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Fitch Revises Entergy New Orleans Rtgs on Emergence from Bankruptcy; Outlook Stable.

NEW YORK -- Fitch Ratings has revised Entergy New Orleans Inc.'s (ENOI) Issuer Default Rating (IDR) to 'BB'. In addition, Fitch has upgraded the following reinstated security ratings of ENOI upon its emergence from bankruptcy:

--First mortgage bonds to 'BBB-' from 'CCC';

--Preferred stock to 'BB' from 'CC'.

The Rating Outlook is Stable.

The ratings reflect credit metrics that are appropriate for the category and business risk as well as lower sustainable operating cash flows and a weaker operating profile. The ratings also reflect the considerable capital spending requirements to repair and restore the gas distribution system and, to a lesser extent, the electric system. Re-building of the system will occur as necessary to serve returning customer load. The 2005 hurricanes destroyed a significant portion of ENOI's customer base, reducing the number of electric and gas customers by 50% and 55%, respectively, from YE2004. In addition, ENOI's electric customer mix has shifted to 59% commercial/industrial and 24% residential, from 48% commercial/industrial and 35% residential. Fitch views commercial and industrial demand as more elastic than residential demand. Offsetting these concerns are ample cash on hand from insurance proceeds and Community Development Block Grants, higher authorized electric rates, the demonstrated commitment to rebuilding ENOI by its parent, Entergy Corp., and reasonable support from state lawmakers and city regulators. In the reorganization plan, financial grants from Federal agencies, financial support from Entergy Corp., insurance proceeds, and a tariff adjustment permitted full recovery for all pre-petition creditors and successful emergence from bankruptcy. Fitch expects a full year of the rate increase to result in improvements in credit metrics in 2007.

Changes to ENOI's ratings and Rating Outlook will depend on the rate of load growth, the timing and amount of cost recovery, as well as the timing and velocity of the rebuilding of the gas system relative to receipt of additional insurance proceeds and customer demand. Event risk from another large hurricane remains. While ENOI is building a $75 million storm reserve, it will take 10 years to fully fund.

ENOI is an electric and gas utility that serves customers in and around the city of New Orleans. ENOI is a wholly owned subsidiary of Entergy Corp.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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Publication:Business Wire
Date:May 8, 2007
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