Fitch Revises Rating Outlooks of Entergy Subsidiaries to Negative

Business Wire, Oct 6, 2005

NEW YORK -- Fitch Ratings affirms the ratings of Entergy Arkansas, Inc. (EAI), Entergy Gulf States, Inc. (EGSI), Entergy Louisiana, Inc. (ELA), Entergy Mississippi, Inc. (EMI), System Energy Resources, Inc. (SERI), and revises the Rating Outlook for each of these companies to Negative from Stable. A complete list of ratings affected by today's action is provided below.

In its 8-K filing dated Oct. 4, 2005, Entergy Corp. (ETR) estimated repair and restoration costs from Hurricane Rita will be in the range of $400 million to $550 million. These costs are in addition to the estimated $750 million to $1.1 billion of repairs needed to fix damage from Hurricane Katrina. In Fitch's view, the incremental costs from the second hurricane will further increase consolidated debt and reduce cash flow from operations. Recovery of storm costs could come through traditional rate mechanisms, utility tariff securitization bonds, or federal and/or state financial assistance. The timing and nature of any recovery is unknown. Delayed cost recovery or under-recovery could result in ratings downgrades for one or more of these companies. However, constructive regulatory orders relating to the storm could result in a revision of the Rating Outlook to Stable from Negative.

Fitch evaluates the issuers in the ETR group as separate entities with distinct but linked ratings. The rating linkage stems from the utilities' participation in a shared money pool and reliance upon a $2 billion parent company credit facility as their primary sources of short-term financing. Storm costs are expected to increase outstanding debt at the parent company and/or affected subsidiaries. Lower cash flows from ELI and EGSI are likely to increase pressure on EAI, EMI, and SERI to maintain or increase upstream dividends to support parent company debt service and other costs.

EGSI is at greatest risk of a rating downgrade. The current high-end estimate of repair and restoration costs for EGSI is $550 million. Historically, the state regulatory environment for EGSI has been difficult as its service territory is split between LA and TX jurisdictions.

While the service territory of ELI sustained significant damage from Katrina, its ratings are less at risk than those of EGSI. Before the hurricanes, ELI's credit measures were strong for its rating category and provided a cushion to absorb much of the negative financial impact from the storms.

EMI suffered some storm damage from Katrina and to a lesser extent Rita, but the current high estimate of $105 million of combined costs is relatively manageable. Also, the Mississippi Public Service Commission has demonstrated its support for maintaining its utilities' credit quality.

SERI's fixed costs and debt service are recovered under intercompany agreements with Entergy New Orleans, Inc. (ENOI), ELI, EMI, and EAI (that is, all the operating utilities save EGSI). Approximately 17% of SERI's costs are borne by ENOI. Fitch's current rating and Negative Outlook anticipate that ENOI's share of the payments will be covered either by ENOI as debtor-in-possession or by Entergy Corp. or other affiliates, in turn supported by market sales of the power or use of the power to meet other affiliates' demand.

The following ratings have been affirmed and the Rating Outlook has been revised to Negative from Stable by Fitch:

Entergy Arkansas, Inc. (EAI)

-- First mortgage bonds at 'BBB ';

-- Pollution control revenue bonds at 'BBB';

-- Preferred stock at 'BBB-'.

Entergy Gulf States, Inc. (EGSI)

-- First mortgage bonds at 'BBB';

-- Pollution control revenue bonds at 'BBB-';

-- Preferred stock at 'BB '.

Entergy Louisiana, Inc. (ELI)

-- First mortgage bonds at 'BBB ';

-- Pollution control revenue bonds at 'BBB';

-- Preferred stock at 'BBB-'.

Entergy Mississippi, Inc. (EMI)

-- First mortgage bonds at 'BBB ';

-- Preferred stock at 'BBB-'.

System Energy Resources, Inc. (SERI)

-- First mortgage bonds at 'BBB-';

-- Senior unsecured debt at 'BBB-'.

The following ratings are affirmed by Fitch:

Entergy New Orleans, Inc. (ENOI)

-- First mortgage bonds at 'CCC';

-- Preferred stock at 'CC';

-- Issuer default rating at 'D'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.