random walking at times than we've seen in the past. So that partly accounts for a little bit of the reduction overall versus where we a year or two ago.

Specifically in the first quarter, we did have a very strong point of view. It was one of these things that really materialized over a short period of time, over like a matter of weeks as opposed to spreading out over a whole quarter and after pretty much let's just say hitting that one directly, the market pretty much returned more to this choppiness and especially in March.

And that's where really when we had a lot less capital employed, that's where really most of the gain loss days were closer to one. Overall, that's why it explains the first quarter being lower than normal.

What we see going forward, I think it's going to continual improve because we are starting to see a little bit more liquidity and stability in the market as I think if we end up a more consistent longer dated point of view that, directly helps your win loss percentage. At this point in time, we're not concerned about it, but we think it is a normal thing that we were going to see a slide versus what we saw a year ago.

How much capital do you have employed now versus where you were at the height of the -- of the quarter?

We're probably -- we're back certainly within probably more historical levels, probably about half of where we were.

Okay. And -- but no --

At least half of where we were in the first quarter.

Okay. Thanks. And just a couple of other really quick questions, first, with regard to the unplanned outages that you've experienced this quarter, are there any plans that are currently still downed for unplanned outages?

We don't have any down for unplanned outages. We've still got the pilgrim down for a refueling outage.

When do you expect it to come back up?

I think it's in about two weeks.

Okay. And last question: With regard to the party's filing complaints regarding the RFP process, are the parties that are filing complaints outside of the IPPs that actually bid into the process? If there are so few -- if there were so few companies bidding in, I can't imagine many people have, you know, a legitimate claim to make a complaint, were they outside of the process entirely?

Andrea, let me start that now and turn it over to Rick. And one of the reasons I can't completely answer that question is I'm isolated from the process myself.

We have very strict codes of conduct here with regards to how the utility manages the process with the independent monitor. I don't want to mislead you, when I talked about 5% of the IPP is s bidding in, that's a weekly auction process.

And we have two processes, we have one -- actually it is one process twice a year and RFP in the spring and one in the fall. We did get quite a bit of participation in that process and I don't know -- I don't have the numbers with regard to who did and who didn't or some of the prices, that's not actually privy to me at all.

But I am told just generally that the problem with the process is they didn't bid particularly in the products we were asking for in many cases. We asked for lower resources or longer term power contracts that would stabilize the -- the dispatch costs, in particularly for the southern end of the system. Now all that -- I'll let Rick kind of fill in there. He's actually involved in the process.

Andrea, in the fall of RFP, we had quite a bit of interest. We had 130 some bids over 30 different companies bidding into that fall RFP. And like Wayne talked, we looked at short-term products, anywhere from 1 to 3 years and also long-term products. They were all over the board.

So, I'm not real familiar, pretty much everybody that has a plant in our region bid into the fall RFP. So, the complaint that was filed, I haven't really seen the individual companies that were part of that complaint.

Okay, that's helpful. And one last question on that process, when you're evaluating the bids, given -- I'm just trying to understand because clearly there are a lot of walls up regarding how you participate in the process. Do you -- when you're evaluating the bids, do you know who the bids are coming from? Or are you looking at hard data regarding the economics of the bid?

It is hard data with the economics of the bid.

So, how exactly would the IPPs prove that you were prejudice against them if you didn't know who the -- who the data was coming from?

I don't know what --

Yep, that's a good question. Okay, that's fine. Thank you for all your help. Bye-bye.

Thank you, Andrea.

Lazard Asset Management, Jessica Rutledge has a question.

Hi, guys, I'm sorry, I tried to take myself out of queue. I think I hit the wrong number. I was going to ask about the pipeline earnings, as well. Was the cost increase purely a function of the throughput or were there additional cost increases there, as well?

Purely throughput, Jessica.

Excellent, wasn't that fast?

Thank you.

You're welcome.

If you'd like to remove yourself from the queue if your question has been asked and answered, by simply pressing the pound symbol. Our next question will come from Brian with Smith Barney.

Hi, can you give us an update on any sort of concerns over at Indian Point, especially with regards to the fact that the Iraq war appears to have ended faster than expected.

Don?

I can give you a status on Indian Point, I don't understand the second half of that question of the Iraq situation.

Well, I guess the -- the general thought is have -- have concerns about external factors and terrorism affecting Indian Point. Have the concerns about that in the political process or NRC process, safety review process, have those died down given that the Iraq war has finished faster than a lot of people thought or is that not even a factor at all in terms of concerns over at Indian Point.

The only way I can think about it having impact is the level of alert that the nuclear plants, are at has been lowered that has to with probably the situation in Iraq and the information that Homeland Security gets. So, it is at a lower level of alert today than it was. So, I think the, you know, the risk of terrorism in this country has been reduced somewhat, but we are seeing better interaction with FEMA and that, so, you know, I think that's all playing into the fact that things are going better.

Great. Thank you.

We have a question from Paul Patterson with Glen Rock Associates.

Hi, how are you?

Good morning, Paul.

Morning. Most of my questions have been answered. I wanted to ask you about: With the higher gas prices and higher power prices and with your nuclear contracted capacity falling off a bit as time goes on, are you guys -- what are you guys looking at in terms of the opportunities to further hedge?

Oh, Paul, we've -- we've got an act of origination effort in the northeast right now. We expect to have most of our -- not most of, but a -- a good portion of our '05 positions filled up by the end of this year.

The pricing environment we're seeing is -- is structurally about $5 better than our current embedded contracting rate. We don't know where we're going to end up. We've -- we've got really good customers in -- in those regions that we have served well. We have a great relationship with them and certainly want to continue that.

But we feel really encouraged that we're going to be able to recontract out and, you know, a fairly material level above where we're at today. For each dollar megawatt hour we generate about 10 cents of earning. It could be a real nice addition to us '05 and beyond.

And let me add to John's point there, the correlations between gas and power have been increasing I think in almost every single region across the country. In that region in particular, we're well above 50% correlation and gas and power. But having said that, the nuclear organizations are natural hedgers. They look to EK in terms of at what point should they start hedging out the power prices relative to the gas prices?

If we're going to take a point of view on gas prices, that's going to be done through Kyle's group. Because that's a much simpler, a much purer play in terms of managing that risk and that's the group who takes that risk.

Even though we may have some variation between the point of view on gas prices and what power prices are, we're going to pull the trigger on hedging out those nuclear pants at some appropriate place within that band of what EK believes to be acceptable levels.

We will not intentionally try to take points of view on gas prices by not hedging these plants out, trying to squeeze the last nickel out of it up until the, you know, it turns into spot purchases at these plants. So, you know, when we hedge these out it doesn't necessarily reflect our total view on gas prices. We're natural hedgers there and then on the other side, we have a point of view.

What is your point of view, actually, if you brought that up?

On gas?

Yeah.

Kyle, you want to...

I'll give a -- kind of a quick one here, Paul. I won't divulge all of it, but generally we see gas as very constructive.

I think you've read a lot of the same reports that we have and our analysis shows that we're looking at situations right now where gas supply is not really keeping up the I think with demand.

We're also seeing that longer term we're going to -- at least over the next few years, there's going to be some infrastructure changes that need to happen as far as bringing L&G in and things of that nature to offset and get back in balance.

I think the best way to say it is that we think gas will be pretty snug over probably the next couple of years or so and you're looking at a floor, probably much, you know that, we set more with L&G. Assuming there's no extraordinary weather, you're looking for gas to stay reasonably, you know, firm.

The only other wild card is in oil, as long as oil stays up in the mid to high 20s, we will see gas continue in the same range as we're looking at now.

Thank you very much.

Which should be good for Don Hintz's hedging efforts.

Absolutely.

Thank you, Paul.

UBS Warburg's Ron Brown is the next person to ask questions.

Thank you. Good morning. Three questions on Entergy - Koch. First off, could we go a little bit deeper and break out the earnings, how much was day-to-day? How much is point to view? And how much was structured transactions?

Secondly, in the current market environment, how far out can you go with the structured gas and how far out can you go with the structured power contract? And finally, third, I know it's hard to answer. The answer may be 100%. How much is the mark-to-market us is susceptible to a possible reverse?

Ron, I will answer the first question and we will turn to the final two over to Kyle. Normally our contribution is about 40% gas transportation and then of the remaining 60% it's pretty equal, 20% financial sales, financial proxy, mainly derivatives, 20% customer business, you know, fee-based income for managing the assets and 20% point of view.

This quarter, it was about 25% transportation, 25% asset management and financial sales and 50% point of view.

So it was, you know, with the kind of quarter that we had, it was -- which would be the typical profile of a real blow-out quarter like this would be driven mainly by our point of view trading.

Ron, timeframe for structure deals, first of all, I think you know from EK standpoint, most of our books really are only a couple years an end. So, even though that market mail out longer term deals at this point in time, we focus more on the 2 and 3-year end type variety deals.

The gas market is still very liquid and a person could easily do probably five or 10 year type hedging deals there. Power is less, though, but I would assume that you can certainly do at least a couple of years or so pretty easily and maybe even beyond that.

But in general, I think there's sufficient liquidity gas-wise, power is more of a difficult situation, but from EK's standpoint, we stay more in the short-term variety.

Let's see, the third question what? How much of the mark-to-market is subject to reversible, from a mark-to-market standpoint, we book it as we Mark it.

I suppose if we had some -- if we had positions that when you get this, you could always have losses. I don't know if I understand the question right. There is some of that that could be reverse versed, but did I answer the question? Oh, he's talking about cash! I misunderstood. From the standpoint of how much has really been booked, so to speak, that's always difficult to calculate exactly, but certainly on this quarter, it's in the 75% category that's already been turned into cash. Turned into cash. I misunderstood the question.

Okay, thank you very much.

Thank you.

Next is Vic [inaudible] with Deutsche Asset Management.

Yes, thank you, when you mentioned early in the call about the two issues, when was it on the investigation and the other one in the RFP. So, could you give us a feel for what might be the earnings at risk? Because I don't see much earnings at risk.

It's one of those ones with people giving you evil eyes and not jump to quick to agree with you. But obviously, you know, as we tried to indicate, you know, in the most modest manner, at this point in time, we don't, either.

We don't expect to find anything material, we certainly believe in the RFP process that we did everything including hiding the independent monitor and bringing the stats all the way through the process. We did select, you know, some of our own but that was reviewed with great scrutiny by outside parties and like Rick said it was volume to it. So, we didn't even know we were picking some of our affiliate resources. So, we certainly don't expect a reversal of that outcome in the commission process.

With regard to the EK situation, again, I mean I will just go to the 61 trades, which is what we know that FERC has cited and which we have confirmed. Those were done at market and we took both sides of the trade. There was no profit on those transactions.

So, you know, whether or not there's, you know, anything else out there that may come along in reviewing these million trades, you know, we certainly, like I said, don't expect to find anything material. And but I think, you know, your assessment is probably given what you know is probably -- and what we know is probably pretty fair.

Okay, thank you. One other follow-up question, on the asset procure side, in the past you have been refraining from buying merchant asset. Is that plan changing a little bit?

Yeah. I'll take that, Vic. No, we -- I mean we're still interested in merchant assets, you know, we'd have to choke down some negative earnings for a couple of years in most of these regions and maybe even negative cash. So, we -- you know, we're -- we're, you know, we're prepared in the right kind of investor cost level to ride this cycle out.

We haven't found any, yet, that are priced where we think they need to be priced to compensate us for -- for riding out the cycle but we continue to think that the bid asset spread between buyer and seller will close. It's just right now -- it's just not in the spot that we're interested in participating and it's obviously not a spot that the sellers are interested in participating.

So, are you suggesting that you are willing to take some short-term pain for long-term gain...

Absolutely. We've always invested on cash. We make every investment decision that we've made in the last five years on adjusted cash flow discounted risk-adjusted basis.

And we don't worry about, you know, what's going to happen next quarter in earnings where we make an investment decision, we're investing in assets that we think will generate long-term cash flow to help continue to build this company.

So, we actually think we're very well positioned in this environment with our liquidity and our capital strength to be one of few companies that could participate in an investment with that kind of investment profile and we're highly confident that the investors we have would understand that if we explained it to them. So, we -- we would like that kind of profile quite frankly.

Yeah, Vic, just to add to that, given what John said and given the risk you're taking when you don't have a standard market design. You have a lot of things that are still up in the air across the country with regard to transmission rules and other types of things, you know, you would be -- you would certainly be looking at -- what we prefer it s to have a portfolio of these type of assets because there will be some things that will occur in the future that will surprise you.

Some will turn out well, some may not turn out well. If you want a portfolio, you'd be looking at substantial returns in order to warehouse that type of risk.

Okay.

Much different than picking up a pipeline.

Thank you.

Thank you.

We do have a follow-up question from Devon from Luminous Management.

Thanks for the time again. I wanted to follow up to the line of sales regarding asset sales, not question what you're willing to purchase, but it seems that the one thing standing behind -- between this industry and a large-scale writedown of merchant asset plans is the undiscounted cash flow rule and GAAP accounting.

All the guidelines would indicate that the industry should take very substantial writedowns and you guys say the spread between the bid ask has remained wide. Do you think that at some point companies will be willing to take those kind of writedowns because they can't sell them without taking the writedowns and a lot of times those trigger various issues with each company. Do you guys have a view on that?

Well, I think Devon, there will be a time when these companies are just willing to face what the underline asset is worth. And based -- you don't necessarily have to follow the undiscounted cash flow message.

You can use market and there is -- these companies are just choosing not to do that, likely to keep some tripping -- some book-related [inaudible] in their -- in their indentures, but the market is already priced what those assets are worth. If you calculate the, you know, per KW value for any of these more pure merchant-oriented companies, you will see anywhere from 150 a KW to maybe 300 a KW. But the equity markets have priced it. Their accounting hasn't kept up with it.

It's like any other industry, whether it's, you know, goodwill and the technology industry or, you know, an example like that, I think the -- their books will eventually correct with market and I -- I do think that will help some of these companies kind of get off the dime sort of speak. I think that would be a potential catalyst.

Okay, appreciate your view and your candidness. Again, congratulations.

Thank you, Devon.

Laura with UBS Warburg, go ahead.

Hi, good morning I have a follow-up quo the reductioning of cash flow this quarter versus last year. I was wondering, you mentioned here as the main reason in the press release that payment associated with the services and generation contract in the non-nuclear business , is that -- [ INDISCERNIBLE ] -- creek?

Laura, I didn't follow all of your question, but I think I did, let me try. The OCF impact is due to buying gas for our electric generation in the utility and the way our fuel recovery mechanisms work, we don't recover that for some months after we purchase the gas.

And that -- that's what will swing around -- swing our OCF around and it will normally take a while to collect in a high gas price environment and low gas price environment, we tend to have better OCF than we would under really normal circumstances.

Right, my question was referring to the operating cash flow at the competitive business. You mentioned in the press release that the decrease was due primarily to a payment of costs as associated with the services and generation in the wholesale business. I didn't hear about that when Andrea asked her question.

Okay, Laura. I now follow you.

Okay, sorry.

We had a payment to a counterparty that we made in the first quarter and for the settlement of some long standing disputes and that's -- that was what that issue was.

Okay, can you disclose the amount of that?

It was about 20, $25 million bucks.

And the other question is regarding the dividend from Entergy - Koch, I was under the impression that you didn't get a dividend from Entergy - Koch yet.

No, we did not receive a dividend this quarter from Entergy - Koch.

But you did last year?

No, we've never received a dividend from EK.

Okay, because I understand that one of the reasons you mentioned why operating cash flow at a competitive business was down from last year was that you had not received the dividend from EK that you had last year, but maybe I was wrong.

No, Laura, I indicated that we had an operating plant in the UK that generated OCF that we currently don't have. We sold it last year.

Okay.

And that was the -- the main drop in OCF for the competitive businesses.

Okay, great.

And I was just making a point that although we generated substantial operating cash inside of EK, we don't recognize it on Entergy's cash flow statement unless we choose to get a dividend from that business.

Right. And you will at the end of this year? That's what you said?

We will receive a dividend throughout the year probably in the latter half.

Okay. Thank you so much.

Thank you.

That does conclude today's question and answer session. Miss Nancy Morovich, back to you for closing remarks.

Thank you, operator and thanks to everyone for participating this morning. Our call was recorded and can be accessed for the next sew days by dialing 719-457-0820. Replay number 422244.

And, of course, you can also access the replay on our website. As you mentioned, the telephone replay will not an available until around 2:00 p.m. this afternoon.

This concludes our call. Thanks again to everyone.

Again, thank you for joining us today. That does conclude the presentation, you may now disconnect.