Entergy 2004 Annual Report Download - page 68

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Entergy Corporation and Subsidiaries 2004
At December 31, 2004, Entergy had $342.4 million in net
realized federal capital loss carryforwards that will expire as follows:
$103.8 million in 2007, $10.6 million in 2008, and $228.0 million
in 2009.
At December 31, 2004, Entergy had federal net operating
loss carryforwards of $2.9 billion. If the federal net operating loss
carryforwards are not utilized, they will expire in the years 2023
through 2024.
At December 31, 2004, Entergy had state net operating loss
carryforwards of $3.5 billion, primarily resulting from Entergy
Louisiana’s mark-to-market tax election and the change in method
of accounting for tax purposes related to cost of goods sold, as
discussed above. If the state net operating loss carryforwards are not
utilized, they will expire in the years 2008 through 2019.
The 2004 and 2003 valuation allowances are provided against
UK capital loss and UK net operating loss carryforwards, and
certain state net operating loss carryforwards. The UK losses can be
utilized against future UK taxable income. For UK tax purposes,
these carryforwards do not expire.
On October 22, 2004, the American Jobs Creation Act of 2004
(the Act) was enacted. The Act promotes domestic production
and investing activities by providing a number of tax incentives,
including a temporary incentive to repatriate accumulated
foreign earnings, subject to certain limitations, by providing an
85% dividends received deduction for certain repatriated earnings
and also providing a tax deduction of up to 9% of qualifying
production activities. In 2004, Entergy repatriated $64 million of
accumulated foreign earnings, which resulted in approximately
$16.1 million of tax benefit. At December 31, 2004, Entergy has
approximately $7.4 million of undistributed earnings from
subsidiary companies outside the United States that are being
considered for repatriation. If these earnings are repatriated in
accordance with the Act, the repatriation would result in
approximately $1.5 million of income tax expense. In accordance
with FSP 109-1, whichwas issued by the FASB to address the
accounting for the impacts of the Act, the allowable production tax
credit will be treated as a special deduction in the period in which it
is deducted rather than treated as a tax rate change during 2004
which is the period in which the Act was signed into law. The
adoption of FSP 109-1 and FSP 109-2, also issued by the FASB to
address the accounting for the repatriation provisions of the Act, did
not have a material effect on Entergy's financial statements.
NOTE 4. LINES OF CREDIT AND
SHORT-TERM BORROWINGS
Entergy Corporation has in place two separate credit facilities, a
5-year credit facility and a 3-year credit facility. The 5-year credit
facility, which expires in December 2009, has a borrowing capacity
of $500 million, none of which was outstanding at December 31,
2004. The 3-year credit facility, which expires in May 2007, has a
borrowing capacity of $965 million, of which $50 million was
outstanding at December 31, 2004. Entergy also has the ability to
issue letters of credit against the total borrowing capacity of both
credit facilities, and $50 million had been issued against this 3-year
facility at December 31, 2004. The commitment fee for these
facilities is currently 0.13% of the line amount. Commitment fees
and interest rates on loans under the credit facility can fluctuate
depending on the senior debt ratings of the domestic
utility companies.
Entergy Corporation’s facilities require it to maintain a
consolidated debt ratio of 65% or less of its total capitalization, and
maintain an interest coverage ratio of 2 to 1. If Entergy fails to meet
these limits, or if Entergy or the domestic utility companies default
on other indebtedness or are in bankruptcy or insolvency
proceedings, an acceleration of the facility’s maturity date
mayoccur.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans each have 364-day credit facilities available
as follows (in millions):
Amount Drawn as
Company Expiration Date Amount of Facility of Dec. 31, 2004
EntergyArkansas April 2005 $85 –
EntergyLouisiana April 2005 $15(a) –
Entergy Mississippi May 2005 $25 –
Entergy NewOrleans April 2005 $14(a) –
(a) The combined amount borrowed by Entergy Louisiana and Entergy New Orleans
under these facilities at any one time cannot exceed $15 million.
The 364-day credit facilities have variable interest rates and the
average commitment fee is 0.13%. The Entergy Arkansas facility
requires it to maintain total shareholder’s equity of at least 25% of
its total assets.
The short-term borrowings of Entergy’s subsidiaries are limited
to amounts authorized by the SEC. The current limits authorized
are effective through November 30, 2007. In addition to borrowing
from commercial banks, Entergy’s subsidiaries are authorized under
the SEC order to borrow from Entergy’s money pool. The money
pool is an inter-companyborrowing arrangement designed to
reduce Entergy’s subsidiaries’ dependence on external short-term
borrowings. Borrowings from the money pool and external
borrowings combined may not exceed the SEC authorized limits.
As of December 31, 2004, Entergy’s subsidiaries’ aggregate
authorized limit was $1.6 billion and the aggregate outstanding
borrowing from the money pool was $151.6 million. There were no
borrowings outstanding from external sources. Under the SEC
order and without further SEC authorization, the domestic utility
companies and System Energy cannot issue new short-term
indebtedness unless (a) Entergy and the borrower each maintain
common equity of at least 30% of its capital and, (b) with the
exception of money pool borrowings, the debt security to be issued
(if rated) and alloutstanding securities of the issuer and Entergy
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued