Bucking the trend that has brought other companies’ merchant operations to the brink of disaster, New Orleans-based Entergy Corp. on Tuesday reported that its energy trading earnings for the fourth quarter were up 33% from the same period of 2001, while overall, quarterly earnings rose more than 25%.

Entergy reported quarterly earnings for the entire company of $75.8 million (33 cents/share), compared with $20.7 million (9 cents) in 4Q01. On an operational basis, fourth quarter earnings were up 89%, to $77.4 million (34 cents), compared with $39.8 million (18 cents) in 2001.

For the entire year, Entergy’s earnings were $599.4 million ($2.64/share), with operational earnings of $866.4 million ($3.81). In 2001, Entergy reported $3.23/share for operational earnings. Reported earnings year-over-year decline reflected special charges taken in 2002, associated with the closing of North American operations for Entergy’s wholesale power development business.

CEO J. Wayne Leonard said last year had been one of “disappointing performance” for the entire industry, but despite the problems, “Entergy maintained its strong cash position, improved its credit quality and liquidity and exceeded its targeted operational earnings growth.” He said the company has a renewed commitment for 2003 to build on its utility performance, grow the nuclear business and reinforce its energy trading capabilities.

For the fourth quarter, operational utility earnings were $42.4 million (19 cents/share), compared with $44.5 million (20 cents) in 4Q01. The drop in earnings was related to higher inter-company tax accruals and higher operation and maintenance expenses, which were largely offset by higher sales volumes across all customer classes. Entergy said that increased operation and maintenance expenses reflected higher plant outage costs in fossil, higher customer service support costs and higher employee benefits expense.

The decrease in earnings quarter-over-quarter also was impacted by an increase in the loss realized at Entergy New Orleans Inc., and the company has filed a request for rate relief “where inadequate rates continue to negatively impact that company’s financial performance and the overall performance of the utility.”

In 2002, Entergy earned $2.57 per share on an as reported and operational basis, compared with $2.45 per share as reported, and $2.46 per share operational for 2001. The higher earnings in 2002 came from higher sales volumes, reflecting some strengthening in the economy, and cessation of goodwill amortization, partially offset by higher operation and maintenance expenses due to higher fossil plant outage costs and higher nuclear and customer service support costs.

Unlike most of the energy merchant sector, Entergy’s competitive and unregulated businesses scored big in the final quarter. As reported earnings were $57.1 million (25 cents/share), compared with $19.1 million (9 cents) for 4Q01. Excluding special items, operational earnings increased 73%, from 15 cents per share in 4Q01 to 26 cents in 4Q02.

Overall in 2002, as-reported earnings from the competitive businesses declined to $54.7 million (24 cents), from $233.8 million ($1.04) in 2001. The decline is primarily due to the special charge in second quarter 2002, which was associated with the closing of Entergy’s wholesale power development business. On an operational basis, the competitive businesses contributed operational earnings of $321.7 million ($1.41), compared with $212.4 million, or (95 cents) in 2001.

Energy Commodity Services, which includes earnings contributions from Entergy-Koch LP and Entergy’s non-nuclear wholesale assets, reported earnings of $23.3 million (10 cents/share) in 4Q02, compared to a loss of $9.8 million (minus 4 cents) for 4Q01. Strong earnings in trading, improved results in the gas pipeline business, and the absence in 2002 of losses realized in 4Q01 contributed to the jump in earnings. As was the case in the first three quarters of 2002, the income sharing mechanisms that are part of the Entergy-Koch partnership agreement allocated substantially all of the partnership’s income to Entergy in the fourth quarter of this year.

Entergy-Koch contributed higher operational earnings in fourth quarter 2002 compared to the same period in 2001 primarily because of earnings at the trading unit. Also, the company’s Gulf South Pipeline realized higher earnings even as volumes of gas transported decreased because of more favorable transportation contract pricing. For the year, however, Energy Commodity Services had a loss of $145.8 million (minus 64 cents), on an as-reported basis, because of second quarter charges, compared with earnings of $105.9 million (47 cents) in 2001.

“In 2002 Entergy was challenged by extremely difficult market conditions,” said CFO C. John Wilder. “The success achieved by Entergy as reflected in 2002 results supports our belief that our business fundamentals are sound and our strategic initiatives are on track. We enter 2003 with an economy that has yet to fully recover and with numerous challenges ahead in the energy market. However, we are committed to diligently manage our businesses consistent with our long-term aspirations in order to deliver sustained value to our shareholders.”

Entergy confirmed 2003 as-reported and operational earnings guidance in the range of $3.75 to $3.95 per share. Earnings guidance for 2003 includes the impact of Entergy’s decision to expense stock options effective 1Q03, which is not expected to be material.

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