Entergy 2008 Annual Report Download - page 42

40
ENTERGY CORPORATION AND SUBSIDIARIES 2008
Management’s Financial Discussion and Analysis continued
40
spin-off include a potential new share repurchase program
targeted at $2.5 billion, $0.5 billion of which has already been
authorized by the Entergy Board of Directors, with the balance to
be authorized and to commence following completion of spin-off.
The amount of this potential program to follow completion of the
spin-off is expected to be reduced by the amount of repurchases
made pursuant to the January 2008 incremental program.
The amount of repurchases may vary as a result of material
changes in business results or capital spending or new investment
opportunities, or if recent limitations in the credit markets
continue for a prolonged period.
The 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.
EN T E R G Y NE W OR L E A N S DE B T O R -IN -PO S S E S S I O N CR E D I T FA C I L I T Y
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 efforts. The credit facility provided for up to
$200 million in loans. The 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
confirmation 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 T A L
Entergy’s sources to meet its capital requirements and to fund
potential investments include:
ninternally generated funds;
ncash on hand ($1.92 billion as of December 31, 2008);
nsecurities issuances;
nbank financing under new or existing facilities; and
nsales of assets.
Circumstances such as weather patterns, fuel and purchased
power price fluctuations, and unanticipated expenses, including
unscheduled plant outages and storms, could affect the timing
and level of internally generated funds in the future.
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, 2008, Entergy Arkansas and Entergy Mississippi had
restricted retained earnings unavailable for distribution to Entergy
Corporation of $461.6 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.
Entergy believes that the Registrant Subsidiaries have sufficient
capacity under these tests to meet foreseeable capital needs.
The FERC has jurisdiction over 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. The 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, 2010 (except Entergy Gulf
States Louisiana and Entergy Texas, which are effective through
November 8, 2009, as established by an earlier FERC order).
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy
Mississippi, Entergy Texas, and System Energy have obtained
long-term financing authorization from the FERC, and Entergy
Arkansas has obtained long-term financing authorization from
the APSC. The long-term securities issuances of Entergy New
Orleans are limited to amounts authorized by the City Council,
and the current authorization extends through August 2010. 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. The 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, 2008, 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 $436.2 million, and Entergy’s subsidiaries’ had no outstanding
short-term borrowings from external sources. See Notes 4 and
5 to the financial statements for further discussion of Entergy’s
borrowing limits and authorizations.
In January 2009, Entergy Texas issued $500 million of 7.125% Series
Mortgage Bonds due February 2019. Entergy Texas used a portion of
the proceeds to repay Entergy Corporation on a $160 million note
for money advanced in December 2008, to repay the $100 million
outstanding on its credit facility, and to repay short-term borrowings
under the Entergy System money pool. Entergy Texas intends to use
the remaining proceeds to repay on or prior to maturity approximately
$70 million of obligations that had been assumed by Entergy Texas
under the debt assumption agreement with Entergy Gulf States
Louisiana and for other general corporate purposes.
HU R R I C A N E KA T R I N A A N D HU R R I C A N E RI T A
In August and September 2005, Hurricanes Katrina and Rita
caused catastrophic damage to large portions of the Utility’s service
territories in Louisiana, Mississippi, and Texas, including the effect
of extensive flooding that resulted from levee breaks in and around
the greater New Orleans area. The storms and flooding resulted
in widespread power outages, significant damage to electric
distribution, transmission, and generation and gas infrastructure,
and the loss of sales and customers due to mandatory evacuations
and the destruction of homes and businesses. Entergy has pursued
a broad range of initiatives to recover storm restoration and
business continuity costs, including obtaining reimbursement of
certain costs covered by insurance and pursuing recovery through
existing or new rate mechanisms regulated by the FERC and local
regulatory bodies, including the issuance of securitization bonds.
Following are updates regarding Entergy’s cost recovery efforts.
Storm Cost Financings
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana,
and the Louisiana Utilities Restoration Corporation (LURC),
an instrumentality of the State of Louisiana, filed at the LPSC
an application requesting that the LPSC grant financing orders
authorizing the financing of Entergy Gulf States Louisiana and
Entergy Louisiana storm costs, storm reserves, and issuance costs
pursuant to Act 55 of the Louisiana Legislature (Act 55 financings).
The Act 55 financings are expected to produce additional
customer benefits as compared to Act 64 traditional securitization.
Entergy Gulf States Louisiana and Entergy Louisiana also filed
an application requesting LPSC approval for ancillary issues