Well apparently the Government does not owe Entergy

Who knew that lobbying well for the same thing could either mean receiving money after a disaster or not receiving it? There was an article in The Times-Picayune today about the fed not giving any assistance to Entergy following Hurricane Katrina.

Entergy Corp. investors, not taxpayers, should pay for the $350 million that the company's bankrupt New Orleans utility needs to rebound from Hurricane Katrina, a senior White House official wrote in a letter to an Entergy executive…

"The risk of a financial loss from a natural disaster is one that any investor in a private firm must face, and it would be wrong for the taxpayer to bail out those investors after the fact," wrote Allan Hubbard, chairman of the White House's Gulf Coast Recovery and Rebuilding Council.

"We believe that transferring federal tax dollars to the bondholders and shareholders of a private firm is inappropriate," Hubbard wrote.

Entergy executives and city officials who regulate the local power supplier have pushed hard in Washington for federal aid, warning that electricity rates in New Orleans could jump more than 140 percent if utility customers are forced to foot the hurricane recovery bill. They said such a rate increase would significantly raise the cost of living in the city and stifle its recovery.

This is the unbelievable part.

What's more, they've said, Entergy New Orleans should receive the same financial support given to New York's power utility, ConEdison Co. of New York, which received $250 million in federal aid after the Sept. 11, 2001, terrorist attacks on the World Trade Center towers. Like Entergy New Orleans, the New York utility is a subsidiary of a much larger utility holding company, Consolidated Edison Inc., which was not required to foot the recovery bill for its subsidiary.

But the letter from the White House makes it clear that Entergy's lobbying efforts have fallen short.

I cannot believe that they would help New York but not New Orleans, and the reasoning is because “Entergy’s lobbying efforts have fallen short”?

The local utility sustained massive damage to its electrical and gas networks and filed to reorganize under bankruptcy protection shortly after the storm. With a greatly reduced customer base in the city, the utility has few sources of revenue. For the time being, most of the company's cash is coming from loans from its parent, Entergy Corp., through a bankruptcy mechanism…

U.S. Rep. Bobby Jindal, R-Kenner, said Monday that Bush's reluctance to finance Entergy New Orleans' storm recovery is rooted in feelings within the administration that taxpayer money was squandered on corporate bailouts after the Sept. 11 terrorist attacks, particularly those that went to airlines that later filed for bankruptcy.

But the congressman said Entergy New Orleans is facing much more dire conditions than any of the companies that received federal help after the terrorist
attacks.

After 9/11, there was a brief economic aftermath. The stock market was closed for six days. Nothing like the economic aftermath that is affecting New Orleans.

I went to the New Orleans Entergy website, and no where do they mention the recent rejection of aid from the federal government. They do mention the work they have accomplished since Katrina.

The vast majority of residents and businesses in the New Orleans area will have electric and gas service available to them within six weeks following the approval by the New Orleans City Council on Thursday to reallocate funds to assist storm restoration efforts.

Entergy New Orleans has worked with New Orleans City Council members and the council’s utility committee advisors to identify ways to assist the company in accelerating restoration of electric and gas service. Together, the company and the council have developed a plan to make it possible for the utility company to secure additional storm restoration resources that will expedite restoration in New Orleans neighborhoods - except for the decimated areas. Those areas are expected to have power by February 2006.

The press release following this one talks about an assistance fund Entergy has set up to help displaced victims.

The Entergy Corporation has announced $1.8 million in grants from the Power of Hope Fund to approximately 2,200 individuals and families who suffered losses in Hurricanes Katrina and Rita.

Entergy seeded the Power of Hope fund with an initial $1 million contribution. Through donations from employees, individuals, businesses and organizations, the fund has grown to $3.5 million. However, the fund has been flooded with requests for assistance. More than 10,000 requests totaling over $500 million have been received.

There was a press release over a month ago concerning Entergy New Orleans bankruptcy.

To protect its customers and ensure continued progress in restoring power and gas service to New Orleans after Hurricane Katrina, Entergy Corporation announced today that its New Orleans subsidiary – Entergy New Orleans, Inc.– has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Simultaneous with this filing, Entergy New Orleans filed a motion with the Court for “debtor-in-possession” financing that contemplates Entergy Corporation making loans up to $200 million to Entergy New Orleans to address Entergy New Orleans’ current liquidity crisis. The petition also requests that up to $150 million of these loans be approved on an interim basis. These funds will enable Entergy New Orleans to meet its near-term obligations, including employee wages and
benefits, payments under power purchase and gas supply agreements, and its
current efforts to repair and restore the facilities needed to serve its electric and gas customers.

I find this extremely interesting that Entergy New Orleans is filing bankruptcy, and still the company is giving away money. Now correct me if I’m wrong, but doesn’t bankruptcy mean they don’t have enough money? Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. “To pay their creditors” – I think that involves money.

Am I the only one confused?

Amid all this confusion I decided to go to someone who might shed a little light on my bankruptcy questions. Gerald Casey is a bankruptcy attorney in Lake Charles, Louisiana.

The first thing you would have to look at is Entergy’s assets and liabilities to establish how they are able to have the Hope Fund.

The company they filed under is Entergy New Orleans Inc., case number 05-17697, filed Sept. 23, 2005, in the U.S. Bankruptcy Court for the Eastern District of Louisiana.

According to the total amount of debt $3.5 million is nothing. This is going to be a really complicated case.

The contribution to the charity could be recovered through the bankruptcy and may be. It’s either a "fraudulent conveyance" or a "preferential payment.” I expect the employees will be looking at all transactions pre-bankruptcy in order to recover money to fully fund employee benefits.

Mr. Casey sent me Entergy New Orleans’ summary of schedules. Entergy New Orleans owes to the 20 largest unsecure creditors a total of $82,851,410.18. The top to unsecure creditors are Atmos Energy Marketing, LLC, who they owe almost $20 million, and Bridgeline Gas Markeeting, LLC, who they owe almost $13 million.

More information then I originally intended, but it does give us a feel of what he was talking about the $3.5 million really being nothing. It appears that Entergy is going to have to start doing some serious money management.

I want to know what happens if Entergy cannot afford to be in New Orleans. I guess another bigger energy company will buy them out. That will be real interesting with New Orleans like it is right now.