Entergy 2012 Annual Report Download - page 35

Entergy Corporation and Subsidiaries 2012
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
LIQUIDITY AND CAPITAL RESOURCES
This section discusses Entergy’s capital structure, capital spending
plans and other uses of capital, sources of capital, and the cash flow
activity presented in the cash flow statement.
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown
in the following table:
2012 2011
Debt to capital 58.7% 57.3%
Effect of excluding securitization bonds (1.8%) (2.3%)
Debt to capital, excluding securitization bonds(1) 56.9% 55.0%
Effect of subtracting cash (1.1%) (1.5%)
Net debt to net capital,
excluding securitization bonds(1) 55.8% 53.5%
(1) Calculation excludes the Arkansas, Louisiana and Texas securitization bonds,
which are non-recourse to Entergy Arkansas, Entergy Louisiana, and Entergy
Texas, respectively.
Net debt consists of debt less cash and cash equivalents. Debt con-
sists of notes payable, capital lease obligations, and long-term debt,
including the currently maturing portion. Capital consists of debt,
common shareholders’ equity, and subsidiaries’ preferred stock with-
out sinking fund. Net capital consists of capital less cash and cash
equivalents. Entergy uses the net debt to net capital ratio and the
ratios excluding securitization bonds in analyzing its financial condi-
tion and believes they provide useful information to its investors and
creditors in evaluating Entergy’s financial condition.
Long-term debt, including the currently maturing portion, makes
up most of Entergy’s total debt outstanding. Following are Entergy’s
long-term debt principal maturities and estimated interest payments
as of December 31, 2012. To estimate future interest payments for
variable rate debt, Entergy used the rate as of December 31, 2012.
The amounts 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 and 2016- After
Estimated Interest Payments 2013 2014 2015 2017 2017
Utility $1,194 $ 904 $ 816 $1,540 $12,186
Entergy Wholesale Commodities 15 15 18 4 57
Parent & Other 83 83 627 1,385 512
Total $1,292 $1,002 $1,461 $2,929 $12,755
Note 5 to the financial statements provides more detail concerning
long-term debt outstanding.
Entergy Corporation has in place a credit facility that has a bor-
rowing capacity of $3.5 billion and expires in March 2017. Entergy
Corporation also has the ability to issue letters of credit against 50%
of the total borrowing capacity of the credit facility. The commitment
fee is currently 0.275% of the commitment amount. Commitment
fees and interest rates on loans under the credit facility can fluctu-
ate depending on the senior unsecured debt ratings of Entergy
Corporation. The weighted average interest rate for the year ended
December 31, 2012 was 2.04% on the drawn portion of the facility.
As of December 31, 2012, amounts outstanding and capacity avail-
able under the $3.5 billion credit facility are (in millions):
Capacity Borrowings Letters of Credit Capacity Available
$3,500 $795 $8 $2,697
A covenant in Entergy Corporation’s credit facility requires Entergy
to maintain a consolidated debt ratio of 65% or less of its total
capitalization. The calculation of this debt ratio under Entergy
Corporation’s credit facility is different than the calculation of the
debt to capital ratio above. Entergy is currently in compliance with
the covenant. If Entergy fails to meet this ratio, or if Entergy or one
of the Utility operating companies (except Entergy New Orleans)
defaults on other indebtedness or is in bankruptcy or insolvency pro-
ceedings, an acceleration of the Entergy Corporation credit facility’s
maturity date may occur.
In September 2012, Entergy Corporation implemented a com-
mercial paper program with a program limit of up to $500 mil-
lion. In November 2012, Entergy Corporation increased the limit
for the commercial paper program to $1 billion. At December 31,
2012, Entergy Corporation had $665 million of commercial paper
outstanding. The weighted-average interest rate for the year ended
December 31, 2012 was 0.88%.
Capital lease obligations are a minimal part of Entergy’s overall
capital structure. Following are Entergy’s payment obligations under
those leases (in millions):
2016- After
2013 2014 2015 2017 2017
Capital lease payments $6 $5 $5 $9 $34
The capital leases are discussed in Note 10 to the financial statements.
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had
credit facilities available as of December 31, 2012 as follows (amounts
in millions):
Amount Drawn
Expiration Amount of Interest as of
Company Date Facility Rate(a) Dec. 31, 2012
Entergy Arkansas April 2013 $ 20(b) 1.81% –
Entergy Arkansas March 2017 $150(c) 1.71% –
Entergy Gulf States
Louisiana March 2017 $150(d) 1.71% –
Entergy Louisiana March 2017 $200(e) 1.71% –
Entergy Mississippi May 2013 $ 35(f) 1.96% –
Entergy Mississippi May 2013 $ 25(f) 1.96% –
Entergy Mississippi May 2013 $ 10(f) 1.96% –
Entergy
New Orleans November 2013 $ 25(g) 1.69% –
Entergy Texas March 2017 $150(h) 1.96% –
(a) The interest rate is the weighted average interest rate as of December 31, 2012
applied, or that would be applied, to outstanding borrowings under the facility
(b) The credit facility requires Entergy Arkansas to maintain a debt ratio of 65%
or less of its total capitalization. Borrowings under this Entergy Arkansas credit
facility may be secured by a security interest in its accounts receivable.
(c) The credit facility allows Entergy Arkansas to issue letters of credit against
50% of the borrowing capacity of the facility. As of December 31, 2012, no
letters of credit were outstanding. The credit facility requires Entergy Arkansas
to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(d) The credit facility allows Entergy Gulf States Louisiana to issue letters of credit
against 50% of the borrowing capacity of the facility. As of December 31,
2012, no letters of credit were outstanding. The credit facility requires Entergy
Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of
its total capitalization.
(e) The credit facility allows Entergy Louisiana to issue letters of credit against
50% of the borrowing capacity of the facility. As of December 31, 2012, no
letters of credit were outstanding. The credit facility requires Entergy Louisiana
to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(f) Borrowings under the Entergy Mississippi credit facilities may be secured by
a security interest in its accounts receivable. Entergy Mississippi is required to
maintain a consolidated debt ratio of 65% or less of its total capitalization.
(g) The credit facility requires Entergy New Orleans to maintain a debt ratio of
65% or less of its total capitalization.
(h) The credit facility allows Entergy Texas to issue letters of credit against 50% of
the borrowing capacity of the facility. As of December 31, 2012, no letters of
credit were outstanding. The credit facility requires Entergy Texas to maintain
a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to
the terms of the credit agreement, securitization bonds are excluded from debt
and capitalization in calculating the debt ratio.
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