Entergy 2002 Annual Report Download - page 31

Entergy’s guarantees of unconsolidated obligations out-
standing as of December 31, 2002 total a maximum amount of
$267.5 million. In August 2001, EntergyShaw entered into a
turnkey construction agreement with an Entergy subsidiary,
Entergy Power Ventures, L.P. (EPV), and with Northeast Texas
Electric Cooperative, Inc. (NTEC), providing for the con-
struction by EntergyShaw of a 550 MW electric generating
station to be located in Harrison County, Texas. Entergy has
guaranteed the obligations of EntergyShaw to construct the
plant, which will be 70% owned by EPV. Entergy’s maximum
liability on the guarantee is $232.5 million. In addition, one of
the contracts transferred to Entergy-Koch by Entergy’s power
marketing and trading business is backed by an Entergy
Corporation guarantee authorized in the amount of $35 million.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy
Corporation has agreed to supply System Energy with sufficient
capital to:
maintain System Energy’s equity capital at a minimum of
35% of its total capitalization (excluding short-term debt);
permit the continued commercial operation of Grand Gulf 1;
pay in full all System Energy indebtedness for borrowed
money when due; and
enable System Energy to make payments on specific System
Energy debt, under supplements to the agreement assigning
System Energy’s rights in the agreement as security for the
specific debt.
CAPITAL EXPENDITURE PLANS AND
OTHER USES OF CAPITAL
Following are the amounts of Entergy’s planned construction
and other capital investments by operating segment for 2003
through 2005 (in millions):
Planned Construction and Capital Investment 2003 2004 2005
U.S. Utility $924 $915 $965
Non-Utility Nuclear $201 $142 $109
Energy Commodity Services $ 24 $ 76 $ 3
Other $ 7 $ 7 $ 9
The capital plan for the U.S. Utility primarily consists of
spending for maintenance capital, supporting continued reli-
ability improvements, and customer growth. Also included is
the replacement of the Arkansas Nuclear One Unit 1 (ANO 1)
steam generator and reactor vessel closure head. Entergy
estimates the cost of the fabrication and replacement to be
approximately $235 million, of which approximately $135 million
will be incurred through 2004. Entergy expects the replace-
ment to occur during a planned refueling outage in 2005.
Entergy Arkansas filed in January 2003 a request for a declara-
tory order by the APSC that the investment in the replacement
is in the public interest analogous to the order received in
1998 prior to the replacement of the steam generator for
Arkansas Nuclear One Unit 2 (ANO 2). Receipt of an order
relating to the replacement at ANO 1 would provide additional
support for the inclusion of these costs in a future general
rate case; however, management cannot predict the outcome
of either the request for a declaratory order or a general
rate proceeding.
The capital plan for Non-Utility Nuclear primarily consists
of spending for maintenance capital. Entergy also includes
some spending for power uprate projects in the estimate.
The capital plan for Energy Commodity Services primarily
consists of Entergy’s obligation to make a $73 million cash
contribution to Entergy-Koch in January 2004. The comple-
tion of the Harrison County project is also included in the
plan. The plant has been under construction since 2001.
Entergy will own approximately 385 MW once construction is
completed and operation has begun, which Entergy expects to
occur in June 2003.
The planned construction and capital investments do not
include potential investments in new businesses or assets. The
estimated capital expenditures are subject to periodic review
and modification and may vary based on the ongoing effects of
business restructuring, regulatory constraints, business oppor-
tunities, market volatility, economic trends, and the ability to
access capital.
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, financial strength, and future
investment opportunities. At its October 2002 meeting, the
Board increased Entergy’s quarterly dividend per share by 6%,
to $0.35. In 2002, Entergy paid $299 million in cash dividends
on its common stock.
In accordance with Entergy’s stock option plans, Entergy peri-
odically grants stock options to its employees, which may be
exercised to obtain shares of Entergy’s common stock. In order
to reduce the potential increase in outstanding common shares
created by the exercise of stock options, Entergy plans to
purchase up to 10 million shares of its common stock through
mid-2004 on a discretionary basis through open market
purchases or privately negotiated transactions. Entergy repur-
chased 2,885,000 shares of common stock for a total purchase
price of $118.5 million in 2002.
System Energy Letters of Credit
System Energy had three-year letters of credit in place that
were scheduled to expire in March 2003 securing certain of
its obligations related to the sales/leaseback of a portion
of Grand Gulf 1. System Energy replaced the letters of credit
with new three-year letters of credit totaling approximately
$192 million that are backed by cash collateral. System Energy
used approximately $192 million in March 2003 to provide
this cash collateral.
ENTERGY CORPORATION AND SUBSIDIARIES 2002 29