As with many companies whose operations have been damaged by Hurricane Katrina, Entergy (ETR) has been in the news, writes utility analyst Sandy Cohen. Entergy has issued updates. But so have research analysts, and the general media. What follows are mainly links to some articles, press releases, and analyst reports. Where links are unavailable, I provide a brief summary of the report or article.
- Our initial article commenting on ETR's decision to withdraw earnings guidance: Article on ETR on 9/6/05
- ETR's Home page: This site has a variety of Katrina-related links for those looking for updates.
- ETR's Hurricane Rita Update: On ETR's home site is a link to a warning on Hurricane Rita, which is currently lined up to smash the Texas Gulf Coast ... the heart of Entergy's Texas operations. Of concern to investors, ETR points out that it is pulling out its Texas operations workers from Louisiana and shifting them back to Texas. ETR points out that they are thin right now. The potential implication for ETR is potentially more lost revenues and customers ... and delayed return of those customers to service since ETR is potentially short workers.
- USA Today Article on Potential Declaration of Bankruptcy for Entergy New Orleans Unit. In this article, USA cites and ETR press release estimating total cost to repair its systems at over $1 billion. This appears to be more protective than reflective of a lack of resources ... and may be partially a result of the upcoming change in bankruptcy law passed by Congress earlier this year that substantially reduces the rights and protections for those declaring bankruptcy (the law goes into effect sometime in mid-October, I believe). And while the corporation as a whole will not be declaring bankruptcy, a declaration of even one subsidiary would certainly seem likely to have an adverse financial impact on the credit ratings and bond values for the entire corporation, as well as Entergy New Orleans (previously New Orleans Public Service Inc. or NOPSI). There was also a comment from one of the commissioners in Louisiana, who basically says he would not entertain any rate increases by ETR to pay for the repairs. Fortunately for ETR, that is just 1 commissioner, and that regulatory body does not control Entergy New Orleans' rates.
- CSFB also published a nice update on ETR's storm damage update, and potential financial implications. As always, his report is excellent, and strongly suggested reading. In summary, the report highlights the real potential for ETR to lose a substantial number of customers for a relatively long period of time. This could result in a loss of $210 to $250 million of gross margin, which could translate to a loss of $130 to $155 million of net income, or $0.60 to $0.72 in EPS ... all over the next 12 months. While ETR will likely be able to defer a large amount of expenses, it cannot recoup the lost gross margins (non-fuel revenues).
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