Entergy 2006 Annual Report Download - page 48

ENTERGY CORPORATION AND SUBSIDIARIES 2
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facility, additional debt issuances, including Entergy Corporation’s
equity units issuance, along with a decrease in shareholders’ equity,
primarily due to repurchases of common stock.
2006 2005 2004
Net debt to net capital at the end of the year 49.4% 51.5% 45.3%
Effect of subtracting cash from debt 2.9% 1.6% 2.1%
Debt to capital at the end of the year 52.3% 53.1% 47.4%
Net debt consists of debt less cash and cash equivalents. Debt consists
of notes payable, capital lease obligations, preferred stock with sink-
ing fund, and long-term debt, including the currently maturing
portion. Capital consists of debt, shareholders’ equity, and preferred
stock without sinking fund. Net capital consists of capital less cash
and cash equivalents. Entergy uses the net debt to net capital ratio
in analyzing its financial condition and believes it provides useful
information to its investors and creditors in evaluating Entergy’s
financial condition.
Long-term debt, including the currently maturing portion, makes
up substantially all of Entergy’s total debt outstanding. Following are
Entergy’s long-term debt principal maturities and estimated interest
payments as of December 31, 2006. To estimate future interest pay-
ments for variable rate debt, Entergy used the rate as of December 31,
2006. The figures below include payments on the Entergy Louisiana
and System Energy sale-leaseback transactions, which are included in
long-term debt on the balance sheet (in millions):
Long-term Debt Maturities 2010- After
and Estimated Interest Payments 2007 2008 2009 2011 2011
Utility $453 $ 1,154 $ 582 $ 1,389 $ 7,219
Non-Utility Nuclear 100 36 36 71 192
Parent Company & Other
Business Segments 144 410 396 1,765 –
Total $697 $1,600 $1,014 $3,225 $7,411
Note 5 to the financial statements provides more detail concerning
long-term debt.
In May 2005, Entergy Corporation entered into a $2 billion five-
year revolving credit facility, which expires in May 2010. In
December 2005, Entergy Corporation entered into a $1.5 billion
three-year revolving credit facility, which expires in December 2008.
Entergy Corporation also has the ability to issue letters of credit
against the total borrowing capacity of both the three-year and the
five-year credit facilities.
Following is a summary of the borrowings outstanding and capac-
ity available under these facilities as of December 31, 2006
(in millions):
Facility Capacity Borrowings Letters of Credit Capacity Available
5-Year Facility $2,000 $820 $94 $1,086
3-Year Facility $1,500 $ – $ – $1,500
Entergy Corporation’s credit facilities require it to maintain a consol-
idated debt ratio of 65% or less of its total capitalization. If Entergy
fails to meet this debt ratio, or if Entergy or one of the Utility operat-
ing companies (other than Entergy New Orleans) default on other
indebtedness or are in bankruptcy or insolvency proceedings, an
acceleration of the credit facilities’ maturity dates may occur.
Capital lease obligations, including nuclear fuel leases, are a mini-
mal part of Entergy’s overall capital structure, and are discussed
further in Note 10 to the financial statements. Following are Entergy’s
payment obligations under those leases (in millions):
2010- After
2007 2008 2009 2011 2011
Capital lease payments,
including nuclear fuel leases $153 $186 $– $– $2
Notes payable includes borrowings outstanding on credit facilities
with original maturities of less than one year. Entergy Arkansas,
Entergy Gulf States, and Entergy Mississippi each have 364-day
credit facilities available as follows (in millions):
Expiration Amount of Amount Drawn as
Company Date Facility of Dec. 31, 2006
Entergy Arkansas April 2007 $85 –
Entergy Gulf States February 2011 $50(a) –
Entergy Mississippi May 2007 $30(b) –
Entergy Mississippi May 2007 $20(b) –
(a) The credit facility allows Entergy Gulf States to issue letters of credit against
the borrowing capacity of the facility. As of December 31, 2006, $1.4 million
in letters of credit had been issued.
(b) Borrowings under the Entergy Mississippi facilities may be secured by a security
interest in its accounts receivable.
Operating Lease Obligations and Guarantees of
Unconsolidated Obligations
Entergy has a minimal amount of operating lease obligations and
guarantees in support of unconsolidated obligations. Entergy’s guar-
antees in support of unconsolidated obligations are not likely to have
a material effect on Entergy’s financial condition or results of opera-
tions. Following are Entergy’s payment obligations as of December
31, 2006 on non-cancelable operating leases with a term over one year
(in millions):
2010- After
2007 2008 2009 2011 2011
Operating lease payments $97 $80 $78 $123 $144
The operating leases are discussed more thoroughly in Note 10 to the
financial statements.
Summary of Contractual Obligations of Consolidated Entities
(in millions)
2008- 2010- After
Contractual Obligations 2007 2009 2011 2011 Total
Long-term debt(1) $ 697 $2,614 $3,225 $7,411 $13,947
Capital lease payments(2) $ 153 $ 186 $ – $ 2 $ 341
Operating leases(2) $ 97 $ 158 $ 123 $ 144 $ 522
Purchase obligations(3) $1,414 $2,127 $1,754 $3,690 $ 8,985
(1) Includes estimated interest payments. To estimate future interest payments for
variable rate debt, Entergy used the rate as of December 31, 2006. Long-term
debt is discussed in Note 5 to the financial statements.
(2) Capital lease payments include nuclear fuel leases. Lease obligations are
discussed in Note 10 to the financial statements.
(3) Purchase obligations represent the minimum purchase obligation or
cancellation charge for contractual obligations to purchase goods or services.
Almost all of the total are fuel and purchased power obligations.
In addition to these contractual obligations, in 2007, Entergy expects
to contribute $176 million to its pension plans, including Entergy
New Orleans’ contribution of $44 million, and $66 million to other
postretirement plans, including Entergy New Orleans’ contribution
of $5 million.
MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS continued