Fitch lowers Entergy New Orleans

Fitch Ratings said it downgraded the senior secured rating of Entergy New Orleans Inc. to CCC from BBB and placed the ratings on Rating Watch negative. The affiliates' ratings are affirmed for Entergy Arkansas Inc., Entergy Gulf States Inc., Entergy Mississippi Inc. and System Energy Resources Inc.

Fitch downgraded Entergy New Orleans' first mortgage bonds to CCC from BBB and preferred stock to CC from BB+ and placed the issues on Rating Watch negative.

On Tuesday, Entergy Corp. provided information about the estimated costs of storm recovery for all the operating subsidiaries affected by Hurricane Katrina and disclosed that bankruptcy is an option for Entergy New Orleans given the utility subsidiary's poor liquidity position relative to continued operating costs, including power and gas purchase agreements and the high estimated costs of restoration without certainty of cost recovery. Entergy New Orleans' prior outlook was stable.

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