Entergy 2010 Annual Report Download - page 73

ENTERGY CORPORATION AND SUBSIDIARIES 2010
Notes to Consolidated Financial Statements continued
The preferred membership interests are callable at the option of
Entergy Holdings Company LLC after ten years under the terms
of the LLC agreement. The terms of the membership interests
include certain financial covenants to which Entergy Holdings
Company LLC is subject, including the requirement to maintain
a net worth of at least $1 billion.
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. From the bond proceeds received
by Entergy Gulf States Louisiana from the LURC, Entergy Gulf
States Louisiana used $150.3 million to acquire 1,502,643.04
Class B preferred, non-voting, membership interest units of
Entergy Holdings Company LLC, a company wholly-owned and
consolidated by Entergy, that carry a 9% annual distribution rate.
Distributions are payable quarterly commencing on September
15, 2010, and the membership interests have a liquidation
price of $100 per unit. The preferred membership interests are
callable at the option of Entergy Holdings Company LLC after
ten years under the terms of the LLC agreement. The terms of
the membership interests include certain financial covenants to
which Entergy Holdings Company LLC is subject, including the
requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do
not report the bonds on their balance sheets because the bonds
are the obligation of the LCDA, and there is no recourse against
Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the
event of a bond default. To service the bonds, Entergy Gulf States
Louisiana and Entergy Louisiana collect a system restoration
charge on behalf of the LURC, and remit the collections to the
bond indenture trustee. Entergy Gulf States Louisiana and Entergy
Louisiana do not report the collections as revenue because
they are merely acting as the billing and collection agents for
the state.
Hurricane Katrina and Hurricane Rita
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.
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 traditional securitization. Entergy Gulf
States Louisiana and Entergy Louisiana also filed an application
requesting LPSC approval for ancillary issues including the
mechanism to flow charges and savings to customers via a Storm
Cost Offset rider. On April 8, 2008, the Louisiana Public Facilities
Authority (LPFA), which is the issuer of the bonds pursuant to the
Act 55 financings, approved requests for the Act 55 financings.
On April 10, 2008, Entergy Gulf States Louisiana and Entergy
Louisiana and the LPSC Staff filed with the LPSC an uncontested
stipulated settlement that includes Entergy Gulf States Louisiana
and Entergy Louisiana’s proposals under the Act 55 financings,
which includes a commitment to pass on to customers a
minimum of $10 million and $30 million of customer benefits,
respectively, through prospective annual rate reductions of
$2 million and $6 million for five years. On April 16, 2008, the LPSC
approved the settlement and issued two financing orders and one
ratemaking order intended to facilitate implementation of the Act
55 financings. In May 2008, the Louisiana State Bond Commission
granted final approval of the Act 55 financings.
In July 2008 the LPFA issued $687.7 million in bonds under
the aforementioned Act 55. From the $679 million of bond
proceeds loaned by the LPFA to the LURC, the LURC deposited
$152 million in a restricted escrow account as a storm damage
reserve for Entergy Louisiana and transferred $527 million
directly to Entergy Louisiana. From the bond proceeds received
by Entergy Louisiana from the LURC, Entergy Louisiana invested
$545 million, including $17.8 million that was withdrawn from the
restricted escrow account as approved by the April 16, 2008 LPSC
orders, in exchange for 5,449,861.85 Class A preferred, non-voting,
membership interest units of Entergy Holdings Company LLC, a
company wholly-owned and consolidated by Entergy, that carry a
10% annual distribution rate. Distributions are payable quarterly
commencing on September 15, 2008 and have a liquidation
price of $100 per unit. The preferred membership interests are
callable at the option of Entergy Holdings Company LLC after
ten years under the terms of the LLC agreement. The terms of
the membership interests include certain financial covenants to
which Entergy Holdings Company LLC is subject, including the
requirement to maintain a net worth of at least $1 billion.
In August 2008 the LPFA issued $278.4 million in bonds under
the aforementioned Act 55. From the $274.7 million of bond
proceeds loaned by the LPFA to the LURC, the LURC deposited $87
million in a restricted escrow account as a storm damage reserve
for Entergy Gulf States Louisiana and transferred $187.7 million
directly to Entergy Gulf States Louisiana. From the bond proceeds
received by Entergy Gulf States Louisiana from the LURC, Entergy
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