Entergy 2011 Annual Report Download - page 40

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
Agreement, (v) by either Entergy or ITC if ITC’s shareholders fail
to approve the ITC shareholder proposals, (vi) by Entergy if the
ITC Board of Directors withdraws or changes its recommendation
of the ITC shareholder proposals in a manner adverse to Entergy,
(vii) by Entergy if ITC willfully breaches in any material respect its
non-solicitation covenant and the breach has not been cured by the
cure period specified in the Merger Agreement, (viii) by Entergy if
there is a law or order that enjoins the transactions or imposes a
burdensome condition on Entergy, (ix) by either Entergy or ITC if
there is a law or order that enjoins the transactions or imposes a
burdensome condition on ITC, (x) by ITC, prior to ITC shareholder
approval, to enter into a transaction for a superior proposal,
provided that ITC complies with its notice and other obligations
in the non-solicitation provision and pays Entergy the termination
fee concurrently with termination or (xi) by ITC if Entergy takes
certain actions with respect to the migration of the Transmission
Business to a regional transmission organization if such actions
could reasonably be expected to have certain adverse effects on
TransCo or ITC after the Merger. In the event that (i) ITC terminates
the Merger Agreement to accept a superior acquisition proposal, (ii)
Entergy terminates the Merger Agreement because the ITC Board of
Directors has withdrawn its recommendation of the ITC shareholder
proposals, approves or recommends another acquisition proposal,
fails to reaffirm its recommendation or materially breaches the
non-solicitation provisions, (iii) either of the parties terminates the
Merger Agreement because the approval of ITC’s shareholders is not
obtained or (iv) Entergy terminates because of ITC’s uncured willful
breach of the Merger Agreement, and in the case of clauses (iii) and
(iv) an ITC takeover transaction was publicly announced and not
withdrawn prior to termination and within 12 months of termination
ITC agrees to or consummates a takeover transaction, then ITC must
pay Entergy a $113,570,800 termination fee.
Consummation of the Merger is subject to the satisfaction of
customary closing conditions for a transaction such as the Merger,
including, among others, (i) consummation of the Separation,
the Distribution, the Financings and the Special Dividend, (ii) the
approval of the ITC shareholder proposals by the shareholders
of ITC, (iii) the authorization for listing on the New York Stock
Exchange of ITC common stock to be issued in the Merger, (iv) the
receipt by Entergy of regulatory approvals necessary to become a
member of an acceptable regional transmission organization, (v)
the receipt of regulatory approvals necessary to consummate the
transaction and the expiration of the applicable waiting period under
the Hart-Scott-Rodino Act, and no such regulatory approvals impose
a burdensome condition on ITC or Entergy, (vi) the absence of a
material adverse effect on the Transmission Business or ITC, (vii)
the receipt by Entergy of a solvency opinion and (viii) the receipt
of a private letter ruling from the IRS substantially to the effect that
certain requirements for the tax-free treatment of the distribution of
TransCo are met and an opinion that the Distribution and the Merger
will be treated as tax-free reorganizations for U.S. federal income
tax purposes. The Merger and the other transactions contemplated
by the Merger Agreement and the Separation Agreement are planned
for completion in 2013.
Pursuant to the Separation Agreement, and subject to the terms
and conditions set forth therein, Entergy will engage in a series of
preliminary restructuring transactions that result in the transfer to
TransCo’s subsidiaries of the assets relating to the Transmission
Business (the Separation). TransCo and its subsidiaries will con-
summate certain financing transactions (the TransCo Financing)
totaling approximately $1.775 billion pursuant to which (i) TransCo’s
subsidiaries will borrow through a one-year term funded bridge
facility and (ii) TransCo will issue senior securities of TransCo to
Entergy (the TransCo Securities). Neither Entergy nor the Utility
operating companies will guarantee or otherwise be liable for the
payment of the TransCo Securities. Entergy will issue new debt
or enter into agreements under which certain unrelated creditors
will agree to purchase existing corporate debt of Entergy, which
will be exchangeable into the TransCo Securities at closing (the
Exchangeable Debt Financing). In addition, prior to the closing
TransCo may obtain a working capital revolving credit facility in
a principal amount agreed to by Entergy and ITC (such financing,
together with the TransCo Financing and the Exchangeable Debt
Financing, the Financings).
Under the terms of the Separation Agreement, concurrently
with the TransCo Financing, each Utility operating company will
contribute its respective transmission assets to a subsidiary that will
become a TransCo subsidiary in the Separation in exchange for the
equity interest in that subsidiary and the net proceeds received by that
subsidiary from the one-year funded bridge facility described above.
Each Utility operating company will distribute the equity interests in
the subsidiaries holding the transmission assets to Entergy, which
will then contribute such interests to TransCo. The Utility operating
companies intend to apply all or a portion of the amounts received
by them from the subsidiaries to the prepayment or redemption of
outstanding preferred and debt securities, with the goal, following
completion of the Separation, of maintaining their capitalization
balanced between equity and debt generally consistent with the balance
of their capitalization prior to the Separation. Although the aggregate
amount and particular series of preferred and debt securities of each
Utility operating company to be redeemed as well as the redemption
dates are uncertain at this time and are expected to remain subject
to change, each Utility operating company currently anticipates that
all of its outstanding preferred securities, if any, will be redeemed or
otherwise retired prior to the Separation and that debt securities in
the following approximate aggregate amounts will be redeemed prior
to or following the Separation: $.51 billion for Entergy Arkansas,
$.27 billion for Entergy Gulf States Louisiana, $.38 billion for Entergy
Louisiana, $.29 billion for Entergy Mississippi, $.01 billion for Entergy
New Orleans, and $.30 billion for Entergy Texas. Entergy and the
Utility operating companies may, subject to certain conditions, modify
or supplement the manner in which the Separation is consummated.
As of December 31, 2011, net transmission plant in service, which
does not include transmission-related construction work in progress
or general or intangible plant, for the Utility operating companies was
$.94 billion for Entergy Arkansas, $.50 billion for Entergy Gulf States
Louisiana, $.71 billion for Entergy Louisiana, $.51 billion for Entergy
Mississippi, $.02 billion for Entergy New Orleans, and $.62 billion for
Entergy Texas. Consummation of the Separation is subject to the
satisfaction of the conditions applicable to Entergy and ITC contained
in the Separation Agreement and the Merger Agreement, including
that the sum of the principal amount of TransCo Securities issued to
Entergy and the principal amount of the bridge facility entered into by
TransCo’s subsidiaries is at least $1.775 billion.
ENTERGY WHOLESALE COMMODITIES
AUTHORIZATIONS TO OPERATE ITS NUCLEAR
POWER PLANTS
The NRC operating license for Palisades expires in 2031 and for
FitzPatrick expires in 2034. The NRC operating license for Vermont
Yankee was to expire in March 2012. In March 2011 the NRC renewed
Vermont Yankee’s operating license for an additional 20 years, as
a result of which the license now expires in 2032. For additional
discussion regarding the continued operation of the Vermont
Yankee plant, see “Impairment of Long-Lived Assets” in Note 1 to the
financial statements.
The NRC operating license for Pilgrim expires in June 2012, for Indian
Point 2 expires in September 2013, and for Indian Point 3 expires in
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