Electricity and gas utility Entergy Corp. said Tuesday its New Orleans unit will consider filing for bankruptcy protection in the wake of Hurricane Katrina because lower revenue and high restoration costs could leave that business short of cash.
Entergy, whose New Orleans unit has lost up to an estimated 130,000 customers because of the hurricane, said currently estimates the unit's storm-related costs at $325 million to $475 million. The company put its total estimated costs for repairing and replacing electric and gas facilities damaged by the storm at $750 million to $1.1 billion.
Entergy delivers electricity to 2.7 million customers in Arkansas, Louisiana, Mississippi and Texas, and provides natural gas to nearly 240,000 customers in Louisiana.
Customers in the coverage zone of Entergy's New Orleans unit who still can't get electricity and gas account for between $160 million to $190 million in average annual non-fuel revenue, Entergy said. As of Monday, Entergy had restored power to about 77 percent of the 1.1 million customers who lost power at Katrina's peak, and it expects to restore power to all other customers who can take service in non-flooded parts of the New Orleans area within two weeks.
Entergy said it plans to pursue various avenues for recovering costs from the storm, including getting insurance reimbursements and potential federal relief. While the company believes it has enough liquidity itself, the impact of lower revenue and storm costs at its New Orleans unit is expected to cause liquidity constraints for that business, Entergy said.
The companies are considering various options for easing the unit's financial strain, including reducing cash requirements, issuing debt, expanding short-term borrowing and infusing equity into the unit — as well as a potential bankruptcy filing.
Entergy said it can't predict which options it might pursue because of ongoing uncertainties about how much the storm will ultimately cost the company.