A judge has approved Entergy New Orleans’ acceptance of up to $200 million in federal storm recovery funds and at least $50 million in insurance payments for Hurricane Katrina damage, a key step in the city’s electricity and natural gas utility emerging from bankruptcy.
ENO, a unit of New Orleans-based Entergy Corp., filed for protection from its creditors in October 2005 after Katrina and flooding resulting from breached levees in the below-sea level city largely wiped out its system and left it, for months, with few paying customers.
Before the storm, ENO typically contributed only 10 to 15 cents per share of earnings at Entergy Corp., which has not sought bankruptcy protection.
The unit had already obtained the required state approval to get the federal aid, which will help pay for storm recovery costs so far estimated at $213 million, but expected to rise. Formal approval by U.S. Bankruptcy Judge Jerry Brown was required for ENO to get the money.
Under ENO’s reorganization plan, all creditors would be paid in full and the company would maintain its current work force of 400 employees. But the plan would not go into effect without the $200 million grant and at least $50 million in insurance payments. Earlier this month, ENO said it had settled an insurance claim with AIG Inc. for $53.7 million.
Brown approved the insurance payment during an afternoon hearing. ENO attorney Elizabeth Futrell said the company would have at least $50 million in its hands within 30 days. So far, ENO has received $9.8 million in insurance payments, she said.
The immediate storm relief payment will be about $171.1 million. ENO attorney Patrick Vance said the company could have that money by Friday following the judge’s approval. The rest of the federal money – up to the full $200 million – will be paid over the next year after storms costs are certified by the New Orleans City Council, which regulates ENO.
The two payments approved are “more than what’s necessary to exit bankruptcy,” Futrell told the judge.
The bankruptcy reorganization process could be wrapped up by the end of next week. With the contracts in place, Brown has scheduled two days of hearings May 3-4 to confirm the reorganization plan. ENO has said that could enable it to emerge from bankruptcy around June 30.
The company is far from finished spending on Katrina damage. ENO said it expects to spend $465 million to rebuild its natural gas system to pre-storm standards.
The federal funds were sought by ENO to cushion rate increases to repair storm damage. Under a plan approved by the City Council, the company will be allowed to raise electric and gas rates by about 7.5 percent through April 2009. The plan includes a special assessment to build up a $75 million reserve fund against future storms.
Prior to Katrina, ENO had 190,000 power customers and 147,000 natural gas customers in Orleans Parish. Currently, the company says it has about 95,000 electricity customers and 65,000 gas customers.
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