Entergy 2010 Annual Report Download - page 43

ENTERGY CORPORATION AND SUBSIDIARIES 2010
Management’s Financial Discussion and Analysis continued
with the project. In January 2011 the procedural schedule in the
proceeding was suspended pending the development and filing of
a revised project schedule and cost estimate.
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 January 2011 meeting, the Board declared a
dividend of $0.83 per share, which is the same quarterly dividend
per share that Entergy has paid since second quarter 2010. The
prior quarterly dividend per share was $0.75. Entergy paid $604
million in 2010, $577 million in 2009, and $573 million in 2008 in
cash dividends on its common stock.
In accordance with Entergy’s stock-based compensation plan,
Entergy periodically grants stock options to 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 sufficient
to fund the exercise of grants under the plan.
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.
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 completed both the $1.5 billion and $500 million programs
in the third quarter 2009. In October 2009 the Board granted
authority for an additional $750 million share repurchase program
which was completed in the fourth quarter 2010. In October 2010
the Board granted authority for an additional $500 million share
repurchase 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 limitations in the credit
markets continue for a prolonged period.
Sources of Capital
Entergy’s sources to meet its capital requirements and to fund
potential investments include:
n internally generated funds;
n cash on hand ($1.29 billion as of December 31, 2010);
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 could restrict the payment of cash dividends or
other distributions on their common and preferred stock. As of
December 31, 2010, under provisions in their mortgage indentures,
Entergy Arkansas and Entergy Mississippi had restricted retained
earnings unavailable for distribution to Entergy Corporation
of $458 million and $240.8 million, respectively, and Entergy
Louisiana had member’s equity unavailable for distribution to
Entergy Corporation of $465 million. 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 regulatory
approvals are necessary for Entergy Corporation to issue
securities. The current FERC-authorized short-term borrowing
limits are effective through October 2011, as established by a
FERC order issued in October 2009. Entergy Gulf States Louisiana,
Entergy Louisiana, Entergy Mississippi, Entergy Texas, and
System Energy have obtained long-term financing authorizations
from the FERC that extend through July 2011. Entergy Arkansas
has obtained long-term financing authorization from the APSC
that extends through December 2012. Entergy New Orleans
has obtained long-term financing authorization from the City
Council that extends through July 2012. In addition to borrowings
from commercial banks, the FERC short-term borrowing
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, 2010, Entergy’s Registrant 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.
HURRICANE GUSTAV AND HURRICANE IKE
In September 2008, Hurricane Gustav and Hurricane Ike caused
catastrophic damage to portions of Entergy’s service territories
in Louisiana and Texas, and to a lesser extent in Arkansas and
Mississippi. The storms resulted in widespread power outages,
significant damage to distribution, transmission, and generation
infrastructure, and the loss of sales during the power outages. In
October 2008, Entergy Gulf States Louisiana, Entergy Louisiana,
and Entergy New Orleans drew a total of $229 million from their
funded storm reserves.
In September 2009, Entergy Gulf States Louisiana and Entergy
Louisiana and the Louisiana Utilities Restoration Corporation
(LURC), an instrumentality of the State of Louisiana, filed with
the LPSC an application requesting that the LPSC grant financing
orders authorizing the financing of Entergy Gulf States Louisiana’s
and Entergy Louisiana’s storm costs, storm reserves, and issuance
costs pursuant to Act 55 of the Louisiana Regular Session of 2007
(Act 55 financings). In July 2010 the Louisiana Local Government
Environmental Facilities and Community Development Authority
(LCDA) issued $468.9 million in bonds under Act 55. From the
$462.4 million of bond proceeds loaned by the LCDA to the LURC,
the LURC deposited $200 million in a restricted escrow account
as a storm damage reserve for Entergy Louisiana and transferred
$262.4 million directly to Entergy Louisiana. In July 2010 the LCDA
issued another $244.1 million in bonds under Act 55. From the
$240.3 million of bond proceeds loaned by the LCDA to the LURC,
the LURC deposited $90 million in a restricted escrow account
as a storm damage reserve for Entergy Gulf States Louisiana and
transferred $150.3 million directly to Entergy Gulf States Louisiana.
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