Entergy 2007 Annual Report Download - page 40

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Entergy Corporation and Subsidiaries 2007
Dividends and Stock Repurchases
Declarations of dividends on Entergy’s common stock are made at
the discretion of the Board. Among other things, the Board evaluates
the level of Entergy’s common stock dividends based upon Entergy’s
earnings, nancial strength, and future investment opportunities. At
its January 2008 meeting, the Board declared a dividend of $0.75 per
share, which is the same quarterly dividend per share that Entergy paid
in the third and fourth quarter 2007. e prior quarterly dividend per
share was $0.54. Entergy paid $507 million in 2007 and $449 million
in 2006 in cash dividends on its common stock.
In accordance with Entergy’s stock-based compensation plan, Entergy
periodically grants stock options to its key employees, which may be
exercised to obtain shares of Entergy’s common stock. According to
the plan, these shares can be newly issued shares, treasury stock, or
shares purchased on the open market. Entergy’s management has been
authorized by the Board to repurchase on the open market shares up to
an amount sucient to fund the exercise of grants under the plans.
In addition to the authority to fund grant exercises, in January
2007 the Board approved a program under which Entergy is
authorized to repurchase up to $1.5 billion of its common stock,
which Entergy expects to complete in 2008. As of December 31,
2007, $997 million of share repurchases have been made pursuant to
this program. In January 2008, the Board authorized an incremental
$500 million share repurchase program to enable Entergy to consider
opportunistic purchases in response to equity market conditions.
Entergy’s nancial aspirations following the consummation of the
planned Non-Utility Nuclear spin-o include a potential new share
repurchase program targeted at $2.5 billion. e amount of this
potential program to follow completion of the spin-o is expected
to be reduced by the amount of repurchases made pursuant to the
January 2008 incremental program.
e amount of repurchases may vary as a result of material changes in
business results or capital spending or new investment opportunities.
e Board had previously approved a program under which
Entergy was authorized to repurchase up to $1.5 billion of its common
stock through 2006. Entergy completed this program in the fourth
quarter 2006.
Entergy New Orleans Debtor-in-Possession
Credit Facility
On September 26, 2005, Entergy New Orleans, as borrower, and
Entergy Corporation, as lender, entered into a debtor-in-possession
credit facility to provide funding to Entergy New Orleans during its
business restoration eorts. e credit facility provided for up to $200
million in loans. e interest rate on borrowings under the credit
facility was the average interest rate of borrowings outstanding under
Entergy Corporation’s revolving credit facility. With the conrmation
of Entergy New Orleans’ plan of reorganization in May 2007, Entergy
New Orleans repaid to Entergy Corporation, in full, in cash, the $67
million of outstanding borrowings under the debtor-in-possession
credit facility.
SO U R C E S O F CA P I TA L
Entergy’s sources to meet its capital requirements and to fund potential
investments include:
n฀ internally generated funds;
n฀ cash on hand ($1.27 billion as of December 31, 2007);
n฀ securities issuances;
n฀ bank nancing under new or existing facilities; and
n฀ sales of assets.
Circumstances such as weather patterns, fuel and purchased power
price uctuations, and unanticipated expenses, including unscheduled
plant outages and storms, could aect the timing and level of internally
generated funds in the future. In the following section, Entergy’s cash
ow activity for the previous three years is discussed.
Provisions within the Articles of Incorporation or pertinent
indentures and various other agreements relating to the long-term debt
and preferred stock of certain of Entergy Corporation’s subsidiaries
restrict the payment of cash dividends or other distributions on their
common and preferred stock. As of December 31, 2007, Entergy
Arkansas and Entergy Mississippi had restricted retained earnings
unavailable for distribution to Entergy Corporation of $396.4 million
and $121.6 million, respectively. All debt and common and preferred
equity issuances by the Registrant Subsidiaries require prior regulatory
approval and their preferred equity and debt issuances are also subject
to issuance tests set forth in corporate charters, bond indentures, and
other agreements. e Registrant Subsidiaries have sucient capacity
under these tests to meet foreseeable capital needs.
e FERC has jurisdiction over authorizing securities issuances by
the Utility operating companies and System Energy (except securities
with maturities longer than one year issued by Entergy Arkansas
and Entergy New Orleans, which are subject to the jurisdiction of
the APSC and the City Council, respectively). No approvals are
necessary for Entergy Corporation to issue securities. e FERC has
issued orders (FERC Short-Term Orders) approving the short-term
borrowing limits of the Utility operating companies and System
Energy through March 31, 2008 (except Entergy New Orleans, which
is eective through May 4, 2009, and Entergy Gulf States Louisiana
and Entergy Texas, which are eective through November 8, 2009). In
January 2008, Entergy led an application with the FERC to extend
the authorization period for its current short-term borrowing limits
and money pool borrowing arrangement until March 2010 (except
for Entergy Gulf States Louisiana and Entergy Texas). Entergy Gulf
States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy
Texas, and System Energy have obtained long-term nancing
authorization from the FERC, and Entergy Arkansas has obtained
long-term nancing authorization from the APSC. e long-term
securities issuances of Entergy New Orleans are limited to amounts
authorized by the City Council, and it intends to le a request during
2008 for renewal of its authority. In addition to borrowings from
commercial banks, the FERC Short-Term Orders authorized the
Registrant Subsidiaries to continue as participants in the Entergy
System money pool. e money pool is an intercompany borrowing
arrangement designed to reduce Entergy’s subsidiaries’ dependence
on external short-term borrowings. Borrowings from the money
pool and external short-term borrowings combined may not exceed
authorized limits. As of December 31, 2007, Entergy’s subsidiaries’
aggregate money pool and external short-term borrowings authorized
limit was $2.1 billion, the aggregate outstanding borrowing from
the money pool was $346.1 million, and Entergy’s subsidiaries had
no outstanding short-term borrowings from external sources. See
Note 4 to the nancial statements for further discussion of Entergy’s
short-term borrowing limits.
Management’s Financial Discussion and Analysis conti nued