Fitch Revises Outlook on Entergy Corp. & Subsidiaries to Stable; Ratings Affirmed

Business Wire, Oct 12, 2006

NEW YORK -- Fitch revises the Rating Outlook of Entergy Corp. (NYSE:ETR) and its subsidiaries Entergy Arkansas, Inc. (EAI), Entergy Gulf States, Inc. (EGSI), Entergy Louisiana, LLC (ELL), Entergy Mississippi, Inc. (EMI) and System Energy Resources, Inc. (SERI) to Stable from Negative. Fitch also affirms the ratings for each of these companies. A complete list of ratings is available at the bottom of this press release.

The Entergy organization has withstood the financial and operating challenges from last year's unprecedented storm damages without impairment of its consolidated credit profile. While a number of contingencies exist and their resolution cannot be predicted with certainty, Fitch believes the ultimate outcome of such items will have no rating implications. Approximately $8.7 billion of debt is affected.

The Stable Rating Outlook for ETR reflects the partial and continuing recovery of utility cash flows to pre-hurricane levels, strong and growing cash flows from the company's merchant nuclear fleet, limited commodity price exposure, constructive regulatory developments relating to cost recovery, and ample liquidity. Consolidated credit metrics are strong for ETR's rating category as funds from operations (FFO)-to-interest coverage was 4.0 times (x) and total debt-to-FFO was 5.7x for the twelve months ended June 30, 2006. For 2007, Fitch projects that ETR's FFO interest coverage will be in the range of 4.5 to 5.5x, while debt to FFO will be in the range of 4.5 to 5.5x. These projections assume limited storm cost recovery before year-end 2007.

EAI's ratings reflect its strong predictable cash flows, low-cost generation fleet, and the improved credit profiles of hurricane-affected affiliates. The Stable Rating Outlook is based on Fitch's expectation that EAI will maintain credit metrics consistent with its rating category. For 2007, Fitch projects EAI's FFO interest coverage will remain in the range of 5.5 to 6.5x, while debt to FFO will remain in the range of 3.0 to 4.0x. Fitch notes that EAI is currently waiting for several major decisions from regulators; while the company's present credit profile and rating can withstand a moderate deterioration in financial performance caused by any one unsupportive decision, multiple unsupportive decisions could change the rating or Rating Outlook of EAI and its parent, ETR, which relies on utility dividends to fund operations.

EGSI's ratings reflect its limited commodity price exposure, adequate liquidity, and credit metrics consistent with its rating category. For the twelve months ended June 30, 2006, funds from operations (FFO)-to-interest coverage was 4.0x and total debt-to-FFO was 5.8x. The Stable Rating Outlook is based on Fitch's expectation that EGSI's credit metrics will remain adequate for its current rating category. For 2007, Fitch projects EGSI's FFO interest coverage will remain in the range of 3.75 to 4.25x, while debt to FFO will remain in the range of 5.0 to 6.0x. These projections assume limited storm cost recovery before year-end 2007. Fitch also assumes there will be no near-term repayment of debt or equity issued to fund storm restoration costs without proceeds from storm cost recovery.

ELL's ratings reflect its limited commodity price exposure, a supportive capacity cost recovery mechanism, and slowly improving credit metrics. For the twelve months ended June 30, 2006, funds from operations (FFO)-to-interest coverage was 2.3 times (x) and total debt-to-FFO was 10.4x; these metrics are substantially weaker than historical averages and reflect the magnitude of the hurricane damage in 2005. However, Fitch expects operating cash flows, interest coverage, and debt coverage ratios will improve through year-end 2006 and 2007 to pre-hurricane levels. The Stable Rating Outlook is based on Fitch's expectation that ELL's credit metrics will be adequate for its rating category. For 2007, Fitch projects FFO interest coverage will be in the range of 4.5 to 5.5x, and debt to FFO will be in the range of 5.0 to 6.0x. These projections assume limited storm cost recovery before year-end 2007.

EMI's ratings reflect its constructive regulatory environment, the high likelihood of storm cost recovery, and slowly improving credit metrics. For the twelve months ended June 30, 2006, funds from operations (FFO)-to-interest coverage was 2.0 times (x) and total debt-to-FFO was 16.9x; these metrics are substantially weaker than historical averages and reflect the magnitude of the hurricane damage in 2005. However, Fitch expects operating cash flows, interest coverage, and debt coverage ratios will improve through year-end 2006 and 2007 to pre-hurricane levels. The Stable Rating Outlook is based on Fitch's expectation that EMI's credit metrics will be adequate for its rating category. For 2007, Fitch projects EMI's FFO interest coverage will remain in the range of 4.0 to 5.0x, while debt to FFO will remain in the range of 4.5 to 5.5x.

SERI's ratings are supported principally by the obligations of affiliated utilities, ETR's obligation to supply sufficient funds to maintain SERI's equity capital at 35% of capitalization and to pay its debt when due. The Stable Rating Outlook reflects the improved credit profiles of SERI's affiliated utilities.