First quarter earnings for New Orleans-based Entergy Corp. slumped 47% from low volatility in its energy trading unit and on mild weather, but the company still managed to beat Wall Street forecasts by a penny.

The utility had warned earlier this month that mild weather, lower energy trading profits at Entergy-Koch LP and ongoing operational problems at its new Magnolia natural gas storage project in southern Louisiana would bring its earnings down (see Daily GPI, April 13). Entergy owns and operates power plants with about 30,000 MW of generating capacity, and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.6 million utility customers in Arkansas, Louisiana, Mississippi and Texas.

Entergy reported net income of $213 million (88 cents/share), a penny higher than forecast by Thomson First Call analysts. In 1Q2003, Entergy earned $400.9 million ($1.73/share), which included a contribution of $138.6 million (61 cents/share), associated with implementing a new accounting standard on nuclear decommissioning assets and liabilities in the utility and non-utility nuclear businesses.

Operationally, Entergy’s utility, parent and other units earned 55 cents/share in the quarter, which was the same amount earned in 1Q2003. Megawatt-hour sales in the residential sector, after adjusting for milder-than-normal weather, were roughly equal to the strong sales achieved in first quarter 2003. Commercial and governmental sales, after adjusting for weather, increased modestly. Industrial sales experienced an increase of nearly 2% in first quarter 2004 compared to 2003 with usage by petroleum refining customers reflecting significantly increased production.

Higher sales were also realized in the chemicals sector “in spite of the impact of high gas prices that lowered usage by agricultural chemical customers, which are historically sensitive to gas price changes.”

Nuclear was up in the quarter, earning 29 cents, compared with 16 cents a year ago. However, Energy Commodity Services earned 4 cents, compared with 1Q2003’s 41 cents, which the company blamed on the “loss of disproportionate income sharing and decreased U.S. trading profits resulting from lower market volatility.”

CEO J. Wayne Leonard said that the quarter’s results “reflect the subdued volatility in energy commodity markets that limited opportunities in our trading business. The fundamentals in our utility and nuclear operations remain solid, and we expect the combination of productivity improvements, continued operational excellence, and a strong balance sheet to be catalysts for delivering long-term top quartile shareholder returns.”

The “fundamentals of our businesses were again strong,” said CFO Leo Denault, who affirmed earnings estimates for 2004. “The utility was solid; nuclear performed exceptionally well, and our commodity services business turned in a profitable quarter in spite of limited market opportunities.” He said Entergy is forecasting earnings this year in the range of $4.10-$4.30 per share.

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