File No. 70-9049
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
AMENDMENT NO. 2
To
APPLICATION-DECLARATION
Under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Entergy Corporation
639 Loyola Avenue
New Orleans, LA 70113
(Name of company filing this statement
and address of principal executive offices)
Entergy Corporation
(Name of top registered holding company parent of
each applicant or declarant)
C. John Wilder Geoffrey D. Roberts
Executive Vice President President
and Chief Financial Officer Entergy Enterprises, Inc.
Entergy Corporation Parkwood Two Building
639 Loyola Avenue 10055 Grogan's Mill Road
New Orleans, LA 70113 Suite 400
The Woodlands, TX 77380
(Names and addresses of agents for service)
The Commission is also requested to send copies of any
communications in connection with this matter to:
Frederick F. Nugent, Esq. Laurence M. Hamric, Esq.
General Counsel Associate General Counsel
Entergy Power Development Corporation Entergy Services, Inc.
Parkwood Two Building 639 Loyola Avenue
10055 Grogan's Mill Road New Orleans, LA 70113
Suite 400
The Woodlands, TX 77350
Thomas C. Havens, Esq. Kent R. Foster, Esq.
Whitman Breed Abbott & Morgan LLP Entergy Services, Inc.
200 Park Avenue P.O. Box 8082
New York, NY 10166 Little Rock, AR 72203
<PAGE>
Item 1. Description of Proposed Transaction.
Item 1 of the Application-Declaration in this File, as
previously amended, is hereby further amended and restated to
read in its entirety as follows:
"Entergy Corporation ("Entergy"), a Delaware corporation and
a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), hereby requests the
approval of the Securities and Exchange Commission (the
"Commission") for a modification to the condition in Rule
53(a)(1) under the Act so that Entergy may provide guarantees and
use the proceeds of other securities issuances by Entergy (in
each case, to the extent authorized from time to time by the
Commission under the Act) to invest in "exempt wholesale
generators" ("EWGs"), as defined in Section 32 (a) of the Act,
and "foreign utility companies" ("FUCOs"), as defined in Section
33 (a) of the Act (EWGs and FUCOs, collectively, "Exempt
Projects") in amounts which, when added to Entergy's "aggregate
investment" at any time in Exempt Projects, would not exceed
Entergy's "consolidated retained earnings".<FN1>
I. Background.
A. The Entergy System.
Entergy and its various direct and indirect subsidiary
companies comprise the Entergy System (the "Entergy System" or
"System"), which currently consists of: (1) five domestic retail
electric utility companies - Entergy Arkansas, Inc. ("Entergy
Arkansas"), Entergy Gulf States, Inc. ("Entergy Gulf States"),
Entergy Louisiana, Inc. ("Entergy Louisiana"), Entergy
Mississippi, Inc. ("Entergy Mississippi") and Entergy New
Orleans, Inc. ("Entergy New Orleans") (such companies are
sometimes referred to herein, collectively, as the "System
operating companies"); (2) a domestic wholesale electric
generating company that sells power to the System operating
companies (other than Entergy Gulf States) - System Energy
Resources, Inc.; (3) a company that provides administrative and
other services primarily to the System operating companies -
Entergy Services, Inc.; (4) a company that provides management,
operations and maintenance services for the System's nuclear
facilities - Entergy Operations, Inc.; (5) a company that
primarily implements and/or maintains certain fuel supply
programs for the System operating companies - System Fuels, Inc.;
(6) a company that markets and sells its electric generating
capacity and energy to non-associate purchasers in the domestic
bulk power markets - Entergy Power, Inc.; (7) a company that
develops energy and energy-related projects and businesses on
behalf of the Entergy System, and markets skills and intellectual
property developed or acquired by System companies - Entergy
Enterprises, Inc. ("Entergy Enterprises"); (8) a company that
provides operations, maintenance and management services relating
to nuclear generating facilities owned by non-affiliates and
affiliated EWGs - Entergy Nuclear, Inc.; (9) a company primarily
engaged in the marketing and brokering of electricity, gas and
other energy commodities - Entergy Power Marketing Corporation;
and (10) various other subsidiary companies formed to develop,
acquire and own Entergy's interests in domestic and foreign
Exempt Projects, energy-related and telecommunications
businesses.
Entergy, through its domestic public utility subsidiaries
and its Exempt Projects, is engaged principally in the
generation, transmission, distribution and sale of electricity at
retail and wholesale and the purchase of electricity at
wholesale. Entergy's domestic retail public utility companies
provide electric service to approximately 2.5 million customers,
primarily in portions of the states of Arkansas, Louisiana,
Mississippi and Texas, and retail gas service in and around Baton
Rouge, Louisiana and in New Orleans, Louisiana.
Each of the System operating companies is subject to
regulation by state and/or local regulatory authorities.
Specifically, (1) Entergy Arkansas is subject to the jurisdiction
of the Arkansas Public Service Commission (the "APSC") and the
Tennessee Public Service Commission,<FN2> (2) Entergy Gulf States is
subject to the jurisdiction of the Public Utility Commission of
Texas (the "PUCT"), the Louisiana Public Service Commission (the
"LPSC") and certain municipalities in Texas, (3) Entergy
Louisiana is subject to the jurisdiction of the LPSC and the
Council of the City of New Orleans, Louisiana (the "CNO"), (4)
Entergy Mississippi is subject to the jurisdiction of the
Mississippi Public Service Commission (the "MPSC") and (5)
Entergy New Orleans is subject to the jurisdiction of the CNO.
The APSC, CNO, LPSC, MPSC and PUCT are sometimes referred to
herein, collectively, as the "State Regulators".
B. Development of Exempt Projects.
Since 1992, Entergy, through Entergy Enterprises and certain
other non-utility affiliates (Entergy Enterprises and such
affiliates are sometimes referred to herein, collectively, as
"Entergy Wholesale Operations" or "EWO"), has been actively
engaged in the development and acquisition of domestic and
foreign Exempt Projects.<FN3> Entergy's global power development
business is focused on building or acquiring power generation
facilities principally in North America and Europe, as well as,
to a lesser extent, in Latin America. In this regard, Entergy's
management recently announced a $9.8 billion capital investment
plan for 2000-2004 that includes investments of approximately
$3.9 billion on global power development and approximately $1.7
billion on acquiring nuclear generating facilities from non-
affiliates. Entergy's goal is to create a diversified portfolio
of generating assets by adding 1,500 MW of new electric
generating capacity and acquiring 1,000 MW of nuclear capacity
each year, beginning in 2000.
The most significant of Entergy's existing investments in
Exempt Projects consist of the following:
(1) Entergy Power Development Corporation ("EPDC"), a
wholly-owned subsidiary of Entergy, is a FUCO that develops,
acquires and holds, through various direct and indirect FUCO
subsidiaries, certain of Entergy's investments in FUCOs. Such
investments currently consist of the following:
(a) a 20.82% interest, held through its wholly-owned subsidiary
EP Edegel, Inc., in Edegel S.A. ("Edegel"), which owns five
hydroelectric generating stations (with an aggregate installed
capacity of 547 MW), one 260 MW thermal electric generating
station and 576 kilometers of interconnecting transmission lines
near Lima, Peru;
(b) a 4.8% interest, held through its wholly-owned subsidiary
Entergy Pakistan, Ltd., in The Hub Power Company, Ltd. ("Hub
Power"), which owns and operates a 1,292 MW steam electric
generating facility in Pakistan;
(c) a 25% economic interest, held through its wholly-owned
subsidiary Entergy Power Chile, Inc., in Compania Electrica San
Isidro S.A. ("San Isidro"), which owns and operates a 370 MW
combined-cycle electric generating plant located near Santiago,
Chile;
(d) a 6% interest, held through its wholly-owned subsidiary
Entergy S.A., in Central Costanera S.A. ("Costanera"), a company
which owns and operates an electric generating station with a
total installed capacity of 1,260 MW located in Buenos Aires,
Argentina;
(e) an aggregate 10.86% interest, held through Costanera and
EPDC's wholly-owned subsidiary Entergy Power CBA Holding Ltd., in
Central Termoelectric Buenos Aires, S.A. ("CBA"), which owns a
220 MW gas-fired, combined cycle turbine generator located at the
site of the Costanera power plant in Buenos Aires, Argentina;
(f) a 100% interest, held through its wholly-owned subsidiary
Entergy Power Damhead Creek Holding I, Ltd., in Damhead Creek
Limited ("Damhead Creek"), which will own a 740 MW (nominal)
gas-fired, combined cycle electric generating facility currently
under construction in the County of Kent, England, with an
estimated total cost of approximately $582 million; and
(g) a 100% interest, held through its wholly-owned subsidiary
Entergy Power Saltend, Ltd., in Saltend Cogeneration Company
Limited ("Saltend Cogen"), which will own a 1,200 MW (nominal)
gas-fired, combined cycle electric generating facility currently
under construction in the County of Hull, England, with an
estimated total cost of approximately $824 million.
Entergy's aggregate investments in EPDC, Edegel, Hub Power,
San Isidro, Costanera and CBA are approximately $319.5 million,
$100 million, $14.7 million, $15.6 million, $10.5 million, and
$3.7 million, respectively.
(2) Entergy Nuclear Generation Corporation ("ENGC"), an indirect
wholly-owned subsidiary of Entergy, is an EWG formed to acquire,
own and operate the Pilgrim Nuclear Power Station, a 670 MW
nuclear plant located in Plymouth, Massachusetts, which ENGC
purchased from Boston Edison Company in July 1999. Entergy's
aggregate investment in ENGC is approximately $89 million.
(3) Entergy International Holdings Ltd LLC ("EIH"), a
wholly-owned subsidiary of Entergy, is a FUCO formed to develop,
acquire and hold, through various direct and indirect FUCO
subsidiaries, Entergy's investment in certain FUCOs. Entergy's
aggregate investment in EIH is approximately $535 million
(consisting principally of proceeds from the sales in 1998 of
Entergy's investments in London Electricity plc and CitiPower
Pty.).
(4) Entergy Power Operations Corporation ("EPOC"), a
wholly-owned subsidiary of Entergy, is a FUCO formed to provide
various operations and maintenance services ("O&M Services"),
directly or indirectly, to affiliated and non-affiliated power
projects. EPOC's wholly-owned subsidiary Entergy Power Operations
Pakistan Ltd. ("EPOP") is a FUCO that provided O&M Services to
Liberty Power, Ltd., which owns a gas-fired, combined-cycle
electric generating facility located in Pakistan. Two other
wholly-owned subsidiaries of EPOC, Entergy Power Operations U.K.
Limited and Entergy Power Operations Damhead Creek Limited
Partnership, were organized to provide O&M Services to Saltend
Cogen and Damhead Creek, respectively. Entergy's aggregate
investment in EPOP is approximately $500,000.
Reference is hereby made to the relevant Certificates of
Notification on Form U-57, to applications to the Federal Energy
Regulatory Commission (the "FERC") for EWG determinations and to
Entergy's Form U5S for the year ended December 31, 1999 for
further information regarding Entergy's Exempt Projects.
C. Financing of Exempt Projects.
Entergy is currently authorized under the terms of
Commission orders and supplemental orders issued in File Nos.
70-8839, 70-8903 and 70-9123 (collectively, the "Financing
Orders") to finance the acquisition of Exempt Projects by issuing
and/or selling debt and equity securities. Entergy's
authorization under the Financing Orders may be summarized as
follows:
(1) File No. 70-8839. Pursuant to the Commission's orders dated
June 6, 1996 (HCAR No. 26541) and March 25, 1997 (HCAR No.
26693), Entergy is authorized to issue and sell up to an
aggregate of thirty million shares of its authorized but unissued
common stock, par value $0.01 per share ("Common Stock") pursuant
to its Dividend Reinvestment and Stock Purchase Plan (the
"DRIP"). Proceeds from the issuance and sale of Common Stock
under the DRIP may be used for general corporate purposes,
including investments in Exempt Projects (subject to any
requisite Commission approval and to compliance with Rule 53).
From June 1996 through December 31, 1999, Entergy had sold a
total of 16,770,812 shares of Common Stock pursuant to the DRIP.
(2) File No. 70-8903. Pursuant to the Commission's orders dated
February 26, 1997 (HCAR No. 26674) and December 22, 1999 (HCAR
No. 27117), Entergy is authorized to enter into credit facilities
with one or more banks pursuant to which Entergy may effect
borrowings and reborrowings ("Borrowings") and issue unsecured
notes in connection therewith from time to time through December
31, 2002, in an aggregate principal amount at any time
outstanding not to exceed $500 million. Entergy is authorized to
use the proceeds of Borrowings for general corporate purposes,
including financing the acquisition of securities of, or other
interests in, Exempt Projects.<FN4>
(3) File No. 70-9123. Pursuant to the June 1999 Order, Entergy
is authorized, among other things, to finance its investments in
Exempt Projects through providing guarantees or other forms of
credit support ("Guarantees") in respect of the securities or
other obligations of Exempt Projects in an aggregate amount
(inclusive of, among other things, any guarantees previously
issued by Entergy and outstanding under a prior Commission order
in such File) not to exceed $750 million.<FN5> (Such Guarantees,
together with the debt and equity securities authorized under the
other Financing Orders and any subsequent Commission financing
order, are sometimes referred to herein, collectively, as
"Securities").
For the reasons stated herein, Entergy requests that the
Commission exempt Entergy from the requirements of Rule 53(a)(1)
under the Act so that it may use the proceeds of Securities, each
in accordance with and upon the terms and conditions of this
Application-Declaration, the applicable Financing Order and any
subsequent Commission financing order, in an aggregate amount at
any time outstanding which, when added to Entergy's aggregate
investment in Exempt Projects, would not at any time exceed
Entergy's consolidated retained earnings. Entergy further
requests that, to the extent necessary, upon the effectiveness of
the authorization sought herein, the Commission's orders in
Docket Nos. 70-8839, 70-8903 and 70-9123, and any applications
pending in such Dockets, be deemed to be appropriately modified
to permit the transactions therein authorized and/or contemplated
to be consummated consistent with the authorization sought
herein.
Entergy's aggregate investment in all Exempt Projects
(approximately $1,072,322,020 at December 31, 1999) represented
approximately 39.7% of Entergy's consolidated retained earnings
as of December 31, 1999 (approximately $2,698,573,250). Giving
effect to the authorization sought in this File would allow, on a
pro forma basis as of December 31, 1999, the financing by Entergy
of investments in additional Exempt Projects in an amount equal
to approximately $1.8 billion. Entergy is not requesting
authority herein to issue any specific additional securities for
purposes of financing the acquisition of Exempt Projects.
At December 31, 1999, the outstanding amount of Guarantees
provided by Entergy in respect of indebtedness or other
obligations of Exempt Projects was approximately $245 million.
At December 31, 1999, the outstanding amount of non-recourse debt
relating to Entergy's investments in Exempt Projects was
approximately $989 million. Entergy intends, to the fullest
extent practicable, to continue to rely on non-recourse debt in
financing (or refinancing) its investments in Exempt Projects.
D. Future Investments in Exempt Protects.
In addition to the foregoing investments in Exempt Projects,
Entergy is currently investigating, alone or with others,
potential investments in foreign and domestic power projects. In
particular, as discussed above, Entergy is focusing primarily on
investment opportunities in Europe and in North America. Most of
these potential domestic and foreign projects are expected to
qualify as either EWGs or FUCOs. Entergy believes that the
expanded authorization sought herein to use financing proceeds to
invest in Exempt Projects will provide Entergy with financial
flexibility necessary to pursue such investments.
Among Entergy's most significant planned investments in
Exempt Projects are the following:
(1) Indian Point 3/FitzPatrick Nuclear Plants. Entergy
recently agreed to acquire two nuclear power plants from the
Power Authority of the State of New York ("NYPA") - the Indian
Point 3 Nuclear Power Station, a 980 MW facility located in
Westchester County, New York, and the James A. FitzPatrick
Nuclear Power Station, an 825 MW facility located near Oswego,
New York. Under the purchase agreement, Entergy would pay NYPA
$50 million in cash at closing, plus seven annual installments of
approximately $108 million each commencing one year from the date
of closing and eight annual installments of $20 million each
commencing eight years from the date of closing. Entergy
anticipates that, subject to the receipt of necessary regulatory
approvals, the acquisition of the NYPA nuclear facilities will
close by the end of the fourth quarter of 2000.
(2) Freestone Project. Entergy Wholesale Operations is
developing a 1,000 MW gas-fired, combined-cycle merchant power
plant (the "Freestone Project") near Fairfield, Texas, adjacent
to Entergy Gulf States' retail service territory. The total
cost of the Freestone Project is currently estimated to be
approximately $320 million. Financial closing for the Freestone
Project is expected to occur during the second half of 2000.
(3) Warren Power Project. Entergy Wholesale Operations is
developing a 300 MW gas-fired, combined cycle peaking plant (the
"Warren Power Project") in Vicksburg, Mississippi, on the site of
Entergy Mississippi's Baxter Wilson electric generating station.
The total cost of the Warren Power Project is currently estimated to
be approximately $140 million, with construction expected to
commence in the third quarter of 2000.
(4) Castelnou, Spain. Entergy Wholesale Operations is
proposing to develop an 800 MW gas-fired, combined cycle power
plant near Castelnou, in the Aragon region of Spain,
approximately 124 miles west of Barcelona. The total cost of the
project is currently estimated to be approximately $500 million,
and financial close could occur as early as 2001, following
receipt of governmental permits.
(5) Maritza East III Project. Entergy Wholesale Operations
is working with the National Electric Company of Bulgaria ("NEK")
to modernize and upgrade Maritza East III, an 840 MW coal-fired
power plant owned and operated by NEK and located in eastern
Bulgaria. The total cost of the project is currently estimated
to be approximately $460 million, and financial close is expected
during the third quarter of 2000.
E. Risk Profile of Entergy's Investments in Exempt Projects.
Investments in Exempt Projects involve risks that may be
different from those present in the traditional, regulated,
electric utility industry. Entergy has established comprehensive
procedures to identify and address (i.e., limit and/or mitigate)
such risks. The following is a description of the project review
process and associated risk mitigation techniques utilized by
Entergy in connection with potential investments in Exempt
Projects.
(1) The Project Review Process. Every potential Exempt Project
investment is subjected to a series of formal reviews to ensure
the project's soundness. The process begins with a consideration
of Entergy's strategic plans, which employ a variety of tools to
assist in the evaluation of project risks. These tools include,
among others, utilization of independent country risk analysis
services, rating agency country ratings, availability of
political risk insurance, and availability and cost of funds from
international capital sources. Entergy's strategic plans, which
are updated periodically, lead to the identification of projects
and countries where project development efforts are pursued. The
plans also lead to the development of budgeted levels of
expenditure on foreign development activities as well as, in many
cases, limits on investment in particular countries.
Before Entergy makes any investment in an Exempt Project, an
analysis of the investment opportunity, including (if applicable)
the specific country risk, is first presented to executive
management. If an investment in a particular foreign country is
being considered, the analysis includes a review of the political
and economic stability of the country, the government's
commitment to private power, the legal and regulatory framework
for private investment in electricity facilities and whether
local business practices will support long-term investment of
private capital. This careful planning and budgeting process
helps to mitigate the risk of the expenditure of development
funds without a realistic expectation of success in terms of both
making investments in projects and in obtaining appropriate
levels of non-recourse financing on commercially reasonable
terms.
Development costs which do not exceed $10 million may be
approved by the president of EWO. If the cumulative amount of
development costs plus investment exceeds $10 million, then the
proposed investment is presented to the Entergy Corporation board
of directors. At each of the above review and approval levels,
there is an evaluation of the geographic region, the individual
country particulars and the specific project.
Once development of a project is undertaken, milestones are
established to ensure that continuing expenditures on development
are producing acceptable results. In addition, project teams are
required to identify the major technical, financial, commercial
and legal risks associated with their particular project and
whether and how those risks have been mitigated. The members of
the project team are responsible for the due diligence
investigation of those risks that have been identified and must
present their findings to an officer of Entergy or Entergy
Enterprises with oversight responsibilities for the relevant risk
factor.
It is significant to note that the final project review
process is to a large extent replicated by the lenders who agree
to provide construction or permanent debt financing for Entergy's
Exempt Projects, since repayment of that debt may depend solely
or primarily upon the success of the particular Exempt Project.
Project debt maturities are often long-term (e.g., 15 or more
years), meaning that the lenders' exposure to the risks of a
project extends for many years after closing or completion of
construction. Typically, project debt documents require the
establishment of plant overhaul, debt service and other funded
reserves, all of which are designed to preserve the asset and
protect the financial performance of the project against
interruptions in revenues and other contingencies. Entergy's
success in arranging appropriate levels of non-recourse financing
for its Exempt Projects thus serves as a validation of the
project review process described above. For example, the
thoroughness of Entergy's review process was affirmed by the more
than 60 international banks that participated in the large
non-recourse debt offerings arranged by Entergy for its
acquisitions of CitiPower Pty. and London Electricity plc in 1996
and 1997, respectively.
(2) Risk Mitigation of Exempt Projects. Entergy carefully
evaluates the potential risks of an Exempt Project before funds
are committed.
(a) Operating Risks. Entergy has limited, and will
continue to confine, its project development efforts to
generation technologies with which it has existing competencies
in thermal generating sources such as coal, gas, nuclear or
oil-fired generation, as well as hydroelectric generation. Due
diligence of operating assumptions is carried out by engineers
with experience in the technology being evaluated and by outside
technical consultants. The risk of changes in the price of fuel
is sometimes passed through to the purchaser of electricity under
the negotiated terms of a power sales agreement. In certain
cases (such as the Saltend Cogen project in the U.K.), the risk
of fuel price fluctuation may be mitigated through hedging
arrangements, such as indexing the price of fuel to the pool
price of electricity or "tolling" agreements with a power
purchaser. Other operating risks are covered by equipment
warranties and by casualty, business interruption and other forms
of insurance. Further, when an Entergy affiliate is responsible
for managing the day-to-day operations of an Exempt Project in
which it holds an ownership interest (such as the Saltend Cogen
project), Entergy's ability to address and correct operating
problems is far greater than would be the case if operating
control were in the hands of a third party.
(b) Construction Risks. Construction risks typically are
addressed through fixed-price construction contracts with
milestones and performance guarantees (e.g., guaranteed heat
rates, availability factors), backed by appropriate levels of
liquidated damages. The credit-worthiness and "track record" of
the construction contractor is a very important consideration in
this regard. In those cases where an affiliate of Entergy may
serve as its own general construction contractor, Entergy would
look to pre-negotiated cost and damage provisions from
sub-contractors, including, without limitation, equipment
vendors, to protect against performance shortfalls, cost overruns
and schedule delays.
(c) Commercial Risks. Exempt Projects often rely on
"off-take" commitments from one or more power purchasers, such as
a power marketing company, to eliminate all or most of the risk
of variation in revenues. In such cases, Entergy makes an
assessment of the credit-worthiness of the power purchasers
and/or establishes a contingency plan in the event of off-take
defaults.
With most projects operating in competitive power markets,
long-term off-take contracts generally are not available and
electricity prices are determined by supply and demand. EWO
conducts extensive investigations of these electricity markets to
ensure the viability of long-term demand. In most cases, EWO
retains outside experts to provide industry data and projections.
Further, EWO seeks projects that will be capable of producing
electricity at or below long-run marginal costs in the region,
thus assuring that the project will be a competitive supplier.
(d) Financial Risks. Entergy addresses the financial
risks of Exempt Projects in a variety of ways. First, most of
the permanent debt financing that has been arranged to date for
Entergy's Exempt Projects is, by its express terms, non-recourse
to Entergy or any associate company (other than Exempt Project
companies). This means that the non-recourse debt of each Exempt
Project is secured solely by its assets and revenues, and
creditors have no ability to seek repayment upon default from
Entergy or from any System operating company. This method of
financing provides assurances that Entergy's financial exposure
with respect to an Exempt Project is limited to the amount of its
equity investment or commitment, and that the System operating
companies and their customers bear no direct risk of loss from an
Exempt Project's failure or financial distress.
As indicated above, Entergy has, in certain instances,
agreed to provide Guarantees in connection with its Exempt
Projects, and Entergy may in the future determine to provide
additional such Guarantees. However, these financial supports
have been limited in amount (aggregating only approximately $245
million as of December 31, 1999), are carefully monitored by
Entergy, and are treated as a part of Entergy's equity commitment
for regulatory reporting purposes (including in calculating
Entergy's aggregate investment in Exempt Projects). In those
instances where there is recourse to Entergy under a Guarantee,
such recourse is clearly defined and specifically limited through
carefully worded provisions in the Guarantee. To date, Entergy
has never been called upon to fund its obligation under any
Guarantee issued with respect to an investment in an Exempt
Project.
In addition to the non-recourse nature of Exempt Project
debt financing, such project debt is carefully structured to
correspond to the projected revenue stream of the particular
project. For example, when the value of a project depends on a
fixed-price off-take contract (i.e., a power purchase contract),
the project debt may be designed to match debt service with cash
flows and to be of a similar term. For example, the Hub Power
project has non-recourse debt with a 20-year maturity designed in
light of the 25-year term of the project's power purchase
agreement.
Another financial risk is the potential variability of
interest rates. This risk is addressed, in part, by borrowing,
to the extent possible, on a long-term, fixed-rate basis. After
contractual terms for a project have been agreed to but before
financial closing, Entergy is also exposed to interest rate
variability. This risk can be (and will be, upon approval of
Entergy's treasury department, as noted below) mitigated by
purchasing financial instruments that provide hedges against
interest rate volatility.<FN6>
(e) Foreign Currency Exchange Risk. There are several ways
in which Entergy has addressed foreign currency exchange risk,
depending on the status of the host country. In more developed
countries, long-term currency swaps are available to provide
further hedging for the equity component of the investment. In
some countries, the source of revenues can be tied in other ways
to the United States dollar.<FN7> For example, the capacity charge
element of revenues derived by an Exempt Project may be tied to
the cost of new capacity measured in United States dollars.
Project revenues may be expressed in a unit of account (i.e., a
national monetary unit) which adjusts for any inflation of the
local currency, thereby protecting the project against
depreciation of the currency. In other cases (e.g., for the
Saltend Cogen project), the non-recourse project debt is borrowed
in the same currency as the project's revenues, thereby ensuring
a match between debt service obligations and operating income.
In addition, in countries that do not have a history of stability
in the management of their exchange policy, part or all of the
revenue from an Exempt Project is payable in or indexed to hard
currency (almost invariably United States dollars). For example,
the revenue stream associated with the Hub Power project in
Pakistan is paid in a basket of hard currencies which include
United States dollars.
(f) Legal Risks. Legal risks are addressed by careful
review of any investment by legal counsel, including local and
international counsel where foreign projects are concerned. Such
legal reviews address legal, regulatory and permitting risks,
environmental risks, the adequacy and enforceability of
guarantees or other contractual undertakings of third parties,
the status of title to utility property and the obligations
inherent in the financing arrangements.
In addition to the specific risks mentioned above, Exempt
Project investments outside the United States can entail
country-specific risks related to political or economic
performance. As indicated above, EWO evaluates country risk at
the outset of any project development effort and attempts to
mitigate this risk through a number of measures. In addition to
a general review, the country analysis focuses specifically on
the country's electric sector, the government's support for
private ownership in that sector, and the presence of an
established and stable legal system. Most important, the country
review process ensures that the political and economic stability
of any country has been reviewed at several decisional levels up
to and including Entergy's board of directors before any
significant investment occurs.
Moreover, at the outset of development work in a foreign
country, EWO seeks local partners who are experienced in doing
business in the host country. Such local partners have in the
past included Endesa of Chile (in connection with Exempt Projects
in Argentina, Chile and Peru), and Perez Companc of Buenos Aires
(in connection with Exempt Projects in Argentina). Local
partners are a very important element in mitigating the risk of
future expropriation or unfair regulatory treatment. An
additional mitigating factor is the participation of official or
multilateral agencies in a project. When funds for an Exempt
Project are supplied by government sponsored export credit
agencies or other governments or institutions, such as the World
Bank through its International Finance Corporation affiliate, the
host country has strong incentives not to take actions that would
harm a project's viability. For example, most of the debt
related to the Hub Power project is guaranteed by the World Bank;
without such a guaranty, the project would not have been
completed. In addition, political risk can often be addressed
through political risk insurance obtained from the Overseas
Private Investment Corporation, a United States agency, or the
multilateral Investment Guaranty Agency, a World Bank affiliate,
or in the commercial insurance market. Political risk insurance
is available to insure the project debt or the return of an
investor's equity. One can also insure against outright
expropriation, acts of civil violence or even "creeping"
nationalization brought about by punitive regulation. EWO
typically analyzes the perceived political risk of a project and
the costs associated therewith and obtains insurance when the
costs associated with such risk exceed the costs of insurance
coverage.
(g) Portfolio Diversification. Apart from the detailed and
comprehensive approach to the specific risks described above,
Entergy's fundamental view is that the best long-term approach to
managing the risk of investing in Exempt Projects is through
diversifying both the type and the location of projects. In this
regard, Entergy recognizes that the risks inherent in any
investment cannot be eliminated entirely, even by the most
careful approach to project development. Consequently, Entergy
is committed to diversifying its investments across countries and
regions of the world. Entergy's strategy currently is focused on
investment opportunities in Europe and North America, and
substantial investments have been made in the U.K. and in Latin
America, as described above. Entergy has sold its investments
in Australia and seeks no further investments there or in Asia at
this time.
Regional diversification is important since economic and
political instability, when they have occurred historically, have
tended to involve multiple countries in a region. Accordingly,
as indicated above, Entergy's board of directors sets limits on
investment in specific countries which vary according to an
assessment of the country's stability.
Another element of Entergy's diversification policy is to
achieve a balance between so-called "greenfield" projects and
acquisitions of existing facilities and power systems.
Greenfield projects (such as the Damhead Creek and Saltend Cogen
projects) are those that involve completely new development and
construction of electric facilities, principally generating
stations. Greenfield projects involve a higher degree of risk
since they entail a lengthy process of development and
construction. Funds are expended during the early years of such
projects; return on investment is not earned until the project is
in operation. Nevertheless, while these projects have higher
levels of risk and deferred returns, they are important to
Entergy because they generally produce higher rates of return on
investment than investments in existing assets and because they
lay the foundation for continued earnings growth for Entergy in
the future.
To balance these greenfield project development efforts,
Entergy's development efforts also have targeted assets that are
already in operation, either from existing private owners (such
as Entergy's purchase of the Pilgrim nuclear plant and the
planned acquisition of NYPA's nuclear plants) or through
privatizations (such as Entergy's investment in Edegel). These
acquisitions reduce the risk of Entergy's overall business by
producing near-term earnings without significant development or
construction risk. In addition, Entergy is beginning to develop
"brownfield" generating projects at existing power plant sites
owned by affiliates (such as Entergy Mississippi, in the case of
the Warren Power project) and by non-affiliates (such as NEK, in
the case of the Maritza East III project).
The result of this balanced portfolio strategy is that
Entergy is not dependent on any single country, regulatory
environment or type of asset for its earnings from domestic and
foreign Exempt Projects. In addition, while Entergy has
successfully made significant investments in Exempt Projects
which are expected to produce positive long-term results, it has
also ensured that its portfolio of Exempt Projects will add cash
flow and earnings for its shareholders in the immediate future,
thereby supporting share value and dividend growth.
F. Earnings from Exempt Projects.
Entergy's investments in Exempt Projects have generated
modest but important contributions to earnings. For example, for
the year ended December 31, 1999, Entergy's investments in Exempt
Projects increased consolidated net income by approximately $165
million. Entergy expects that its investments in Exempt Projects
will continue to generate positive earnings and contribute to
consolidated earnings growth in the future.
II. Proposed Transactions.
As indicated above, Entergy is presently investigating a
number of additional investment opportunities in domestic and
foreign Exempt Projects. Entergy intends to make additional
investments in Exempt Projects for a number of reasons, including
the following:
(1) Investments in Exempt Projects are a key component of
Entergy's strategy for delivering shareholder value. Such
investments also serve to diversify Entergy's overall utility
operations and thereby reduce Entergy's asset risk as it faces
increasing competitive pressures in its domestic utility
business. Entergy believes that the creation and maintenance of
value for its shareholders also will depend in large measure on
its ability to successfully operate its core business in the
United States as that business becomes subject to increasing
competition. As the U.S. electric utility industry becomes more
competitive, gaining experience in foreign energy markets that
are largely deregulated will help increase the chances of long-
term success in the domestic utility business. For these
reasons, Entergy has in the past pursued investments in regions
or countries (such as Latin America, Australia and the United
Kingdom) which had already moved to deregulate energy markets and
introduce competition at the wholesale and retail levels. The
lessons learned from these markets have provided Entergy with
valuable insights about the features of market structures that
produce efficient and equitable results for consumers and
shareholders, and will help Entergy shape the evolution of
competitive electric power in its service territory.
(2) As discussed in Item 3 below, there has not been a need for
any significant equity investments in any of the System operating
companies in eight years, and Entergy has no current plans to
purchase additional common stock of any System operating company
for at least the next three years. The System operating
companies' anticipated needs for capital investment in new
generation, transmission and distribution facilities over the
next three years are expected to be funded by net cash flow from
operations and proceeds from sales of debt or preferred
securities, and not through additional equity investments by
Entergy. Since there is no anticipated need in the next three
years for any additional equity investments in the System
operating companies, further acquisitions of Exempt Projects will
afford Entergy an opportunity to reinvest retained earnings in an
industry sector in which Entergy has decades of experience.<FN8>
III. Compliance With Rules 53 and 54.
Entergy hereby represents that, pursuant to Rule 54 under
the Act, all of the criteria of Rule 53(a) and (b) are satisfied.
Specifically, (1) Entergy's aggregate investment in Exempt
Projects at December 31, 1999 represented approximately 39.7% of
Entergy's consolidated retained earnings as of December 31, 1999,
(2) Entergy maintains books and records relating to its Exempt
Project investments in accordance with Rule 53(a)(2), and (3) no
more than 2% of the employees of the Entergy System's domestic
public utility companies render services at any one time,
directly or indirectly, to Exempt Projects in which Entergy,
directly or indirectly, holds an interest. Entergy hereby
undertakes to notify the Commission by filing a post-effective
amendment in this proceeding in the event that any of the
circumstances described in Rule 53(b) arise."
Item 3. Applicable Statutory Provisions.
Item 3 of the Application-Declaration in this File, as
previously amended, is hereby further amended and restated to
read in its entirety as follows:
"The transactions proposed herein are or may be subject to
Sections 6(a), 7, 12(b), 32 and 33 of the Act and Rules 45, 53
and 54 thereunder. To the extent that the proposed transactions
are considered by the Commission to require authorization,
approval or exemption under any Section of the Act or rule
thereunder, other than those specifically referred to above,
request for such authorization, approval or exemption is hereby
made.
Rule 53 provides that, if each of the conditions of
paragraph (a) thereof is met, and none of the conditions of
paragraph (b) thereof is applicable<FN9>, then the Commission may not
make certain adverse findings under Sections 7 and 12 of the Act
in determining whether to approve a proposal by a registered
holding company to issue securities in order to finance an
investment in any EWG or to guaranty the securities of any EWG.
Rule 53(c) states that if a registered holding company is
unable to satisfy the requirements of paragraph (a) of Rule 53,
such company must "affirmatively demonstrate", in connection with
a proposal to issue and sell securities to finance an investment
in any EWG, or to guarantee the securities of any EWG, that such
proposal:
(1) will not have a substantial adverse impact upon the
financial integrity of the registered holding company system; and
(2) will not have an adverse impact on any utility subsidiary of
the registered holding company, or its customers, or on the
ability of State commissions to protect such subsidiary or
customers.
Entergy addresses each of these requirements as follows:
(1) The use of proceeds from the issuance and sale of securities
(including guarantees) to make investments in Exempt Projects in
amounts which would cause Entergy's aggregate investment in
Exempt Projects to exceed 50% (but not 100%) of Entergy's
consolidated retained earnings should not have a "substantial
adverse impact" on the financial integrity of the Entergy System.
(a) Aggregate investments in Exempt Projects in amounts up
to 100% of Entergy's consolidated retained earnings would still
represent a relatively small commitment of capital for a company
the size of Entergy, based on various key financial ratios at
December 31, 1999. For example, investments in this amount would
be equal to only 19.2% of Entergy's total capitalization
($14,505,090,000), 18.0% of consolidated net utility plant
($15,500,756,000), 12.1% of total consolidated assets
($22,985,087,000), and 45.3% of the market value of Entergy's
outstanding Common Stock ($6,155,200,458). By way of comparison,
the relevant measures for Entergy are within the ranges the
Commission has found, in the cases of The Southern Company
("Southern")<FN10>, Central and South West Corporation ("CSW")<FN11>, GPU,
Inc. ("GPU")<FN12>, Cinergy, Inc. ("Cinergy")<FN13>, American Electric
Power Company, Inc. ("AEP")<FN14> and New Century Energies, Inc.
("NCE")<FN15> to represent a relatively small commitment of capital.<FN16>
(b) Entergy's consolidated retained earnings grew by an
average of approximately 3.5% per year over the period of 1995 to
1999.<FN17>
(c) Entergy's consolidated capitalization and interest
coverage ratios for 1998 and 1999 were within industry ranges set
by the independent debt rating agencies for BBB rated electric
utility companies, as shown in the table below.<FN18>
Actual 1998 Capitalization and Interest Coverage Ratios:
Total Debt/Capital 48.6 %
EBIT/Cash Interest (times) 2.26
Funds from Operations/Interest (times) 3.19
Actual 1999 Capitalization and Interest Coverage Ratios:
Total Debt/Capital 49.0 %
EBIT/Cash Interest (times) 2.25
Funds from Operations/Interest (times) 3.12
Industry Ratios for BBB Related Companies*
Average High Low
Total Debt/Capital 52% 65% 42%
EBIT/Cash Interest (times) 2.8 4.3 1.9
Funds from Operations/Interest (times) 4.6 6.0 2.7
*(Source: Moody's Investors Service Electric Utility
Sourcebook, October 1999)
Entergy's consolidated capitalization ratio as of December
31, 1999 (approximately 51% equity and approximately 49% debt,
including short-term debt of approximately $315 million) is well
within the industry range set by the independent debt rating
agencies for BBB rated utilities (40% to 65% debt).
(d) There is no indication that Entergy's investments in
Exempt Projects have adversely affected its ability to raise
common equity. Except for issuances of Common Stock pursuant to
the DRIP, as described in Item 1, Entergy has not issued new
common equity since 1985.
Entergy's price-earnings and market-to-book ratios and an
average of the price-earnings and market-to-book ratios for 29
U.S. electric utilities included in Standard and Poor's utility
index (SPELEC) for the period 1995 through 1999 are shown below:
1995 1996 1997 1998 1999
P/E Ratio:
Entergy 13.7 15.1 29.1 10.4 11.4
SPELEC* 13.9 12.8 17.1 19.1 12.5
Market-to-Book Ratio:
Entergy 103% 97% 110% 108% 87%
SPELEC* 144% 137% 168% 186% 141%
*(Source: Average of Standard and Poor's
U.S. Electric Companies (29 Companies))
It is difficult to say with certainty why the market values
Entergy's Common Stock as it does. To the extent that the market-
to-book and price/earnings ratios for Entergy's Common Stock are
under downward pressure, the reason relates, in one way or
another, to uncertainties surrounding potential retail
competition in Entergy's service territory and the prospect of a
restructuring of Entergy's domestic utilities. Each of the five
jurisdictions in which Entergy's domestic retail utility
subsidiaries operate are engaged in processes that are leading or
may lead to open access for retail electric supply sometime in
the future. Implicit in these processes is the prospect that
public utilities, including Entergy's utility subsidiaries, will
have structures and financial characteristics that are
significantly different from those of the past. All of these
factors create uncertainty, which is reflected in the market's
valuation of Entergy's Common Stock. In this respect, the market
price of Entergy's Common Stock is behaving no differently than
that of many other U.S. electric utility companies.
As indicated above, Entergy's investments in Exempt Projects
that have reached the operational stage are now contributing, and
are expected in the future to continue contributing, to Entergy's
consolidated net income. Therefore, Entergy believes that the
market's assessment of Entergy's future growth and earnings
potential, and hence the valuation of Entergy's Common Stock,
will increasingly be influenced by Entergy's ability to augment
its earnings from domestic utility operations with earnings from
investments in Exempt Projects and other non-regulated
businesses. For these and other reasons, Entergy believes it is
important to enhancing shareholder value that it have the
increased financial flexibility sought in this filing to invest
in additional Exempt Projects as appropriate opportunities arise.
(e) Entergy's dividend payout ratio (percentage of earnings
paid out in dividends) over the past several years as compared
with the average of the dividend payout ratios for 29 U.S.
electric utilities included in Standard and Poor's utility index
is indicated below:
1995 1996 1997 1998 1999
Entergy Payout Ratio (%) 85 98 175 50** 53
SPELEC* 62 73 92 54 62
*(Source: Average of Standard and Poor's
U.S. Electric Companies (29 Companies))
**In the third quarter of 1998, Entergy reduced its Common
Stock dividend from 45 cents per share to 30 cents per share.
(f) The market's favorable assessment of the overall
quality of Entergy's portfolio of Exempt Projects is further
demonstrated by the success that Entergy has had in obtaining
non-recourse debt to finance the acquisition and ownership of
these projects. For example, in connection with the Saltend
Cogen and Damhead Creek projects, EWO was able to arrange
non-recourse debt financings in an aggregate principal amount of
approximately $1.7 billion through credit facilities with various
international lenders. The debt issued under such credit
facilities is secured solely by the respective assets of Saltend
Cogen and Damhead Creek projects, and is not guaranteed by, or
otherwise recourse to, Entergy or any of the System operating
companies.
(g) As indicated in Item 1 above, none of the conditions
described in paragraph (b) of Rule 53 is applicable.
Specifically, (1) there has been no bankruptcy of any significant
Entergy subsidiary company, (2) as previously noted, Entergy's
average consolidated retained earnings for the four most recent
quarterly periods have not decreased by 10% from the average for
the preceding four quarterly periods, and (3) Entergy has never
reported "operating losses" in any fiscal year attributable to
its Exempt Projects in excess of 5% of consolidated retained
earnings. No associate Exempt Project has ever defaulted under
the terms of any financing document.
* * * * *
(2) The proposed use of financing proceeds for investments in
Exempt Projects in amounts which would cause Entergy's aggregate
investment in Exempt Projects to not exceed 100% of Entergy's
consolidated retained earnings should have no "adverse impact" on
any of the System operating companies, their respective
customers, or on the ability of the State Regulators to protect
such companies or their customers.
This conclusion is directly supported by, among other
things, (1) analyses of the System operating companies' financial
condition (including the ability of the System operating
companies to issue senior securities), (2) the lack of any
present or anticipated need of any of the System operating
companies for equity capital from Entergy, (3) the existing
structural and other safeguards against adverse effects of
Entergy's investments in Exempt Projects, including the authority
of Entergy's State Regulators to protect the System operating
companies and their customers from any such adverse effects,<FN19> and
(4) Entergy's continuing compliance with other applicable
requirements of Rule 53(a).
(a) As shown below, the debt (including short-term debt)
ratios of the System operating companies for the past five years
have generally been, and should continue to be, consistent with
the industry average for BBB rated electric utilities (which was
52% as of the end of 1999).
Debt as % of 1995 1996 1997 1998 1999
Capitalization
Entergy Arkansas 52.7 52.3 52.4 50.8 51.4
Entergy Gulf States 55.2 52.9 51.4 49.8 49.9
Entergy Louisiana 50.6 51.0 50.7 50.0 51.0
Entergy Mississippi 50.3 49.8 49.3 49.5 51.9
Entergy New Orleans 53.0 52.6 52.7 51.9 54.6
*(Source: BBB industry average from Moody's Investors
Service Electric Utility Sourcebook,
October 1999)
Debt levels of each of the System operating companies
generally are projected to remain stable or decline over the next
several years. The reduction in debt levels in recent years is
attributable largely to redemptions and retirements of senior
debt using funds derived from excess cash flow.
(b) Moreover, additional investments by Entergy in Exempt
Projects will not have any negative impact on the System
operating companies' ability to fund operations and growth. Over
the past 10 years, the System operating companies have funded
substantially all of their construction expenditures from
internally generated funds and from sales of senior securities
and other borrowings. The last significant equity infusion by
Entergy in any of the System operating companies was made in 1992
(approximately $25 million to Entergy Mississippi). Entergy does
not anticipate that it will need to make any additional equity
investment in any System operating company for at least the next
three years.
System operating companies - Construction Expenditures:
Actual (1995-1999) and projected (2000-2002)
expenditures, net of Allowance for Funds Used During
Construction ($ million):
1995 1996 1997 1998 1999 2000 2001 2002
570 508 417 544 738 1054 893 734
Percent internally generated:
1995 1996 1997 1998 1999
247% 251% 347% 322% 177%
The System operating companies' ability to issue debt and
equity securities in the future depends upon earnings coverages
at the time such securities are issued. Each of the System
operating companies must comply with certain coverage
requirements designated in their mortgage bond indentures. The
earnings coverages of the System operating companies are all
currently at levels sufficient to enable such companies to issue
securities in amounts necessary to meet their projected financing
requirements, and over the near term, such coverages are expected
to remain at levels sufficient for such financing requirements.
The following table shows the senior debt securities ratings
of each of the System operating companies over the previous five
years:
Senior Debt Ratings: 1995 1996 1997 1998 1999
Entergy Arkansas BBB BBB BBB+ BBB+ BBB+
Entergy Gulf States BBB- BBB- BBB- BBB- BBB-
Entergy Louisiana BBB BBB BBB BBB BBB
Entergy Mississippi BBB BBB BBB+ BBB+ BBB+
Entergy New Orleans BBB BBB BBB BBB BBB
The senior securities of each of the System operating
companies are presently rated BBB+, BBB-, BBB, BBB+, and BBB for
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi and Entergy New Orleans, respectively, by Standard &
Poor's Ratings Group. The System operating companies continue to
show financial statistics on various performance measures used by
the rating agencies ( e.g., pre-tax interest coverage, debt
ratio, funds from operations to debt, funds from operations
interest coverage, and net cash flow to capital expenditures)
consistent with similarly rated companies in the industry. In
addition, Entergy believes that its investments in Exempt
Projects have not adversely affected the senior debt ratings of
the System operating companies.
(c) There is no evidence indicating that any of the State
Regulators have been, or will be, unable to protect the System
operating companies or their customers from any adverse effects
resulting from Entergy's investments in Exempt Projects. In
addition, all of Entergy's investments in Exempt Projects are
strictly segregated from the System operating companies. In
particular, as discussed above, the financing arrangements used
for Entergy's Exempt Projects are carefully structured to fully
insulate the System operating companies from the direct effects
of any losses that may be incurred in connection with such
projects. No System operating company owes indebtedness, has
extended credit, or has sold or pledged its assets, directly or
indirectly, to any Exempt Project, and the indebtedness of the
Exempt Projects is not recourse to any System operating company.
Entergy further represents that, in connection with any existing
or future investments in Exempt Projects, no System operating
company will, directly or indirectly, sell or pledge any of its
assets or incur any indebtedness to or for the benefit of an
Exempt Project. Therefore, there is no possibility that the
System operating companies would have any liability with respect
to Entergy's investments in Exempt Projects.
As a practical matter, it may not be feasible to insulate
the System operating companies from a potential increase in the
cost of capital that could result from a major loss in connection
with Entergy's investments in Exempt Projects. However, in the
event that any investments in Exempt Projects were to have
indirect adverse effects on the System operating companies' cost
of capital, Entergy's State Regulators have the authority and the
means to prevent any increased capital costs from being passed on
to the ratepayers of such companies. For example, the State
Regulators can fix the cost of capital for purposes of setting
the retail rates of electric utilities subject to their
jurisdiction by comparison with selected groups of domestic
utilities, which exclude any utilities with adverse capital cost
impacts due to investments in Exempt Projects. In addition,
Entergy and its affiliates have been subjected to extensive
audits by the FERC, the Commission and the State Regulators.
These audits have not led to findings that the System operating
companies cross-subsidize Exempt Projects. Furthermore, Entergy
represents herein, and commits to each of its State Regulators,
that Entergy will not seek recovery through rates to the System
operating companies' customers for any possible losses that
Entergy may sustain on investments in Exempt Projects or for
inadequate returns on such investments.
(d) Entergy has complied and will continue to comply with
the requirements of Rule 53(a)(2) (regarding the preparation and
availability of books and records and financial reports for
Exempt Projects), and the limitations in Rule 53(a)(3) (regarding
the use of System operating company employees in connection with
providing services to Exempt Projects).
Entergy's need for the support of personnel provided by the
System operating companies in connection with Exempt Projects has
been, and is projected to remain, minimal. The vast majority of
the operational employees of the Exempt Projects are hired or
contracted locally, even where an Entergy affiliate is the
project operator. Moreover, project development, management and
home office support functions for the Exempt Projects are largely
performed by Entergy's non-utility affiliates and by outside
consultants. The increased levels of investment in Exempt
Projects proposed herein are not expected to have any significant
impact on the level of utilization of System operating company
employees. Entergy further represents that the System operating
companies have not increased, and will not increase, staffing
levels or acquire other resources to support the operations of
Exempt Projects.
For all of the foregoing reasons, Entergy believes that, on
the basis of the information set forth herein, and consistent
with similar authorizations previously granted by the Commission,
the Commission should make the requisite findings under Rule
53(c) and grant Entergy's request for a modification of the
condition set forth in Rule 53(a)(1)."
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
D-4 - Conformed copy of Letter, dated July 8,
1998, from the PUCT to the Commission
D-5 - Conformed copy of Letter, dated April
17, 2000, from the ASPC to the Commission,
together with the Stipulation and Agreement
relating thereto
G-1 - Financial Schedules
(b) Financial Statements:
Financial Statements of Entergy Corporation and of Entergy
Corporation and Subsidiaries, consolidated, as of December 31,
1999 (reference is also made to Exhibit G-1 hereto).
Except as reflected in the Financial Statements, no material
changes not in the ordinary course of business have taken place
since December 31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
amendment to be signed on its behalf by the undersigned thereunto
duly authorized.
ENTERGY CORPORATION
By: /s/ Steven C. McNeal
Steven C. McNeal
Vice President and Treasurer
Dated: April 28, 2000
_______________________________
<FN1> The terms "aggregate investment" and "consolidated retained
earnings" are used in this Application-Declaration as defined
in Rule 53(a)(1) under the Act.
<FN2> Although Entergy Arkansas is subject to retail rate regulation
by the Tennessee Public Service Commission with respect to
retail service provided by Entergy Arkansas to less than 100
customers in southwestern Tennessee, Entergy Arkansas'
revenues from such service are immaterial, accounting for less
than 1% of its total operating revenues.
<FN3> Pursuant to a Commission order dated June 22, 1999 (the "June
1999 Order" ), Entergy Enterprises and other non-utility
subsidiaries of Entergy are currently authorized, among other
things, (1) to conduct development activities with respect to
potential investments by Entergy in Exempt Projects and other
non-utility businesses, (2) to provide management and
administrative support services to certain associate
companies, (3) to market intellectual property developed by
other System companies, and (4) to provide consulting services
to certain associate companies and to non-associate companies,
primarily in the areas of power generation, transmission and
distribution and ancillary operations.
<FN4> As of December 31, 1999, the indebtedness outstanding under
these credit arrangements was approximately $120 million.
<FN5> Guarantees may also be provided for Entergy's other
non-utility investments.
<FN6> The Treasurer's Department has responsibility to review,
analyze and compare the costs of such instruments and the
perceived interest rate risk, to approve the purchase of such
instruments when the costs associated with such perceived risk
exceed the costs associated with such instruments, and
generally to monitor the use of such instruments in connection
with Entergy's Exempt Projects.
<FN7> In addition, back-up guarantees or other undertakings by a
foreign central government may be available to ensure that the
United States dollar payments due under an off-take contract
are actually made available by the central bank or ministry of
finance.
<FN8> Entergy has committed to State and local regulators under
settlement arrangements entered into in 1992 and in
conjunction with this Application-Declaration to give first
priority in the allocation of resources to the capital
requirements of the System operating companies.
<FN9> As discussed below, none of the conditions specified in Rule
53(b) is applicable.
<FN10>See HCAR No. 26501 (April 1, 1996).
<FN11>See HCAR No. 26653 (January 24, 1997).
<FN12>See HCAR No. 26779 (November 17, 1997).
<FN13>See HCAR No. 26848 (March 23, 1998).
<FN14>See HCAR No. 26864 (April 27, 1998).
<FN15>See HCAR No. 26982 (February 26, 1999).
<FN16>Specifically, the respective percentages for Southern (as of
December 31, 1995) were 16.3%, 15.4%, 11.0% and 20.4%, for CSW
(as of June 30, 1995) were 23%, 23%, 14% and 31%, for GPU (as
of June 30, 1997) were 24.9%, 34.2%, 19.4% and 49.8%, for
Cinergy (as of March 31, 1997) were 16%, 16%, 11% and 19%, for
AEP (as of September 30, 1997) were 16%, 13.8%, 9.8% and
18.5%, and for NCE (as of September 30, 1998) were 13.7%,
11.8%, 9.1% and 12.5%.
<FN17>Entergy's consolidated retained earnings grew during this
period notwithstanding a decrease of approximately $184
million in Entergy's consolidated retained earnings during
1997 due to regulatory developments in Texas affecting Entergy
Gulf States and the recording in July 1997 of the U.K.
windfall profits tax imposed on London Electricity plc.
<FN18>The consolidated capitalization ratios provided herein include
non-recourse debt that is consolidated for financial reporting
purposes.
<FN19>To provide additional assurances in this regard to the
Commission, Entergy has requested each State Regulator to
certify to the Commission that it will exercise its authority
under relevant state law to protect ratepayers from any such
adverse effects.
EXHIBIT D-4
[LETTERHEAD OF PUBLIC UTILITY COMMISSION OF TEXAS]
July 8, 1998
Mr. Jonathan G. Katz
Secretary
Securities & Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Mr. Katz:
Entergy Gulf States (EGS), subsidiary of Entergy
Corporation (Entergy), has advised the Public Utility
Commission of Texas (PUCT) that Entergy anticipates requesting
approval from the Securities and Exchange Commission (SEC) for
an increase in its authority for investment in foreign utility
companies (FUCOs) and exempt wholesale generators (EWGs)
beyond that permitted under existing Entergy orders and Rule
53 promulgated under the Public Utility Holding Company Act of
1935 (PUHCA). In connection with such activities, Entergy has
requested that the Commission provide to you the certification
contemplated in Section 33(a)(2) of PUHCA of the PUCT's
authority to protect the Texas retail ratepayers of EGS.
As the Commission having jurisdiction over the retail
electric rates of EGS in the State of Texas, please be advised
that the PUCT:
(i) has the authority to protect the ratepayers of EGS;
and
(ii) intends to exercise such authority.
This certification is applicable to all FUCOs and EWGs in
which Entergy or its subsidiaries seek to obtain an ownership
interest. The certification is subject to being revised or
withdrawn by the PUCT in the future.
Entergy has agreed to comply with the requirements of
P.U.C. SUBST. R. 23.18 (attached for your convenience)
regarding FUCO ownership by exempt holding companies as a
condition of PUCT certification. In addition, Entergy has
agreed to provide information pursuant to section 23.18(d) of
the rule to the Commission prior to seeking any additional
ownership interests in FUCOs or foreign EWGs. Please contact
Ms. Martha Hinkle of the PUCT staff if you have any questions
on this matter.
Sincerely,
PUBLIC UTILITY COMMISSION OF TEXAS
/s/Pat Wood
Pat Wood, III, Chairman
/s/Judy Walsh
Judy Walsh, Commissioner
cc: Office of Public Utility Regulation
Securities and Exchange Commission
EXHIBIT D-5
[LETTERHEAD OF ARKANSAS PUBLIC SERVICE COMMISSION]
April 17, 2000
Mr. Jonathan G. Katz, Secretary
Securities & Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Mr. Katz:
Entergy Corporation ("Entergy") and Entergy Arkansas, Inc.
("EAI") have advised the Arkansas Public Service Commission
("APSC") that Entergy has requested SEC approval for an
increase in its authority for investments in exempt wholesale
generators and foreign utility companies (collectively "Exempt
Projects") from 50% to 100% of Entergy's consolidated retained
earnings. In connection with such activities, Entergy has
requested that the APSC provide to you a certification of the
APSC's authority to protect the ratepayers of EAI.
The APSC hereby certifies that it has the authority and
resources to protect EAI ratepayers from any effect of
Entergy's investment in foreign utility companies ("FUCOs")
and intends to exercise that authority in the event that
Entergy invests no more than the Investment Limit in FUCOs,
subject to the terms of the Stipulation and Agreement entered
into by and among Entergy, EAI and the APSC on April 17, 2000.
Sincerely,
/s/Jim von Gremp
Jim von Gremp
Chairman
<PAGE>
STIPULATION AND AGREEMENT
1. On May 6, 1997, Entergy Corporation ("Entergy"), a
Delaware corporation and registered holding company under the
Public Utility Holding Company Act of 1935 as amended (the
"Act"), filed with the Securities and Exchange Commission
("SEC") a Form U-1 Application-Declaration, as amended
("Application-Declaration"), seeking an order that would
exempt Entergy from the requirements of Rule 53(a)(1) under
the Act ("Rule 53") so as to allow Entergy to guarantee
securities of exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs") and to use the proceeds of
recourse debt and equity securities to invest in the
securities of EWGs and FUCOs in amounts which, when added to
Entergy's "aggregate investment" (as defined in Rule 53(a)(1)
under the Act) at any time in such entities, would not exceed
100% of Entergy's "consolidated retained earnings" (as defined
in Rule 53(a) under the Act). On October 12, 1998, the
Arkansas Public Service Commission ("APSC") filed a Motion to
Intervene, Request for Dismissal, or, in the Alternative,
Request for Hearing ("Motion") in the SEC proceeding. The
Motion requested that the Application-Declaration be denied
or, in the alternative, that it be set for an evidentiary
hearing.
2. In consideration of the commitments made by Entergy and
Entergy Arkansas, Inc. ("EAI") herein, the APSC agrees
promptly after the execution and delivery of this Stipulation
and Agreement to submit a letter to the SEC certifying that
the APSC has the authority to protect the retail ratepayers of
EAI and that the APSC intends to exercise such authority. A
copy of the text of the letter is attached hereto and made a
part hereof. The APSC further agrees to take no action
adverse to Entergy's obtaining the waiver referenced above and
to promptly withdraw its Motion in the SEC proceeding.
Entergy and EAI represent that the commitments made by them in
this Stipulation and Agreement are premised upon (i) the need
to obtain action from the APSC in connection with the
Application-Declaration expressing no objection to the relief
requested from the SEC, and (ii) the fact that the commitments
are linked contractually to, and conditioned upon, the
granting by the SEC of all relief requested in the Application-
Declaration.
3. As an inducement to the APSC to undertake the acts agreed
to by it herein, Entergy and EAI agree as follows:
a. The cost of capital and other costs that are
reflected in EAI's or Entergy's other U.S. electric operating
companies' rates applicable to Arkansas retail ratepayers will
not be adversely affected by Entergy's investments in FUCOs,
EWGs or other non-regulated businesses. In any proceeding
before the APSC or the Federal Energy Regulatory Commission
("FERC") to set rates applicable to Arkansas retail ratepayers
for EAI, Entergy's other U.S. electric operating companies,
including System Energy Resources, Inc., or transmission rates
for Entergy or any Entergy affiliate, the cost of capital
should be set commensurate with the business and financial
risks attendant to the relevant company and should not reflect
any increased risk associated with Entergy's investment in
FUCOs, EWGs, or other non-regulated businesses. Entergy and
EAI will not oppose orders entered by the APSC or the FERC
which are fairly designed to give effect to this principle,
taking into consideration all relevant facts.
b. EAI, Entergy Services, Inc., Entergy's other U.S.
electric operating companies and any Entergy transmission
subsidiary will not seek any rate change applicable to
Arkansas retail ratepayers which is supported in whole or in
part by costs, capital or otherwise, attributable to Entergy's
investments in FUCOs, EWGs or other non-regulated businesses.
c. If the APSC orders a show cause investigation into
the rates charged by EAI to its Arkansas ratepayers, EAI and
Entergy agree as follows:
(1) The effective date for any refund or credit to
EAI's Transition Cost Account ("TCA")<FN1> ordered pursuant to
Section 3(c)(2) below shall be the date of the APSC order
instituting the investigation;
(2) To secure any liability for overcollections
which may be attributable in whole or in part to Entergy's
investments in FUCOs, EWGs, or other non-regulated businesses,
EAI agrees to either post a bond or to obtain a letter of
credit as ordered by the Commission up to an amount not to
exceed sixty million dollars ($60,000,000). The amount of any
overcollection contemplated by this Section 3(c)(2) will be
determined using the difference between (1) the revenue
requirement calculated using EAI's cost of capital calculated
based on EAI's regulated activities and Entergy's investments
in FUCOs, EWGs and other non-regulated businesses, and (2) the
revenue requirement calculated using EAI's cost of capital
calculated based only on EAI's regulated activities. All
overcollections calculated pursuant to this paragraph shall be
refunded to ratepayers or credited to EAI's TCA as the
Commission may direct. Any such refund or TCA credit shall
not exceed the total annual rate reduction attributable to the
cost of capital difference, as determined in the preceding
sentence, divided by twelve months times the number of months
from the effective date to the date of the Commission's refund
order. The bond or letter of credit provided for hereinabove
will not be a cap on EAI's ultimate liability for a refund
and/or TCA credit.
d. In the event that EAI's bond ratings on its first
mortgage bonds, or those of a successor regulated distribution
utility, are downgraded to a Standard and Poor's bond rating
of BB+ or lower, or a Moody's bond rating of Ba1 or lower due
in whole or in part to Entergy's investments in FUCOs, EWGs or
other non-regulated businesses, and in the event said
downgradings continue for a period of fifteen (15) consecutive
months, EAI and Entergy agree to divest all EAI generation,
transmission, and distribution assets certificated under the
authority of the APSC upon written order of divestiture issued
by the APSC, subject to Sections 3(d)(1)-(d)(6) below. Prior
to the implementation of any final written order approving a
plan of divestiture, the following shall occur:
(1) EAI shall be afforded a hearing, at its
request, on the questions of:
(a) whether the continued downgrading of its
first mortgage bonds is due "in whole or
in part" to Entergy's investments in
FUCOs, EWGs, or other non-regulated
businesses; and, if so,
(b) whether divestiture would be in the best
interest of Arkansas ratepayers.
EAI shall file any such request for hearing within fifteen
(15) days of the APSC's order of divestiture. Such hearing
shall commence within sixty (60) days of the APSC's order of
divestiture unless otherwise directed by the APSC. EAI shall
bear the burden of demonstrating that the continued
downgrading of its first mortgage bonds is not due in whole or
in part to Entergy's investments in FUCOs, EWGs, or other non-
regulated businesses and that divestiture is not in the best
interest of Arkansas ratepayers;
(2) EAI shall develop a plan of divestiture which
permits EAI to realize fair value of such assets while
balancing the interest of EAI's Arkansas retail ratepayers;
(3) Other parties may also propose divestiture
plans;
(4) Any request for hearing by EAI pursuant to
paragraph 3(d)(1) above shall not affect EAI's and Entergy's
obligation to submit a plan of divestiture as ordered by the
APSC. The divestiture plan(s) shall be filed in a docketed
proceeding for APSC approval prior to closing the sale of
assets, and consideration of such plans shall be consistent
with all applicable laws. The transfer of assets shall only
occur pursuant to a final written order of the APSC following
consideration of the proposed divestiture plans; and
(5) The parties recognize that Arkansas General
Assembly Act 1556 of 1999 will require the unbundling of EAI's
generation, transmission, distribution and customer services
rates and functions. The parties further recognize that such
unbundling is necessary to the implementation of competition
in the retail generation market in Arkansas. The parties
agree, therefore, that assets transferred by EAI to an EAI
affiliate or to an unaffiliated entity, with the approval of
the APSC, shall not thereafter be subject to divestiture
hereunder or otherwise affected by this Agreement; provided,
however, that the APSC may condition the transfer by EAI of
any asset(s) to an EAI affiliate upon the asset's continuing
to be subject to the terms and conditions of this Stipulation
and Agreement.
e. Commencing no later than June 1, 2000, with
respect to calendar year 1999, Entergy will provide the APSC
with copies of its annual SEC Form U5S filings, including
Exhibits F-2 and F-3 thereto, each of Entergy's U.S. electric
operating companies' dividend payout ratio for the previous
calendar year; and, by EAI general ledger account number, the
annual payments, dividends, or any other transfers or receipts
to or from EAI by or to EAI's affiliates. Subsidiary earnings
and dividend payout ratios shall be kept confidential if
requested by EAI, using the agreement attached as Appendix A
hereto. Other than for the SEC Form U5S, Entergy will provide
all information mentioned in this paragraph in summary report
form and, upon request by the Commission, the data supporting
the summary report.
f. The terms and obligations imposed upon Entergy and
EAI by this Stipulation and Agreement are expressly
conditioned upon the issuance of a favorable ruling from the
SEC on the pending Application-Declaration and, absent an
acceptable order from the SEC, this Agreement will have no
effect. Nothing contained herein is intended by either party
to expand the obligations of Entergy or EAI, or the
jurisdictional authority of the APSC beyond current law other
than as may be required to fully implement this Stipulation
and Agreement. This agreement shall be binding on Entergy,
EAI, and their respective successors and assigns.
4. This agreement shall remain in effect until
otherwise ordered by the APSC, subject only to the following
limitations:
a. If the Public Utility Holding Company Act of
1935 is repealed, the investment cap (limiting aggregate
investment to no more than 100% of consolidated retained
earnings) shall no longer be in effect; and
b. If, upon petition being filed, or on its own
motion, the APSC finds that full and effective competition has
been achieved with respect to retail open access in EAI's
service territory in Arkansas, this Agreement shall terminate.
This AGREEMENT AND STIPULATION entered into on this 17th
day of April, 2000.
ARKANSAS PUBLIC SERVICE COMMISSION
By: /s/Mary Cochran
Mary Cochran
General Counsel
ENTERGY CORPORATION
By: /s/J. Wayne Leonard
J. Wayne Leonard
Chief Executive Officer
ENTERGY ARKANSAS, INC.
By: /s/Thomas J. Wright
Thomas J. Wright
President
_______________________________
<FN1> The TCA was established pursuant to the Stipulation and
Settlement Agreement approved by the Commission in Order
No. 31 in Docket No. 96-360-U.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $6,271,414
Natural gas 110,355
Steam products 15,852
Competitive businesses 2,375,607
----------
TOTAL 8,773,228
----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 2,082,875
Purchased power 2,442,484
Nuclear refueling outage expenses 76,057
Other operation and maintenance 1,705,545
Decommissioning 45,988
Taxes other than income taxes 339,284
Depreciation and amortization 698,881
Other regulatory charges - net 8,113
Amortization of rate deferrals 122,347
----------
TOTAL 7,521,574
----------
OPERATING INCOME 1,251,654
----------
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction 29,291
Gain on sale of assets - net 71,926
Miscellaneous - net 154,423
----------
TOTAL 255,640
----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 476,877
Other interest - net 82,471
Distributions on preferred securities of subsidiaries 18,838
Allowance for borrowed funds used during construction (22,585)
----------
TOTAL 555,601
----------
INCOME BEFORE INCOME TAXES 951,693
Income taxes 356,667
----------
CONSOLIDATED NET INCOME 595,026
Preferred dividend requirements and other 42,567
----------
EARNINGS APPLICABLE TO
COMMON STOCK $552,459
==========
Earnings per average common share:
Basic and diluted $2.25
Dividends declared per common share $1.20
Average number of common shares outstanding:
Basic 245,127,460
Diluted 245,326,883
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999
(In Thousands)
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents:
Cash $108,198
Temporary cash investments - at cost,
which approximates market 1,105,521
-----------
Total cash and cash equivalents 1,213,719
-----------
Other temporary investments - at cost,
which approximates market 321,351
Notes receivable 2,161
Accounts receivable:
Customer 290,331
Allowance for doubtful accounts (9,507)
Other 207,898
Accrued unbilled revenues 298,616
-----------
Total receivables 787,338
-----------
Deferred fuel costs 240,661
Fuel inventory - at average cost 94,419
Materials and supplies - at average cost 392,403
Rate deferrals 30,394
Deferred nuclear refueling outage costs 58,119
Prepayments and other 78,567
-----------
TOTAL 3,219,132
-----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 214
Decommissioning trust funds 1,246,023
Non-utility property - at cost (less accumulated depreciation) 317,165
Non-regulated investments 198,003
Other - at cost (less accumulated depreciation) 16,714
-----------
TOTAL 1,778,119
-----------
UTILITY PLANT
Electric 23,163,161
Plant acquisition adjustment 406,929
Property under capital lease 768,500
Natural gas 186,041
Steam products -
Construction work in progress 1,500,617
Nuclear fuel under capital lease 286,476
Nuclear fuel 87,693
-----------
TOTAL UTILITY PLANT 26,399,417
Less - accumulated depreciation and amortization 10,898,661
-----------
UTILITY PLANT - NET 15,500,756
-----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 16,581
SFAS 109 regulatory asset - net 1,068,006
Unamortized loss on reacquired debt 198,631
Other regulatory assets 637,870
Long-term receivables 32,260
Other 533,732
-----------
TOTAL 2,487,080
-----------
TOTAL ASSETS $22,985,087
===========
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Currently maturing long-term debt $194,555
Notes payable 120,715
Accounts payable 707,678
Customer deposits 161,909
Taxes accrued 445,677
Accumulated deferred income taxes 72,640
Nuclear refueling outage costs 11,216
Interest accrued 129,028
Co-owner advances 7,018
Obligations under capital leases 178,247
Other 125,749
-----------
TOTAL 2,154,432
-----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,310,340
Accumulated deferred investment tax credits 519,910
Obligations under capital leases 205,464
FERC settlement - refund obligation 37,337
Other regulatory liabilities 199,139
Decommissioning 703,453
Transition to competition 157,034
Regulatory reserves 378,307
Accumulated provisions 279,425
Other 535,156
-----------
TOTAL 6,325,565
-----------
Long-term debt 6,612,583
Preferred stock with sinking fund 69,650
Preference stock 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 338,455
Common stock, $.01 par value, authorized 500,000,000
shares; issued 247,082,345 shares 2,471
Paid-in capital 4,636,163
Retained earnings 2,786,467
Accumulated other comprehensive loss:
Cumulative foreign currency translation adjustment (68,782)
Net unrealized investment losses (5,023)
Less - treasury stock, at cost (8,045,434 shares) 231,894
-----------
TOTAL 7,457,857
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,985,087
===========
<PAGE>
ENTERGY CORPORATION
STATEMENT OF INCOME
For the Year Ended December 31, 1999
(In Thousands)
Income:
Equity in income of subsidiaries $651,977
Interest on temporary investments 5,703
--------
Total 657,680
--------
Expenses and Other Deductions:
Administrative and general expenses 85,815
Income taxes 12,524
Taxes other than income 739
Interest 6,143
--------
Total 105,221
--------
Net Income $552,459
========
<PAGE>
ENTERGY CORPORATION
BALANCE SHEET
December 31, 1999
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Temporary cash investments - at cost,
which approximates market $16,493
----------
Total cash and cash equivalents 16,493
Accounts receivable:
Associated companies 177,501
Interest receivable 93
Other 1,937
----------
Total 196,024
----------
Investment in Wholly-owned Subsidiaries 7,114,525
----------
Deferred Debits and Other Assets 50,357
----------
Total $7,360,906
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $120,000
Accounts payable:
Associated companies 2,165
Other 17,786
Taxes accrued 9,142
Other current liabilities 6,399
----------
Total 155,492
----------
Deferred Credits and Noncurrent Liabilities 80,989
----------
Shareholders' Equity:
Common stock, $.01 par value, authorized
500,000,000 shares; issued 247,082,345 shares 2,471
Paid-in capital 4,636,163
Retained earnings 2,786,467
Cumulative foreign currency translation adjustment (68,782)
Less cost of treasury stock (8,045,434 shares) 231,894
----------
Total common shareholders' equity 7,124,425
----------
Total $7,360,906
==========
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