_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification
Offices and Telephone Number No.
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-2703 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_________________________________________________________________________
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Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at July 31, 1997
Entergy Corporation ($0.01 par value) 241,269,934
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1997
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 3
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 6
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 12
Statements of Consolidated Income 15
Statements of Consolidated Cash Flows 16
Consolidated Balance Sheets 18
Selected Operating Results 20
Entergy Arkansas, Inc.:
Results of Operations 21
Statements of Income 22
Statements of Cash Flows 23
Balance Sheets 24
Selected Operating Results 26
Entergy Gulf States, Inc.:
Results of Operations 28
Statements of Income (Loss) 30
Statements of Cash Flows 31
Balance Sheets 32
Selected Operating Results 34
Entergy Louisiana, Inc.:
Results of Operations 35
Statements of Income 36
Statements of Cash Flows 37
Balance Sheets 38
Selected Operating Results 40
Entergy Mississippi, Inc.:
Results of Operations 41
Statements of Income 42
Statements of Cash Flows 43
Balance Sheets 44
Selected Operating Results 46
Entergy New Orleans, Inc.:
Results of Operations 48
Statements of Income 50
Statements of Cash Flows 51
Balance Sheets 52
Selected Operating Results 54
System Energy Resources, Inc.:
Results of Operations 55
Statements of Income 56
Statements of Cash Flows 57
Balance Sheets 58
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 60
Part II:
Item 1. Legal Proceedings 72
Item 4. Submission of Matters to a Vote of Security
Holders 73
Item 5. Other Information 74
Item 6. Exhibits and Reports on Form 8-K 75
Experts 76
Signature 77
<PAGE>
This combined Quarterly Report on Form 10-Q is separately filed
by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc. Information
contained herein relating to any individual company is filed by such
company on its own behalf. Each company makes representations only
as to itself and makes no other representations whatsoever as to any
other company. This combined Quarterly Report on Form 10-Q
supplements and updates the Annual Report on Form 10-K for the
calendar year ended December 31, 1996, and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, filed by the
individual registrants with the SEC and should be read in conjunction
therewith.
Investors are cautioned that forward-looking statements
contained herein with respect to the revenues, earnings, competitive
performance, or other prospects for the business of Entergy
Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., System Energy Resources, Inc. or their affiliated
companies may be influenced by factors that could cause actual
outcomes and results to be materially different than projected. Such
factors include, but are not limited to, the effects of weather, the
performance of generating units, fuel prices and availability,
regulatory decisions and the effects of changes in law, capital
spending requirements, the evolution of competition, changes in
accounting standards, and other factors.
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
Algiers 15th Ward of the City of New Orleans,
Louisiana
ALJ Administrative Law Judge
ANO Arkansas Nuclear One Plant
ANO 1 Unit No. 1 of ANO
ANO 2 Unit No. 2 of ANO
APSC Arkansas Public Service Commission
Cajun Cajun Electric Power Cooperative, Inc.
Capital Funds Agreement Agreement, dated as of June 21, 1974, as
amended, between System Energy and Entergy
Corporation, and the assignments thereof
CitiPower CitiPower Pty.
Council Council of the City of New Orleans,
Louisiana
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
Entergy Entergy Corporation and its various direct
and indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas
Power & Light Company
Entergy Corporation Entergy Corporation, a Delaware corporation,
successor to Entergy Corporation, a Florida
corporation
Entergy Enterprises Entergy Enterprises, Inc.
Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf
States Utilities Company (including wholly
owned subsidiaries - Varibus Corporation,
GSG&T, Inc., Prudential Oil & Gas, Inc., and
Southern Gulf Railway Company)
Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana
Power & Light Company
Entergy Mississippi Entergy Mississippi, Inc., formerly
Mississippi Power & Light Company
Entergy New Orleans Entergy New Orleans, Inc., formerly New
Orleans Public Service Inc.
Entergy Operations Entergy Operations, Inc., a subsidiary of
Entergy Corporation that has operating
responsibility for ANO, Grand Gulf 1, River
Bend, and Waterford 3
Entergy Services Entergy Services, Inc.
EPA U.S. Environmental Protection Agency
<PAGE>
Abbreviation or Acronym Term
EPAct Energy Policy Act of 1992
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 1996, of
Entergy, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy
Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant
ISES Independence Steam Electric Generating
Station
kWh Kilowatt-hour(s)
LPSC Louisiana Public Service Commission
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy on February 7, 1997
Merger The combination transaction, consummated on
December 31, 1993, by which Entergy Gulf
States became a subsidiary of Entergy
Corporation and Entergy Corporation became a
Delaware corporation
MPSC Mississippi Public Service Commission
NRC Nuclear Regulatory Commission
Owner Participant A corporation that, in connection with the
Waterford 3 sale and leaseback transactions,
has acquired a beneficial interest in a
trust, the Owner Trustee of which is the
owner and lessor of undivided interests in
Waterford 3
Owner Trustee Each institution and/or individual acting as
Owner Trustee under a trust agreement with
an Owner Participant in connection with the
Waterford 3 sale and leaseback transactions
PCBs Polychlorinated biphenyls
PUHCA Public Utility Holding Company Act of 1935,
as amended
PUCT Public Utility Commission of Texas
PURPA Public Utility Regulatory Policies Act
River Bend River Bend Nuclear Plant, owned 70% by
Entergy Gulf States
RUS Rural Utilities Service
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash flow from operations for Entergy, the domestic utility
companies, and System Energy for the six months ended June 30, 1997,
and 1996 was as follows:
Six Months Six Months
Company Ended 6/30/97 Ended 6/30/96
(In Millions)
Entergy $ 840.2 $ 626.4
Entergy Arkansas $ 177.7 $ 157.8
Entergy Gulf States $ 213.5 $ 113.6
Entergy Louisiana $ 115.2 $ 155.9
Entergy Mississippi $ 87.6 $ 80.7
Entergy New Orleans $ 29.2 $ 15.0
System Energy $ 131.6 $ 129.3
The positive cash flow from operations for the domestic utility
companies results from continued efforts to streamline operations and
to reduce costs, as well as from collections under rate phase-in
plans that exceed current cash requirements for the related costs.
In the income statement, these revenue collections are offset by the
amortization of the previously deferred costs so that there is no
effect on net income. These phase-in plans will continue to
contribute to Entergy's cash position in the immediate future.
The Grand Gulf 1 phase-in plans will expire in 1998 for Entergy
Arkansas and Entergy Mississippi, and in 2001 for Entergy New
Orleans. Entergy Gulf States' phase-in plan for River Bend will
expire in 1998. However, Entergy Louisiana's phase-in plan for
Waterford 3 expired in June 1997. Competitive growth businesses had
a positive impact on Entergy's cash flow from operations. In
accordance with the purchase method of accounting, London
Electricity's results of operations are not included in Entergy's six
months ended June 30, 1996 Statements of Consolidated Cash Flows.
Financing Sources
As discussed in Note 8, the acquisition of London Electricity
for $2.1 billion was accomplished in February 1997. The acquisition
was financed with $1.7 billion of debt that is non-recourse to
Entergy Corporation, and $392 million of equity provided by Entergy
Corporation from available cash and borrowings under its $300 million
line of credit. Currently, Entergy is pursuing alternatives to
refinance a portion of this debt. Excluding the London Electricity
investment, cash from operations, supplemented by cash on hand, was
sufficient to meet substantially all investing and financing
requirements of the domestic utility companies and System Energy,
including capital expenditures, dividends, and debt and preferred
stock maturities for the six months ended June 30, 1997.
Entergy has been able to fund the capital requirements for its
domestic utility companies with cash from operations as discussed
above in "Cash Flows". Should additional cash be needed to fund
investments or to retire debt, the domestic utility companies and
System Energy each have the ability, subject to regulatory approval
and compliance with issuance tests, to issue debt or preferred
securities to meet such requirements. In addition, to the extent
market conditions and interest and dividend rates allow, the domestic
utility companies and System Energy will continue to refinance and/or
redeem higher cost debt and preferred stock prior to maturity. See
Note 4 herein for a discussion of the recent refinancing by Entergy
Louisiana. The domestic utility companies may continue to establish
special purpose trusts as financing subsidiaries for the purpose of
issuing preferred trust securities, such as those issued in 1996 by
Entergy Louisiana Capital I and Entergy Arkansas Capital I, and those
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
issued in January 1997 by Entergy Gulf States Capital I. Entergy
Corporation, the domestic utility companies, and System Energy also
have the ability to effect short-term borrowings. See Notes 4,
5, 6, 7, 9 and 10 in the Form 10-K for additional information on
Entergy's capital and refinancing requirements in 1997-2001.
As of June 30, 1997, Entergy Corporation had $225 million
outstanding under its $300 million bank credit facility, representing
the remaining balance of the amount used for the acquisition of
London Electricity in February 1997. In addition, Entergy Technology
Holding Company (ETHC) had $61 million outstanding under its $250
million bank line of credit as of June 30, 1997. See Note 4 to the
Form 10-K for information on the domestic utility companies' and
System Energy's short-term borrowing authorizations and bank lines of
credit.
Financing Uses
Productive investment by Entergy Corporation is integral to
enhancing the long-term value of its common stock. Entergy
Corporation has been expanding its investments in business
opportunities overseas as well as in the United States. As of June
30, 1997, Entergy Corporation had acquired or participated in foreign
electric ventures in Australia, Argentina, Chile, Pakistan, Peru, and
the United Kingdom, and had acquired several telecommunications-based
businesses in the United States. As of June 30, 1997, Entergy
Corporation had a net investment of $1.3 billion in equity capital in
competitive growth businesses. See Note 8 for a discussion of
Entergy Corporation's acquisition of London Electricity on February
7, 1997.
To make capital investments, fund its subsidiaries, and pay
dividends, Entergy Corporation will utilize internally generated
funds, cash on hand, funds available under its $300 million bank
credit facility, funds received from its dividend reinvestment and
stock purchase plan, and bank financings as required. See Note 3
herein for information regarding proceeds from the issuance of common
stock under Entergy's dividend reinvestment and stock purchase plan
during the six months ended June 30, 1997. See Note 9 in the Form 10-
K for a discussion of capital requirements. Entergy Corporation
receives funds through dividend payments from its subsidiaries.
During the six months ended June 30, 1997, such dividend payments
from subsidiaries totaled $175.9 million. In order to improve its
capital structure, Entergy Gulf States has not paid common stock
dividends since the third quarter of 1994. During the six months
ended June 30, 1997, Entergy Corporation paid $212.1 million of
common stock dividends. Declarations of dividends on common stock
are made at the discretion of Entergy Corporation's Board of
Directors. Management will not recommend future changes in dividends
to the Board unless warranted by economic circumstances and the then
current business environment. See Note 8 in the Form 10-K for
information on dividend restrictions.
Entergy Corporation and Entergy Gulf States
See Notes 1 and 2 regarding River Bend and Cajun litigation. An
adverse ruling regarding River Bend could result in up to
approximately $273 million of potential write-offs (net of tax) and
up to $215 million in refunds of previously collected revenue. Such
write-offs and charges could result in substantial net losses being
reported in the future by Entergy Gulf States, with resulting adverse
adjustments to the common equity of Entergy Corporation and Entergy
Gulf States. Adverse resolution of these matters could negatively
affect Entergy Gulf States' ability to obtain financing, which could
in turn affect Entergy Gulf States' liquidity and ability to resume
paying common stock dividends.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Corporation and System Energy
Under the Capital Funds Agreement, Entergy Corporation has
agreed to supply to System Energy sufficient capital to maintain
System Energy's equity capital at a minimum of 35% of its total
capitalization (excluding short-term debt), to permit the continued
commercial operation of Grand Gulf 1, and to pay in full all
indebtedness for borrowed money of System Energy when due under any
circumstances. In addition, under supplements to the Capital Funds
Agreement assigning System Energy's rights thereunder as security for
specific debt of System Energy, Entergy Corporation has agreed to
make cash capital contributions, if required, to enable System Energy
to make payments on such debt when due. The Capital Funds Agreement
may be terminated by the parties thereto, subject to the consent of
certain creditors.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, including
"Open Access Transmission", "Municipalization", "Industry
Consolidation", "Functional Unbundling", and "Effects of Alternate
Energy Sources on Retail Electric Sales to Industrial and Large
Commercial Customers" for a discussion of the increasing competitive
pressures facing Entergy and the electric utility industry. See "ANO
Matters", and "Property Tax Exemptions" in the Form 10-K for a
discussion of other significant issues affecting Entergy. Set forth
below are recent developments to the Form 10-K disclosure for the
sections presented.
Competition and Industry Challenges
Transition to Competition Filings
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and Note 2
herein for a discussion of the domestic utility companies' filings
with their respective state and local regulators concerning the
transition to competition. Entergy Gulf States made a supplemental
filing with the PUCT on April 4, 1997, outlining a comprehensive
market reform proposal calling for the establishment of retail
competition, service quality standards, a regional power exchange,
and an independent system operator. Entergy Gulf States requested
from the PUCT a reciprocal commitment ensuring the full recovery of
prudently incurred investments previously approved by regulators.
The PUCT has scheduled hearings on the transition to competition
beginning in October 1997.
The MPSC conducted hearings in April 1997 on various transition
to competition issues, including the recoverability of stranded
costs, the potential for cost shifting, and electric supply
reliability. In early July the MPSC issued an order directing the
MPSC Staff to submit a report by November 1, 1997, outlining a plan
for restructuring the electric utility industry in Mississippi.
Entergy Arkansas filed a supplement to its transition to
competition plan with the APSC on May 1, 1997. This filing is
similar to the supplemental filing made by Entergy Gulf States as
discussed above. See Note 2 for additional information regarding
this filing.
In October 1996, Entergy Gulf States and Entergy Louisiana filed
proposals with the LPSC designed to achieve an orderly transition to
retail electric competition in Louisiana, while protecting certain
classes of ratepayers from bearing the burden of cost shifting. See
Note 2 for additional information regarding this filing. Hearings on
these proposals have been delayed until 1998.
In February 1997, the LPSC ruled that certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals would be
addressed in those companies' existing rate dockets, and that certain
other issues would be addressed in an ongoing generic regulatory
proceeding examining electric industry restructuring. In July 1997,
Entergy Gulf States and Entergy Louisiana filed supplemental
testimony on asset securitization, market price projections, and
potential strandable cost quantification in response to the issues
identified by the LPSC.
The Council established two new dockets in March 1997 regarding
electric and gas utility service competition in the City of New
Orleans. One docket will address competitive issues, including the
advisability of implementing competition, recoverability and
measurement of stranded costs, maximization of consumer savings from
competition and minimization of cost shifting, and potential
conflicts among federal, state, and local regulators, as such issues
relate to electric and gas service currently being provided to New
Orleans customers by Entergy New Orleans. The second docket will
address the same issues related to the provision of electric service
to Algiers customers by Entergy Louisiana. A procedural schedule was
established which required comments to
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
be filed in April 1997 and set hearings for May, July and October
1997. Entergy New Orleans intends to file a specific transition to
competition plan following these hearings.
Retail and Wholesale Rate Issues
See Note 2 to the Form 10-K for a discussion of the ongoing
trend of regulator mandated rate reductions as well as incentive and
performance-based regulation and filings made with state and local
regulators regarding an orderly transition to a more competitive
market for electricity. See Note 2 herein for a discussion of rate
reductions implemented at Entergy Louisiana and Entergy New Orleans
during the current period.
On July 14, 1997, Entergy Services filed with the FERC its
wholesale transmission open access compliance tariff incorporating
the requirements of FERC Order No. 888-A.
Legislative Activity
A number of bills recently have been introduced in the U. S.
Congress calling for deregulation of the electric power industry.
Included in these proposals are some that would amend or repeal PUHCA
and/or PURPA. These bills generally have provisions that would give
consumers the ability to choose their own electricity service
provider.
Entergy Gulf States was an active participant in discussions
aimed at developing legislation related to electric utility industry
restructuring and competition by the Texas Legislature before it
adjourned June 2, 1997. No legislation was passed in Texas during
the recent session and the legislature will not convene again until
January 1999, by which time Entergy Gulf States believes the PUCT
will have acted on its transition to competition filing.
The Arkansas Senate has passed a resolution requesting a study
of the impact of competition in the electric utility industry on the
citizens of Arkansas, the electric utility industry, and the
regulatory authority of the APSC. This study is scheduled to begin
no later than December 1, 1997.
Competitive Growth Businesses
Entergy Corporation seeks opportunities to expand its domestic
and foreign businesses that are not regulated by domestic state and
local utility regulatory authorities. Such business ventures
currently include power development and operations and retail
services related to the utility business. Refer to "MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES"
for a discussion of Entergy Corporation's 1997 investments in
competitive growth businesses. These investments may involve a
greater risk than domestic regulated utility enterprises. For the
six months ended June 30, 1997, Entergy Corporation's competitive
growth businesses increased consolidated net income by approximately
$49 million.
Entergy Nuclear, Inc. (Entergy Nuclear) began providing
management and operations services in February 1997 for an initial
period of up to one year to Maine Yankee Atomic Power Company (Maine
Yankee) at the Maine Yankee nuclear plant. The creation of Entergy
Nuclear and its undertaking with Maine Yankee are authorized by
existing SEC orders previously granted to Entergy Enterprises.
Entergy Corporation has an
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
application pending at the SEC to create a different structure under
which Entergy Nuclear would engage in this business for other nuclear
utilities.
On August 6, 1997, the board of directors of Maine Yankee
announced the permanent closure of the nuclear plant based on
economic concerns and uncertainty about the operation of the plant.
Entergy Nuclear will honor its short-term contract to provide
management services to Maine Yankee to prepare for decommissioning
through September 30, 1997 and, at the option of Maine Yankee,
through March 31, 1998.
As of June 30, 1997, Entergy Corporation controlled 100% of the
common shares of London Electricity. For additional information
related to this acquisition, see Note 8 herein. Through London
Electricity, Entergy expects to gain valuable experience in the
deregulated United Kingdom electricity market to apply to the
anticipated deregulated electricity market in the United States.
London Electricity has already experienced seven years of a partially
competitive supply environment and expects to be in a fully
competitive supply market beginning April 1, 1998. In conjunction
with the acquisition of London Electricity, Entergy established an
international retail operations group to coordinate retail electric
operations in the United Kingdom, Australia, and Argentina.
In February 1997, Entergy Richmond Power Corporation, a wholly-
owned subsidiary of Entergy Power Development Corporation, sold its
50% interest in Richmond Power Enterprise LP (owner of a gas-fired
electric and steam generation facility), to a third party for $10
million, realizing an after tax gain of $2.7 million.
In February 1997, Entergy Corporation announced a joint venture
with Hyperion Telecommunications. It is expected that by the end of
1997, the joint venture (to be known as Entergy Hyperion
Telecommunications) will offer competitive telephone services
primarily to commercial customers in the metropolitan areas of Little
Rock, Arkansas, Jackson, Mississippi, and Baton Rouge, Louisiana.
In June 1997, Entergy Transener, S.A., a wholly-owned subsidiary
of Entergy Power Development Corporation, sold its interest in a
consortium that owned 65% of Transener S.A. for $27.5 million,
realizing an after-tax gain of $5.8 million.
During the second quarter of 1997, Entergy Pakistan Limited, a
wholly-owned subsidiary of Entergy Power Development Corporation,
sold 25% of its interest in Hub Power Company, Ltd. for $26.9
million, which resulted in an after-tax gain of $9.3 million.
During the second quarter of 1997, Entergy Power Chile, S.A., an
indirect wholly-owned subsidiary of Entergy Power Development
Corporation, purchased a 25% interest in the San Isidro project, a
370 MW gas-fired, combined cycle generating facility under
construction in Chile. Entergy Power Chile, S.A. is obligated to
fund up to $20 million for the cost of completing the plant,
scheduled for commercial operation in 1999. The other owner of the
project, which is also the developer, is Empresa Nacional de
Electricidad, S.A. (Endesa).
On July 1, 1997, Entergy Security acquired the Ranger American
group of companies for an aggregate purchase price of approximately
$60.8 million. Ranger American is a leading provider of electronic
security services in the largest cities in Texas and in Atlanta,
Georgia. This expansion increases Entergy Security's customer total
to approximately 140,000 and its annual revenues to more than $53
million. See Note 3 for details regarding the Entergy Corporation
common stock that was issued in connection with this acquisition.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, and Note 8
herein, for a discussion of Entergy's major competitive growth
businesses.
Windfall Profits Tax
As a result of Parliamentary elections held on May 1, 1997, the
Labour Party gained control of the British government. On July 31,
1997, the British government enacted into law a one-time "windfall
profits tax" on privatized industries, including regional electric
utilities such as London Electricity. An initial examination of the
proposed tax indicates that London Electricity's assessment is
approximately 140 million British Pounds (approximately $229 million)
which will not be deductible for United Kingdom income tax purposes.
Payment of the tax is required in two equal installments, the first
to be due on December 1, 1997, and the second installment due a year
later. The government also decreased the corporate tax rate in the
United Kingdom from the current 33% to 31%, which will be effective
as of April 1, 1997. In accordance with SFAS 109, "Accounting
for Income Taxes", this reduction in United Kingdom income tax
rates will result in a one-time reduction in income tax expense of
approximately $65 million to adjust London Electricity's deferred
income tax liability to the new rate. Accordingly, the liability
for the windfall profits tax (with a corresponding charge against
income) and the reduction in London Electricity's deferred income
tax liability (with a corresponding reduction in income tax expense),
were recorded in July 1997.
Waterford 3 Refueling Outage
A scheduled 45-day refueling outage for the Waterford 3 nuclear
plant began on April 12, 1997. Additional work and two minor
incidents caused the outage to be extended from May 27 to mid-June.
On May 28, 1997, a start-up transformer at Waterford 3 failed due to
an internal fault. A replacement transformer was located and was
shipped to Waterford 3, where certain plant configuration changes
were made to facilitate its installation. After installation of the
replacement transformer, the plant was restarted on July 29, 1997.
Cajun - River Bend
The RUS entered into an agreement on February 11, 1997 for the
sale of Cajun's 30% interest in River Bend to PECO Energy Company
(PECO) pursuant to authorization granted in the Bankruptcy Court
Order of August 26, 1996. On July 10, 1997, PECO terminated this
agreement with the RUS. Under orders of the Bankruptcy Court, RUS
now has until mid-October 1997 to determine whether to sell the
Cajun interest to another purchaser, to retain it, or to transfer
it to Entergy Gulf States at no cost.
Labor Agreements
During April 1997, Entergy Gulf States and a union representing
1,000 employees in Texas and Louisiana signed a two-year labor
contract (expiring August 14, 1999). The contract stipulate that
there will be no layoffs in the next two years and wages will be
increased 3% in 1997 and 1998.
In early July 1997, Entergy Operations and the union
representing 317 employees at River Bend, and Entergy Mississippi and
the union representing 400 employees signed two-year labor contracts
which also stipulates that there will be no layoffs of covered
employees over the next two years and that wages will be
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
increased 3% over the next two years. These increases at Entergy
Mississippi are to be effective October 15, 1998, and October 15,
1999. The new contract will run from October 1998 to October 2000.
Deregulated Utility Operations
Entergy Gulf States discontinued regulatory accounting
principles in 1989 for its wholesale jurisdiction and steam
department, and in 1991 for the Louisiana deregulated portion of
River Bend. Operating income from these operations during the three
and six months ended June 30, 1997, was $4.6 million and $9.2
million, respectively, compared to $1.8 million and $8.0 million
during the comparable periods in 1996.
The increase in operating income from these deregulated
operations for the three and six months ended June 30, 1997 was
principally due to decreased steam products expenses, partially
offset by reduced wholesale jurisdiction revenues. The future impact
of the deregulated utility operations on Entergy's and Entergy Gulf
States' results of operations and financial position will depend on
future operating costs, future efficiency and availability of
generating units, and future market prices for energy over the
remaining life of the assets.
Accounting Issues
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note 1 in the Form 10-K for
a discussion of the impact of the adoption by Entergy of SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", effective January 1, 1996.
Continued Application of SFAS 71 - As a result of the EPAct, the
actions of regulatory bodies, and other factors, the electric utility
industry is moving toward a combination of competition and a modified
regulatory environment. The domestic utility companies' and System
Energy's financial statements currently reflect, for the most part,
assets and costs based on existing cost-based ratemaking regulations
in accordance with SFAS 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). Continued applicability of SFAS 71
to the domestic utility companies' and System Energy's financial
statements requires that rates set by an independent regulator on a
cost-of-service basis be charged to and collected from customers.
In the event that all or a portion of a utility's operations
cease to meet those criteria for various reasons, including
deregulation, a change in the method of regulation, or a change in
the competitive environment for the utility's regulated services, the
utility is required to discontinue application of SFAS 71 for the
relevant portion of its operations by eliminating from the balance
sheet the effects of any actions of regulators recorded as regulatory
assets and liabilities. Discontinuation of the application of SFAS
71 would have a material adverse impact on Entergy's financial
statements.
The SEC has expressed concern regarding the continuing
applicability of SFAS 71 to the financial statements of electric
utilities which either have been ordered by regulators to adopt
transition to competition plans, or as in a number of other states,
are in the process of participating with the state legislature and/or
regulators in the development of such plans. While such plans may
call for rate caps or decreases, they generally provide for recovery
of above market rate generating plant and other regulatory assets
(stranded costs). The SEC is concerned that portions of entities
subject to such plans may not meet the criteria for the continued
application of SFAS 71. The Emerging Issues Task Force of the FASB
(EITF) met in May and July of 1997 to address the issues of when such
an entity should discontinue the application of SFAS 71, and how SFAS
101 should be applied to a portion of an entity subject to such a
plan. As a result of these meetings, a consensus was reached
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
that SFAS 71 should be discontinued at a date no later than when the
details of the transition to competition plan for that portion of the
entity are known. Additionally, the EITF reached a consensus that
stranded costs which are to be recovered through cash flows derived
from another portion of the entity which continues to apply SFAS 71
should not be written off and considered regulatory assets of that
segment which will continue to apply SFAS 71.
The domestic utility companies' and System Energy's financial
statements continue to apply SFAS 71 for their regulated operations,
except for those portions of Entergy Gulf States' business described
in "Deregulated Utility Operations" above. Although discussions with
regulatory authorities regarding retail competition have occurred and
are expected to continue, no final transition to competition plan has
been adopted, and therefore, the regulated operations continue to
apply SFAS 71. See Note 1 to the Form 10-K for additional discussion
of Entergy's application of SFAS 71.
Accounting for Decommissioning Costs - In February 1996, the
FASB issued an exposure draft of a proposed SFAS addressing the
accounting for decommissioning costs of nuclear generating units as
well as liabilities related to the closure and removal of all long-
lived assets. See Note 1 for a discussion of proposed changes in the
accounting for decommissioning/closure costs and the potential impact
of these changes on Entergy.
Year 2000 Issues
Like many companies, Entergy is currently evaluating its
computer software and databases to determine the extent to which
modifications are required to prevent problems related to the year
2000, and the resources which will be required to make such
modifications. These problems could result in malfunctions in
certain software and databases with respect to dates on or after
January 1, 2000, unless corrected. Entergy is evaluating the cost
of making the necessary modifications required to correct any
"Year 2000" problems.
Financial Derivatives
Derivative instruments have been used by Entergy on a limited
basis. Entergy uses financial derivatives only to mitigate business
risks and not for speculative purposes. See Notes 7 and 9 to the
Form 10-K and Note 4 herein for additional information concerning
Entergy's derivative instruments outstanding as of December 31, 1996,
and June 30, 1997.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
On February 7, 1997, Entergy Corporation made unconditional its
offer to acquire London Electricity. In accordance with the purchase
method of accounting, the results of operations for the three and six
months ended June 30, 1996 of Entergy Corporation and subsidiaries
reported in the Statements of Consolidated Income and Cash Flows do
not include London Electricity's results of operations. Consolidated
net income for the three and six months ended June 30, 1997 includes
a positive effect due to the inclusion of London Electricity results
subsequent to February 1, 1997. See Note 8 for additional
information regarding London Electricity.
Net Income
Consolidated net income decreased for the three months ended
June 30, 1997 primarily due to a decrease in electric revenues and an
increase in other operation and maintenance expense, partially offset
by an increase in competitive growth business revenue and a decrease
in income tax expense. Consolidated net income increased for the six
months ended June 30, 1997 primarily due to the $174 million net of
tax write-off of River Bend rate deferrals in January 1996 pursuant
to SFAS 121. Excluding this item, net income would have decreased
$19.2 million for the six months ended June 30, 1997 primarily due to
a decrease in electric revenues and an increase in other operations
and maintenance expense, partially offset by an increase in
competitive growth business revenue and a decrease in income tax
expense.
The increase in competitive growth business revenues for the
three and six months ended June 30, 1997 was primarily due to the
inclusion of London Electricity revenues and increased earnings of
CitiPower. London Electricity contributed earnings of $9.4 million
or $0.04 per share for the three months ended June 30, 1997 and $25.0
million or $0.11 per share for the six months ended June 30, 1997 to
consolidated net income. CitiPower's net income increased primarily
due to favorable weather trends and due to restructuring charges that
were recorded in 1996.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues associated with
Entergy's domestic regulated operations for the three and six months
ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($14.8) ($37.8)
Rate riders (12.9) (17.4)
Fuel cost recovery (39.8) 23.1
Sales volume/weather (39.8) (36.0)
Other revenue (including unbilled) (42.6) (29.1)
Sales for resale (22.0) (35.8)
------- -------
Total ($171.9) ($133.0)
======= =======
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues of the domestic utility companies
and System Energy decreased for the three and six months ended June
30, 1997 primarily due to reductions in base revenues, the impact of
milder weather in the current period, reductions in other revenue,
and a decrease in sales for resale to non-associated utilities. Base
revenues decreased primarily due to rate reductions for Louisiana
retail customers, aggressive pricing strategies for targeted customer
segments, and a change in sales mix from residential and commercial
customers to industrial customers at Entergy Gulf States. The
decrease in other revenue is primarily due to the impact in 1996 of a
non-recurring adjustment to reserve for a potential refund associated
with a change in accounting for unbilled revenue in 1993, as well as
lower unbilled revenue in the current period. Unbilled revenues
decreased primarily due to milder weather in the current period. The
decrease in sales for resale to non-associated utilities is primarily
due to changes in generation requirements and availability among the
domestic utility companies. Fuel cost recovery decreased for the
three months ended June 30, 1997 primarily due to lower fuel prices
and milder weather, which caused a decrease in energy sales. Fuel
cost recovery increased for the six months ended June 30, 1997 due to
a PUCT order which approved recovery of under-recovered fuel expenses
at Entergy Gulf States. See Note 2 herein for further discussion.
Competitive growth business revenues increased for the three and
six months ended June 30, 1997 primarily due to the February 1997
acquisition of London Electricity. London Electricity generated
revenues of $463.2 million and $854.4 million for the three and six
months ended June 30, 1997, respectively.
Expenses
Operating expenses for the three months ended June 30, 1997 and
the portion of the six months ended June 1997 subsequent to
February 1 include the operating expenses of London Electricity,
which were not included in the prior year's financial statements.
Excluding the operating expenses of London Electricity, Entergy's
operating expenses for the three and six months ended June 30, 1997
are discussed below.
For the three months ended June 30, 1997, operating expenses
decreased by approximately $35.4 million primarily due to lower fuel
expenses, partially offset by an increase in other operations and
maintenance expense. Fuel expenses decreased primarily due to lower
fuel prices and a decrease in energy sales as a result of the milder
weather in the current period. The increase in other operations and
maintenance expense is primarily due to an increase in non-outage
related maintenance expense at Waterford 3 and an increase in
maintenance expense at certain fossil plants.
Operating expenses increased by approximately $32 million for
the six months ended June 30, 1997 primarily due to an increase in
depreciation, amortization and decommissioning expense and a decrease
in rate deferrals, partially offset by a decrease in fuel expenses.
The increase in depreciation, amortization, and decommissioning is
due to (i) additional depreciation recorded by System Energy
associated with the sale and leaseback in 1989 of a portion of Grand
Gulf 1 and (ii) plant additions and improvements. Rate deferrals
recorded in the first quarter of 1996 relate primarily to the LPSC-
approved rate deferral of the Waterford 3 property tax first imposed
in 1996. This tax is currently included in base rates. Fuel
expenses decreased primarily due to a decrease in energy sales as a
result of the milder weather in the current period and lower fuel
prices.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income increased for the six months ended June 30, 1997
primarily as a result of the 1996 write-off of River Bend rate
deferrals pursuant to SFAS 121. Excluding London Electricity,
interest on long-term debt decreased for the three and six months
ended June 30, 1997 due primarily to ongoing retirement and
refinancing of higher cost debt. Interest on debt associated with
the London Electricity acquisition more than offset this decrease.
Income tax expense decreased for the three months ended June 30, 1997
primarily due to lower pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands, Except Share Data)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $1,502,742 $1,674,610 $2,954,667 $3,087,678
Natural gas 23,025 28,991 80,521 86,464
Steam products 12,872 15,214 23,961 30,792
Competitive growth businesses 639,451 134,862 1,164,694 247,735
---------- ---------- ---------- ----------
Total 2,178,090 1,853,677 4,223,843 3,452,669
---------- ---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 339,778 405,549 738,520 781,313
Purchased power 469,726 189,153 890,688 347,310
Nuclear refueling outage expenses 13,172 13,739 30,408 27,948
Other operation and maintenance 512,830 380,085 938,917 733,297
Depreciation, amortization, and decommissioning 241,286 195,100 469,315 389,667
Taxes other than income taxes 90,205 89,942 183,196 178,913
Rate deferrals (7,909) (11,273) (17,484) (31,075)
Amortization of rate deferrals 85,115 90,213 184,178 181,724
---------- ---------- ---------- ----------
Total 1,744,203 1,352,508 3,417,738 2,609,097
---------- ---------- ---------- ----------
Operating Income 433,887 501,169 806,105 843,572
---------- ---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 3,035 2,796 6,068 5,354
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net 29,224 12,682 46,617 23,461
---------- ---------- ---------- ----------
Total 32,259 15,478 52,685 (165,683)
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt 205,310 174,704 390,800 347,547
Other interest - net 11,148 10,098 23,053 21,945
Distributions on preferred securities of subsidiaries 4,710 - 8,882 -
Allowance for borrowed funds used
during construction (2,440) (2,329) (4,877) (4,467)
---------- ---------- ---------- ----------
Total 218,728 182,473 417,858 365,025
---------- ---------- ---------- ----------
Income Before Income Taxes 247,418 334,174 440,932 312,864
Income Taxes 88,839 127,473 155,868 175,153
---------- ---------- ---------- ----------
Net Income 158,579 206,701 285,064 137,711
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 12,303 18,378 29,026 36,459
---------- ---------- ---------- ----------
Earnings Applicable to Common Stock $146,276 $188,323 $256,038 $101,252
========== ========== ========== ==========
Earnings per average common share $0.61 $0.83 $1.08 $0.44
Dividends declared per common share $0.45 - $0.90 $0.90
Average number of common shares outstanding 238,577,894 228,036,032 236,865,266 227,908,318
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $285,064 $137,711
Noncash items included in net income:
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals/excess capacity-net 223,311 210,399
Depreciation, amortization, and decommissioning 469,315 390,038
Deferred income taxes and investment tax credits (70,123) (49,738)
Allowance for equity funds used during
construction (5,475) (5,354)
Changes in working capital:
Receivables 8,750 (101,595)
Fuel inventory 37,965 7,348
Accounts payable (23,891) 7,740
Taxes accrued 106,367 63,797
Interest accrued 868 (6,238)
Other working capital accounts (98,449) (132,057)
Decommissioning trust contributions (41,757) (26,157)
Other (51,731) (64,015)
----------- -----------
Net cash flow provided by operating activities 840,214 626,377
----------- -----------
Investing Activities:
Construction/capital expenditures (296,817) (285,411)
Allowance for equity funds used during construction 5,475 5,354
Nuclear fuel purchases (52,323) (73,782)
Proceeds from sale/leaseback of nuclear fuel 79,512 54,241
Acquisition of London Electricity, net of cash
acquired (1,980,631) -
Acquisition of CitiPower - (1,156,112)
Investment in nonregulated/nonutility properties 78,537 (6,426)
Other (20,767) (20,752)
----------- -----------
Net cash flow used in investing activities (2,187,014) (1,482,888)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Financing Activities:
<S> <C> <C>
Proceeds from the issuance of:
General and refunding mortgage bonds 64,827 39,608
First mortgage bonds 84,064 198,250
Bank notes and other long-term debt 1,691,201 947,443
Preferred securities of subsidiaries trust 82,323 -
Common stock 166,870 -
Retirement of:
First mortgage bonds (192,504) (357,016)
General and refunding mortgage bonds (634) (30,000)
Other long-term debt (21,160) (93,373)
Redemption of preferred stock (103,867) (25,580)
Changes in short-term borrowings - net 113,104 225,025
Preferred stock dividends paid (27,275) (36,365)
Common stock dividends paid (212,141) (199,493)
---------- ---------
Net cash flow provided by financing activities 1,644,808 668,499
---------- ---------
Effect of exchange rates on cash and cash equivalents 809 73
---------- ---------
Net increase (decrease) in cash and cash equivalents 298,817 (187,939)
Cash and cash equivalents at beginning of period 388,703 533,590
---------- ---------
Cash and cash equivalents at end of period $687,520 $345,651
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $256,899 $354,051
Income taxes $81,165 $159,719
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $6,268 ($11,103)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $92,263 $34,807
Temporary cash investments - at cost,
which approximates market 595,257 346,782
Special deposits - 7,114
----------- -----------
Total cash and cash equivalents 687,520 388,703
Notes receivable 8,708 1,384
Accounts receivable:
Customer (less allowance for doubtful accounts of
$17.2 million in 1997 and $9.2 million in 1996) 534,148 324,687
Other 181,641 99,066
Accrued unbilled revenues 478,558 351,429
Deferred fuel 123,720 122,184
Fuel inventory 101,638 139,603
Materials and supplies - at average cost 370,259 339,622
Rate deferrals 369,289 444,543
Prepayments and other 216,618 151,312
----------- -----------
Total 3,072,099 2,362,533
----------- -----------
Other Property and Investments:
Decommissioning trust funds 399,719 357,962
Non-regulated investments 489,608 513,058
Other 82,411 59,053
----------- -----------
Total 971,738 930,073
Utility Plant:
Electric 25,189,766 22,811,164
Plant acquisition adjustment - Entergy Gulf States 447,293 455,425
Electric plant under leases 674,049 679,991
Property under capital leases - electric 142,109 147,277
Natural gas 175,081 168,143
Steam products 81,743 81,743
Construction work in progress 472,444 401,676
Nuclear fuel under capital leases 274,587 250,651
Nuclear fuel 60,719 112,625
----------- -----------
Total 27,517,791 25,108,695
Less - accumulated depreciation and amortization 9,286,199 8,885,572
----------- -----------
Utility plant - net 18,231,592 16,223,123
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 251,437 399,493
SFAS 109 regulatory asset - net 1,195,931 1,196,041
Unamortized loss on reacquired debt 207,481 217,664
Other regulatory assets 460,742 435,652
Long-term receivables 212,224 216,082
CitiPower license (net of $23.3 million of amortization) 563,641 606,214
London Electricity license (net of $16.3 million of
amortization) 1,552,542 -
Other 263,570 379,419
----------- -----------
Total 4,707,568 3,450,565
----------- -----------
TOTAL $26,982,997 $22,966,294
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $387,630 $345,620
Notes payable 400,468 20,686
Accounts payable 746,602 554,558
Customer deposits 180,128 155,534
Taxes accrued 340,776 180,340
Accumulated deferred income taxes 54,276 78,010
Interest accrued 206,732 203,425
Dividends declared 8,259 8,950
Obligations under capital leases 152,206 151,287
Other 139,651 184,157
----------- -----------
Total 2,616,728 1,882,567
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,733,064 3,770,760
Accumulated deferred investment tax credits 598,221 607,641
Obligations under capital leases 260,922 247,360
Other 1,502,279 1,298,306
----------- -----------
Total 7,094,486 5,924,067
----------- -----------
Long-term debt 9,524,296 7,590,804
Subsidiaries' preferred stock with sinking fund 196,237 216,986
Subsidiary's preference stock 150,000 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 130,000
Shareholders' Equity:
Subsidiaries' preferred stock without sinking fund 345,954 430,955
Common stock, $.01 par value, authorized 500,000,000
shares; issued 240,664,720 shares in 1997 and
234,456,457 shares in 1996 2,407 2,345
Paid-in capital 4,477,900 4,320,591
Retained earnings 2,384,923 2,341,703
Cumulative foreign currency translation adjustment 10,203 21,725
Less - treasury stock (1,123,923 shares in 1997 and
1,496,118 shares in 1996) 35,137 45,449
----------- -----------
Total 7,186,250 7,071,870
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $26,982,997 $22,966,294
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Domestic Electric Operating
Revenues:
Residential $ 454.3 $ 516.5 ($62.2) (12)
Commercial 362.4 380.1 (17.7) (5)
Industrial 477.0 497.0 (20.0) (4)
Governmental 40.4 41.2 (0.8) (2)
---------------------------------
Total retail 1,334.1 1,434.8 (100.7) (7)
Sales for resale 81.0 103.4 (22.4) (22)
Other 87.6 136.4 (48.8) (36)
---------------------------------
Total $ 1,502.7 $ 1,674.6 ($171.9) (10)
=================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 5,531 6,305 (774) (12)
Commercial 4,952 5,084 (132) (3)
Industrial 11,239 10,984 255 2
Governmental 598 591 7 1
---------------------------------
Total retail 22,320 22,964 (644) (3)
Sales for resale 1,828 3,235 (1,407) (43)
---------------------------------
Total 24,148 26,199 (2,051) (8)
=================================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 956.4 $ 1,023.5 ($67.1) (7)
Commercial 730.7 734.6 (3.9) (1)
Industrial 973.9 957.3 16.6 2
Governmental 82.0 80.0 2.0 3
---------------------------------
Total retail 2,743.0 2,795.4 (52.4) (2)
Sales for resale 157.6 193.6 (36.0) (19)
Other 54.1 98.7 (44.6) (45)
---------------------------------
Total $ 2,954.7 $ 3,087.7 ($133.0) (4)
=================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 11,931 12,972 (1,041) (8)
Commercial 9,847 9,877 (30) -
Industrial 22,135 21,429 706 3
Governmental 1,193 1,147 46 4
---------------------------------
Total retail 45,106 45,425 (319) (1)
Sales for resale 4,253 5,809 (1,556) (27)
---------------------------------
Total 49,359 51,234 (1,875) (4)
=================================
</TABLE>
<PAGE>
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 as a result of decreased electric operating revenues, partially
offset by lower income taxes.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($0.7) $0.2
Rate riders (1.8) (0.4)
Fuel cost recovery (0.6) 3.2
Sales volume/weather (13.9) (14.7)
Other revenue (including unbilled) (6.3) (16.3)
Sales for resale (21.1) (24.7)
------ ------
Total ($44.4) ($52.7)
====== ======
Electric operating revenues decreased for the three and six
months ended June 30, 1997 primarily as a result of decreased retail
energy sales, sales for resale, and other revenues primarily due to
milder weather conditions during the current periods. The decrease
in sales for resale resulted from changes in the generation
requirements and availability among the domestic utility companies
and decreased sales to non-associated companies. Other revenues
decreased as a result of decreased unbilled revenues primarily due to
milder weather conditions in the current periods.
Expenses
Operating expenses decreased for the three and six months ended
June 30, 1997 primarily due to a decrease in fuel and purchased power
expenses. This decrease is due to lower fuel costs and reduced sales
caused by milder weather conditions in the current periods.
Other
Miscellaneous other income - net decreased for the three and six
months ended June 30, 1997 due to reduced Grand Gulf 1 carrying
charges as a result of a decline in the deferral balance which does
not impact net income. Income tax expense decreased for the three
and six months ended June 30, 1997 because of lower pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $423,619 $467,990 $798,350 $851,071
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 62,754 66,475 129,347 131,675
Purchased power 109,120 121,631 203,854 220,256
Nuclear refueling outage expenses 5,367 7,541 12,266 15,083
Other operation and maintenance 86,085 85,871 171,801 169,136
Depreciation, amortization, and decommissioning 41,335 40,786 82,784 81,816
Taxes other than income taxes 9,101 10,425 18,529 19,443
Amortization of rate deferrals 28,984 30,024 68,005 66,470
-------- -------- -------- --------
Total 342,746 362,753 686,586 703,879
-------- -------- -------- --------
Operating Income 80,873 105,237 111,764 147,192
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 1,445 1,061 2,888 2,151
Miscellaneous - net 5,090 7,891 10,414 16,130
-------- -------- -------- --------
Total 6,535 8,952 13,302 18,281
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 23,777 24,932 48,227 49,767
Other interest - net 971 1,260 1,900 2,287
Distributions on preferred securities 1,275 - 2,550 -
of subsidiary
Allowance for borrowed funds used
during construction (869) (634) (1,737) (1,299)
-------- -------- -------- --------
Total 25,154 25,558 50,940 50,755
-------- -------- -------- --------
Income Before Income Taxes 62,254 88,631 74,126 114,718
Income Taxes 24,169 32,919 26,193 39,738
-------- -------- -------- --------
Net Income 38,085 55,712 47,933 74,980
Preferred Stock Dividend Requirements
and Other 2,798 4,426 5,630 8,884
-------- -------- -------- --------
Earnings Applicable to Common Stock $35,287 $51,286 $42,303 $66,096
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $47,933 $74,980
Noncash items included in net income:
Change in rate deferrals/excess capacity-net 81,151 69,808
Depreciation, amortization, and decommissioning 82,784 81,816
Deferred income taxes and investment tax credits (30,693) (28,555)
Allowance for equity funds used during construction (2,888) (2,151)
Changes in working capital:
Receivables 29,939 (28,948)
Fuel inventory 29,293 23
Accounts payable (22,365) (7,352)
Taxes accrued 11,613 15,028
Interest accrued 622 (3,500)
Other working capital accounts (33,731) 2,254
Decommissioning trust contributions (7,869) (7,530)
Provision for estimated losses and reserves 5,383 2,362
Other (13,509) (10,471)
-------- --------
Net cash flow provided by operating activities 177,663 157,764
-------- --------
Investing Activities:
Construction expenditures (61,664) (67,212)
Allowance for equity funds used during construction 2,888 2,151
Nuclear fuel purchases (36,532) (26,049)
Proceeds from sale/leaseback of nuclear fuel 36,553 25,437
-------- --------
Net cash flow used in investing activities (58,755) (65,673)
-------- --------
Financing Activities:
Proceeds from issuance of first mortgage bonds 84,064 84,256
Retirement of first mortgage bonds (117,587) (112,807)
Redemption of preferred stock - (4,000)
Dividends paid:
Common stock (31,400) (15,300)
Preferred stock (5,729) (8,983)
-------- --------
Net cash flow used in financing activities (70,652) (56,834)
-------- --------
Net increase in cash and cash equivalents 48,256 35,257
Cash and cash equivalents at beginning of period 43,857 11,798
-------- --------
Cash and cash equivalents at end of period $92,113 $47,055
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $41,995 $49,169
Income taxes $40,864 $56,452
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $5,817 ($7,482)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $11,772 $5,117
Temporary cash investments - at cost,
which approximates market:
Associated companies 23,184 17,462
Other 57,157 21,278
---------- ----------
Total cash and cash equivalents 92,113 43,857
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.3 million in 1997 and 1996) 54,353 71,144
Associated companies 29,592 45,303
Other 1,215 5,862
Accrued unbilled revenues 111,974 104,764
Fuel inventory - at average cost 28,026 57,319
Materials and supplies - at average cost 82,927 72,976
Rate deferrals 120,706 153,141
Deferred excess capacity 4,424 9,005
Deferred nuclear refueling outage costs 37,977 24,534
Prepayments and other 7,000 7,491
---------- ----------
Total 570,307 595,396
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,211 11,211
Decommissioning trust fund 221,374 203,274
Other - at cost (less accumulated depreciation) 3,887 5,058
---------- ----------
Total 236,472 219,543
---------- ----------
Utility Plant:
Electric 4,610,523 4,578,728
Property under capital leases 56,613 57,869
Construction work in progress 116,834 83,524
Nuclear fuel under capital lease 95,040 79,103
Nuclear fuel - 27,500
---------- ----------
Total 4,879,010 4,826,724
Less - accumulated depreciation and amortization 2,057,738 1,976,204
---------- ----------
Utility plant - net 2,821,272 2,850,520
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 31,114 75,249
SFAS 109 regulatory asset - net 250,225 244,767
Unamortized loss on reacquired debt 55,647 56,664
Other regulatory assets 94,432 80,257
Other 31,031 31,421
---------- ----------
Total 462,449 488,358
---------- ----------
TOTAL $4,090,500 $4,153,817
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $17,465 $32,465
Notes payable 667 667
Accounts payable:
Associated companies 47,583 91,205
Other 91,346 97,589
Customer deposits 23,917 21,800
Taxes accrued 65,807 54,194
Accumulated deferred income taxes 58,889 70,506
Interest accrued 28,247 27,625
Co-owner advances 18,819 33,873
Deferred fuel cost 12,995 6,955
Obligations under capital leases 53,086 53,012
Other 14,036 17,967
---------- ----------
Total 432,857 507,858
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 778,092 785,994
Accumulated deferred investment tax credits 106,103 108,307
Obligations under capital leases 98,567 83,940
Other 128,099 113,998
---------- ----------
Total 1,110,861 1,092,239
---------- ----------
Long-term debt 1,241,548 1,255,388
Preferred stock with sinking fund 36,027 40,027
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
Shareholders' Equity:
Preferred stock without sinking fund 116,350 116,350
Common stock, $0.01 par value, authorized
325,000,000 shares; issued and outstanding
46,980,196 shares 470 470
Paid-in capital 590,169 590,169
Retained earnings 502,218 491,316
---------- ----------
Total 1,209,207 1,198,305
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,090,500 $4,153,817
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 105.2 $ 118.3 ($13.1) (11)
Commercial 75.9 77.3 (1.4) (2)
Industrial 84.2 87.3 (3.1) (4)
Governmental 4.6 4.1 0.5 12
-----------------------------
Total retail 269.9 287.0 (17.1) (6)
Sales for resale
Associated companies 61.6 75.6 (14.0) (19)
Non-associated companies 51.0 58.1 (7.1) (12)
Other 41.1 47.3 (6.2) (13)
-----------------------------
Total $ 423.6 $ 468.0 ($44.4) (9)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,091 1,274 (183) (14)
Commercial 972 1,038 (66) (6)
Industrial 1,541 1,567 (26) (2)
Governmental 57 57 0 -
-----------------------------
Total retail 3,661 3,936 (275) (7)
Sales for resale
Associated companies 2,906 3,113 (207) (7)
Non-associated companies 1,515 2,034 (519) (26)
-----------------------------
Total 8,082 9,083 (1,001) (11)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 236.6 $ 250.5 ($13.9) (6)
Commercial 148.5 147.9 0.6 -
Industrial 165.8 165.0 0.8 -
Governmental 8.9 8.2 0.7 9
-----------------------------
Total retail 559.8 571.6 (11.8) (2)
Sales for resale
Associated companies 122.4 135.4 (13.0) (10)
Non-associated companies 95.2 106.9 (11.7) (11)
Other 21.0 37.2 (16.2) (44)
-----------------------------
Total $ 798.4 $ 851.1 ($52.7) (6)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,609 2,845 (236) (8)
Commercial 1,980 2,034 (54) (3)
Industrial 3,111 3,092 19 1
Governmental 117 113 4 4
-----------------------------
Total retail 7,817 8,084 (267) (3)
Sales for resale
Associated companies 5,880 5,767 113 2
Non-associated companies 3,011 3,708 (697) (19)
-----------------------------
Total 16,708 17,559 (851) (5)
=============================
</TABLE>
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 1997
primarily due to decreased electric operating revenues, partially
offset by a decrease in interest on long-term debt and income taxes.
Net income increased for the six months ended June 30, 1997
primarily due to the $174 million net of tax write-off of River Bend
rate deferrals required by the adoption of SFAS 121 in the first
quarter of 1996. Excluding the effect of the write-off, net income
for the six months ended June 30, 1997 would have decreased
approximately $10.4 million due to decreased electric operating
revenues. The decrease in net income is partially offset by reduced
other operation and maintenance expense and interest on long-term
debt.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($9.6) ($26.5)
Fuel cost recovery (0.4) 22.0
Sales volume/weather (2.7) 3.8
Other revenue (including unbilled) (24.3) (7.2)
Sales for resale (8.8) (15.9)
------ ------
Total ($45.8) ($23.8)
====== ======
Electric operating revenues decreased for the three months ended
June 30, 1997 as a result of decreased other revenue, base revenues,
and sales for resale. The decrease in other revenue is primarily due
to the impact in 1996 of a non-recurring adjustment to reserve for a
potential refund associated with a change in accounting for unbilled
revenue in 1993 as well as lower unbilled revenue. Excluding the non-
recurring adjustment, unbilled revenue decreased due to the change in
generation for the three months ended June 30, 1997 as compared to
the change in generation for the three months ended June 30, 1996.
Base revenues decreased primarily due to aggressive pricing
strategies for targeted customer segments and a change in the sales
mix from residential and commercial customers to industrial customers
primarily due to the impact of milder weather. Sales for resale
decreased primarily due to changes in generation requirements for non-
associated customers.
<PAGE>
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues decreased for the six months ended
June 30, 1997 as a result of decreased base revenue, other revenue,
and sales for resale, partially offset by an increase in fuel
adjustment revenue. Base revenues decreased primarily due to rate
reductions implemented for Louisiana retail customers in February
1997, aggressive pricing strategies for targeted customer segments,
and a change in the sales mix from residential and commercial
customers to industrial customers primarily due to the impact of
milder weather. Sales for resale decreased primarily due to changes
in generation requirements for non-associated customers. The
decrease in other revenue is primarily due to unbilled revenue, which
decreased due to the change in generation for the three months ended
June 30, 1997 as compared to the change in generation for the three
months ended June 30, 1996. Fuel adjustment revenues increased due
to a PUCT order which approved recovery of under-recovered fuel
expenses. See Note 2 herein for further discussion.
Gas operating revenues increased for the six months ended June
30, 1997 due to an increase in the fixed fuel factor granted by the
LPSC. This increase permits recovery of previously deferred gas
costs.
Steam operating revenues decreased for the three and six months
ended June 30, 1997 due to increased customer requirements in 1996.
Expenses
Fuel expenses, depreciation, amortization, and decommissioning
expenses, and amortization of rate deferrals increased for the three
and six months ended June 30, 1997. Fuel expenses increased
primarily due to a PUCT order which approved recovery of previously
under-recovered fuel expenses, as discussed above in "Revenues and
Sales". Depreciation, amortization and decommissioning expenses
increased primarily due to the purchase of meters and transformers
and additions to lines and substations. Amortization of rate
deferrals increased based on the LPSC-approved River Bend phase-in-
plan. These increases were partially offset by decreased other
operation and maintenance expenses and decreased purchased power
expenses. The decrease in other operation and maintenance expenses
is primarily due to a decrease in the reserve for Cajun's unpaid
portion of River Bend related costs which is reflected in long-term
receivables. Payments into the registry of the District Court for
Entergy Gulf States' portion of expenses for Big Cajun 2, Unit 3, are
expected to be recovered during 1997 as a part of the settlement of
the disputes between Cajun and Entergy. See Note 1 herein for
further discussion. Purchased power decreased due to decreased
energy requirements and lower energy prices.
Other
Other income increased for the six months ended June 30, 1997,
primarily due to the write-off of River Bend rate deferrals required
by the adoption of SFAS 121 in the first quarter of 1996. Interest
charges decreased for the three and six months ended June 30, 1997
due to the retirement of certain high cost long-term debt. Income
taxes decreased for the three months ended June 30, 1997 due to lower
pretax income. Income taxes increased for the six months ended June
30, 1997 due to higher pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
STATEMENTS OF INCOME (LOSS)
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $457,739 $503,490 $905,877 $929,667
Natural gas 5,810 6,863 27,911 21,739
Steam products 12,872 15,214 23,961 30,792
-------- -------- -------- --------
Total 476,421 525,567 957,749 982,198
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 138,692 125,057 259,084 242,466
Purchased power 66,428 86,760 145,769 154,594
Nuclear refueling outage expenses 2,573 2,572 5,218 4,932
Other operation and maintenance 92,182 97,730 175,444 194,471
Depreciation, amortization, and decommissioning 53,833 51,504 106,801 102,755
Taxes other than income taxes 26,803 25,205 56,010 51,539
Amortization of rate deferrals 20,267 18,319 40,766 35,963
-------- -------- -------- --------
Total 400,778 407,147 789,092 786,720
-------- -------- -------- --------
Operating Income 75,643 118,420 168,657 195,478
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 726 739 1,451 1,232
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net 4,488 5,690 8,589 10,630
-------- -------- -------- --------
Total 5,214 6,429 10,040 (182,636)
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 41,755 46,476 83,741 92,964
Other interest - net 978 959 3,716 1,909
Distributions on preferred securities of 1,860 - 3,182 -
subsidiary
Allowance for borrowed funds used
during construction (620) (628) (1,239) (1,056)
-------- -------- -------- --------
Total 43,973 46,807 89,400 93,817
-------- -------- -------- --------
Income (Loss) Before Income Taxes 36,884 78,042 89,297 (80,975)
Income Taxes 9,856 30,902 29,734 24,142
-------- -------- -------- --------
Net Income (Loss) 27,028 47,140 59,563 (105,117)
Preferred and Preference Stock
Dividend Requirements and Other 4,995 7,066 13,938 14,285
-------- -------- -------- ---------
Earnings (Loss) Applicable to Common Stock $22,033 $40,074 $45,625 ($119,402)
======== ======== ======== =========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income (loss) $59,563 ($105,117)
Noncash items included in net income (loss):
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals 40,549 35,963
Depreciation, amortization, and decommissioning 106,801 102,755
Deferred income taxes and investment tax credits (1,887) 23,368
Allowance for equity funds used during construction (1,451) (1,232)
Changes in working capital:
Receivables (35,261) (17,731)
Fuel inventory 3,889 (4,962)
Accounts payable 17,673 6,912
Taxes accrued 26,282 1,869
Interest accrued (1,218) (16,162)
Deferred fuel (205) (48,671)
Other working capital accounts 12,274 (31,198)
Decommissioning trust contributions (3,227) (2,961)
Provision for estimated losses and reserves (17,021) (8,222)
Other 6,752 (15,525)
-------- ----------
Net cash flow provided by operating activities 213,513 113,584
-------- ----------
Investing Activities:
Construction expenditures (59,558) (84,521)
Allowance for equity funds used during construction 1,451 1,232
Nuclear fuel purchases - (21,580)
Proceeds from sale/leaseback of nuclear fuel - 23,375
--------- -----------
Net cash flow used in investing activities (58,107) (81,494)
--------- -----------
Financing Activities:
Proceeds from the issuance of:
Long-term debt - 780
Preferred securities of subsidiary trust 82,323 -
Retirement of:
First mortgage bonds (46,917) (65,959)
Other long-term debt (425) (425)
Redemption of preferred and preference stock (89,367) (4,204)
Dividends paid on preferred and preference stock (11,936) (14,198)
--------- -----------
Net cash flow used in financing activities (66,322) (84,006)
--------- -----------
Net increase (decrease) in cash and cash equivalents 89,084 (51,916)
Cash and cash equivalents at beginning of period 122,406 234,604
--------- -----------
Cash and cash equivalents at end of period $211,490 $182,688
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $83,269 $105,598
Income taxes $1,158 $70
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $859 ($752)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $16,467 $6,573
Temporary cash investments - at cost,
which approximates market:
Associated companies 51,689 45,234
Other 143,334 70,599
---------- ----------
Total cash and cash equivalents 211,490 122,406
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.0 million in 1997 and 1996) 97,230 87,883
Associated companies 7,083 2,777
Other 40,834 30,758
Accrued unbilled revenues 86,883 75,351
Deferred fuel costs 99,708 99,503
Accumulated deferred income taxes 60,059 56,714
Fuel inventory - at average cost 41,120 45,009
Materials and supplies - at average cost 91,077 86,157
Rate deferrals 69,938 105,456
Prepayments and other 19,312 16,321
---------- ----------
Total 824,734 728,335
---------- ----------
Other Property and Investments:
Decommissioning trust fund 47,119 41,983
Other - at cost (less accumulated depreciation) 38,652 38,358
---------- ----------
Total 85,771 80,341
---------- ----------
Utility Plant:
Electric 7,164,941 7,112,021
Natural Gas 47,005 45,443
Steam products 81,743 81,743
Property under capital leases 71,422 72,800
Construction work in progress 110,326 112,137
Nuclear fuel under capital lease 41,631 49,833
---------- ----------
Total 7,517,068 7,473,977
Less - accumulated depreciation and amortization 2,940,806 2,846,083
---------- ----------
Utility plant - net 4,576,262 4,627,894
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 102,948 120,158
SFAS 109 regulatory asset - net 383,163 372,817
Unamortized loss on reacquired debt 51,380 54,761
Other regulatory assets 40,884 45,139
Long-term receivables 212,225 216,082
Other 197,970 185,921
---------- ----------
Total 988,570 994,878
---------- ----------
TOTAL $6,475,337 $6,431,448
============ ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $150,865 $160,865
Accounts payable:
Associated companies 53,636 55,630
Other 105,208 85,541
Customer deposits 29,026 25,572
Taxes accrued 62,429 36,147
Interest accrued 48,433 49,651
Nuclear refueling reserve 19,488 12,354
Obligations under capital leases 39,639 39,110
Other 27,783 18,186
---------- ----------
Total 536,507 483,056
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,225,525 1,200,935
Accumulated deferred investment tax credits 217,667 219,188
Obligations under capital leases 69,225 83,524
Deferred River Bend finance charges 21,509 33,688
Other 526,800 539,752
---------- ----------
Total 2,060,726 2,077,087
---------- ----------
Long-term debt 1,878,048 1,915,346
Preferred stock with sinking fund 75,210 77,459
Preference stock 150,000 150,000
Company - obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 -
Shareholders' Equity:
Preferred stock without sinking fund 51,444 136,444
Common stock, no par value, authorized
200,000,000 shares; issued and outstanding
100 shares 114,055 114,055
Paid-in capital 1,152,575 1,152,689
Retained earnings 371,772 325,312
---------- ----------
Total 1,689,846 1,728,500
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $6,475,337 $6,431,448
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease %
(In Millions)
<S> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 133.5 $ 141.9 ($ 8.4) (6)
Commercial 107.0 109.4 (2.4) (2)
Industrial 176.9 177.0 (0.1) -
Governmental 8.5 7.8 0.7 9
-----------------------------
Total retail 425.9 436.1 (10.2) (2)
Sales for resale
Associated companies 4.3 2.8 1.5 54
Non-associated companies 10.8 21.1 (10.3) (49)
Other 16.7 43.5 (26.8) (62)
-----------------------------
Total $ 457.7 $ 503.5 ($ 45.8) (9)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,644 1,821 (177) (10)
Commercial 1,530 1,556 (26) (2)
Industrial 4,555 4,163 392 9
Governmental 114 110 4 4
-----------------------------
Total retail 7,843 7,650 193 3
Sales for resale
Associated companies 152 84 68 81
Non-associated companies 489 678 (189) (28)
-----------------------------
Total 8,484 8,412 72 1
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease %
(In Millions)
Electric Operating Revenues:
Residential $ 267.1 $ 276.6 ($ 9.5) (3)
Commercial 212.3 211.9 0.4 -
Industrial 354.9 337.6 17.3 5
Governmental 16.5 14.8 1.7 11
-----------------------------
Total retail 850.8 840.9 9.9 1
Sales for resale
Associated companies 5.5 5.5 - -
Non-associated companies 24.3 40.2 (15.9) (40)
Other 25.3 43.1 (17.8) (41)
-----------------------------
Total $ 905.9 $ 929.7 ($ 23.8) (3)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,437 3,645 (208) (6)
Commercial 3,018 3,018 - -
Industrial 8,720 8,064 656 8
Governmental 228 203 25 12
-----------------------------
Total retail 15,403 14,930 473 3
Sales for resale
Associated companies 199 140 59 42
Non-associated companies 1,152 1,178 (26) (2)
-----------------------------
Total 16,754 16,248 506 3
=============================
</TABLE>
<PAGE>
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 due primarily to decreased electric operating revenues and
increased other operation and maintenance expenses. These factors
were partially offset by a decrease in income taxes.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($0.2) ($5.9)
Fuel cost recovery (23.3) (0.9)
Sales volume/weather (15.3) (17.5)
Other revenue (including unbilled) (5.1) (0.9)
Sales for resale (1.7) (4.2)
------ ------
Total ($45.6) ($29.4)
====== ======
Electric operating revenues decreased for the three months ended
June 30, 1997 primarily due to lower fuel adjustment revenues, which
do not affect net income, and lower sales volume. Fuel adjustment
revenues decreased due to lower fuel prices and reduced generation,
as described below in "Expenses". Sales volume decreased due to
milder weather during the current period.
Electric operating revenues decreased for the six months ended
June 30, 1997 primarily due to lower sales volume and due to a
decrease in base revenues. Sales volume decreased due to milder
weather during the current period. Base revenues decreased due to a
base rate reduction that became effective in the third quarter of
1996.
Expenses
Fuel expenses decreased for the three and six months ended June
30, 1997. This decrease was partially offset by increases in
purchased power, other operation and maintenance expenses, and the
impact of 1996 rate deferrals. Fuel expense decreased due to lower
fuel prices and due to reduced generation resulting from the extended
refueling outage at the Waterford 3 nuclear plant. Purchased power
increased during the period due to shifting generation requirements
as a result of the refueling outage at Waterford 3. Other operation
and maintenance expenses increased due to non-refueling outage
related contract work and maintenance performed at Waterford 3.
Waterford 3 property taxes recorded in 1996 were offset by the
recording of the LPSC-approved rate deferral for these taxes.
Other
Income taxes decreased for the three and six months ended June
30, 1997 due to lower pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $412,263 $457,847 $846,246 $875,614
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 61,063 100,662 173,979 191,342
Purchased power 114,557 100,062 210,753 200,937
Nuclear refueling outage expenses 1,324 3,933 5,299 7,933
Other operation and maintenance 82,301 70,907 156,386 136,677
Depreciation, amortization, and decommissioning 41,095 41,931 85,466 83,672
Taxes other than income taxes 17,581 18,246 35,820 37,980
Rate deferrals - (4,516) - (11,375)
Amortization of rate deferrals 6,431 6,886 12,752 13,546
-------- -------- -------- --------
Total 324,352 338,111 680,455 660,712
-------- -------- -------- --------
Operating Income 87,911 119,736 165,791 214,902
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 219 249 437 526
Miscellaneous - net (276) 442 (917) 728
-------- -------- -------- --------
Total (57) 691 (480) 1,254
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 30,007 31,062 60,090 61,779
Other interest - net 1,276 2,163 3,211 4,499
Distributions on preferred securities of subsidiary 1,575 - 3,150 -
Allowance for borrowed funds used
during construction (378) (423) (756) (831)
-------- -------- -------- --------
Total 32,480 32,802 65,695 65,447
-------- -------- -------- --------
Income Before Income Taxes 55,374 87,625 99,616 150,709
Income Taxes 22,767 32,240 40,837 54,794
-------- -------- -------- --------
Net Income 32,607 55,385 58,779 95,915
Preferred Stock Dividend Requirements
and Other 3,254 5,253 6,846 10,168
-------- -------- -------- --------
Earnings Applicable to Common Stock $29,353 $50,132 $51,933 $85,747
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $58,779 $95,915
Noncash items included in net income:
Change in rate deferrals 5,749 13,546
Depreciation, amortization, and decommissioning 85,466 83,672
Deferred income taxes and investment tax credits 1,343 (12,206)
Allowance for equity funds used during construction (437) (526)
Changes in working capital:
Receivables (11,709) (25,733)
Accounts payable (11,107) 3,694
Taxes accrued 12,737 40,291
Interest accrued (10,083) (5,901)
Other working capital accounts (21,691) (14,593)
Decommissioning trust contributions (6,590) (6,593)
Provision for estimated losses and reserves 3,951 836
Other 8,836 (16,520)
-------- --------
Net cash flow provided by operating activities 115,244 155,882
-------- --------
Investing Activities:
Construction expenditures (36,173) (53,592)
Allowance for equity funds used during construction
437 526
Nuclear fuel purchases (42,920) -
Proceeds from sale/leaseback of nuclear fuel 42,920 -
-------- --------
Net cash flow used in investing activities (35,736) (53,066)
-------- --------
Financing Activities:
Proceeds from the issuance of first mortgage bonds - 113,994
Retirement of:
First mortgage bonds (16,000) (130,000)
Other long-term debt (194) (233)
Redemption of preferred stock (7,500) (7,500)
Changes in short-term borrowings - net 13,049 (27,386)
Dividends paid:
Common stock (51,500) (50,200)
Preferred stock (6,744) (10,072)
-------- ---------
Net cash flow used in financing activities (68,889) (111,397)
-------- ---------
Net increase (decrease) in cash and cash equivalents 10,619 (8,581)
Cash and cash equivalents at beginning of period 23,746 34,370
-------- --------
Cash and cash equivalents at end of period $34,365 $25,789
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $68,469 $68,870
Income taxes $17,805 $48,729
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $633 ($1,814)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $11,837 $1,804
Temporary cash investments - at cost,
which approximates market 22,528 21,942
---------- ----------
Total cash and cash equivalents 34,365 23,746
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 76,314 73,823
Associated companies 14,415 11,606
Other 6,828 7,053
Accrued unbilled revenues 70,513 63,879
Deferred fuel costs 28,453 18,347
Accumulated deferred income taxes - 1,465
Materials and supplies - at average cost 82,119 78,449
Rate deferrals - 5,749
Deferred nuclear refueling outage costs 34,006 5,300
Prepaid income tax 4,808 24,651
Prepayments and other 12,479 10,234
---------- ----------
Total 364,300 324,302
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 58,855 50,481
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 95,610 87,236
Utility Plant:
Electric 5,009,817 4,997,456
Property under capital leases 232,582 232,582
Construction work in progress 77,994 56,180
Nuclear fuel under capital lease 72,415 38,157
Nuclear fuel 3,067 34,191
---------- ----------
Total 5,395,875 5,358,566
Less - accumulated depreciation and amortization 1,960,778 1,881,847
---------- ----------
Utility plant - net 3,435,097 3,476,719
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 287,009 295,836
Unamortized loss on reacquired debt 35,510 37,552
Other regulatory assets 24,087 30,320
Other 27,389 27,313
---------- ----------
Total 373,995 391,021
---------- ----------
TOTAL $4,269,002 $4,279,278
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S>
Current Liabilities: <C> <C>
Currently maturing long-term debt $53,300 $34,275
Notes payable - associated companies 44,115 31,066
Accounts payable:
Associated companies 52,586 73,389
Other 66,561 89,550
Customer deposits 60,419 59,070
Taxes accrued 20,127 7,390
Accumulated deferred income taxes 8,045 -
Interest accrued 39,166 49,249
Dividends declared 3,252 3,489
Obligations under capital leases 28,000 28,000
Other 6,784 4,940
---------- ----------
Total 382,355 380,418
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 820,486 831,093
Accumulated deferred investment tax credits 137,088 139,899
Obligations under capital leases 44,415 10,156
Deferred interest - Waterford 3 lease obligation 17,302 16,809
Other 122,804 114,665
---------- ----------
Total 1,142,095 1,112,622
---------- ----------
Long-term debt 1,338,276 1,373,233
Preferred stock with sinking fund 85,000 92,500
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
Shareholders' Equity:
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized
250,000,000 shares; issued and outstanding
165,173,180 shares 1,088,900 1,088,900
Capital stock expense and other (2,321) (2,659)
Retained earnings 64,197 63,764
----------- -----------
Total 1,251,276 1,250,505
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,269,002 $4,279,278
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 119.5 $ 139.9 ($ 20.4) (15)
Commercial 85.1 90.5 (5.4) (6)
Industrial 169.7 182.5 (12.8) (7)
Governmental 8.1 8.3 (0.2) (2)
-----------------------------
Total retail 382.4 421.2 (38.8) (9)
Sales for resale
Associated companies 0.5 0.5 0.0 -
Non-associated companies 13.2 14.9 (1.7) (11)
Other 16.1 21.2 (5.1) (24)
-----------------------------
Total $ 412.2 $ 457.8 ($45.6) (10)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,581 1,787 (206) (12)
Commercial 1,127 1,156 (29) (3)
Industrial 4,268 4,400 (132) (3)
Governmental 110 110 0 -
-----------------------------
Total retail 7,086 7,453 (367) (5)
Sales for resale
Associated companies 19 15 4 27
Non-associated companies 220 280 (60) (21)
-----------------------------
Total 7,325 7,748 (423) (5)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 252.8 $ 275.2 ($ 22.4) (8)
Commercial 174.6 176.5 (1.9) (1)
Industrial 357.8 358.1 (0.3) -
Governmental 17.1 16.8 0.3 2
-----------------------------
Total retail 802.3 826.6 (24.3) (3)
Sales for resale
Associated companies 0.8 0.7 0.1 14
Non-associated companies 25.1 29.4 (4.3) (15)
Other 18.0 18.9 (0.9) (5)
-----------------------------
Total $ 846.2 $ 875.6 ($29.4) (3)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,304 3,613 (309) (9)
Commercial 2,230 2,248 (18) (1)
Industrial 8,593 8,613 (20) -
Governmental 229 225 4 2
-----------------------------
Total retail 14,356 14,699 (343) (2)
Sales for resale
Associated companies 26 18 8 44
Non-associated companies 360 513 (153) (30)
-----------------------------
Total 14,742 15,230 (488) (3)
=============================
</TABLE>
<PAGE>
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 primarily due to a decrease in revenues and an increase in other
operation and maintenance expenses, partially offset by a decrease in
income tax expense.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.0) ($1.3)
Grand Gulf rate rider (11.1) (17.0)
Fuel cost recovery (6.8) 1.3
Sales volume/weather (4.2) (4.2)
Other revenue (including unbilled) (7.1) (9.8)
Sales for resale (4.4) (7.2)
------ ------
Total ($34.6) ($38.2)
====== ======
Electric operating revenues decreased for the three and the six
months ended June 30, 1997 due to decreases in the Grand Gulf 1 rate
rider revenues, other revenue, and sales for resale. Revenue from
the Grand Gulf 1 rate rider does not affect net income. In
connection with an annual MPSC review, in October 1996, Entergy
Mississippi's Grand Gulf 1 rate rider was decreased based on the
estimate of costs over the next year. Therefore, Grand Gulf 1 rate
rider revenues for the three and six months ended June 30, 1997 were
lower than revenues for the same period in 1996. The decrease in
other revenue is due to the impact of milder weather on unbilled
revenue. Sales for resale decreased as a result of reductions in
sales to both associated and non-associated companies due to changes
in the generation requirements and availability among domestic
utility companies.
Expenses
Fuel expenses decreased for the three and six months ended June
30, 1997 due to the lower cost of purchased power and lower fuel
requirements resulting from decreased energy sales. Other operation
and maintenance expenses increased as a result of higher contract
work and materials and supplies related to maintenance and plant
outage expenses for the three and six months ended June 30, 1997.
Rate deferrals reducing operating expenses in 1996 and 1997
represent the deferral of Entergy Mississippi's portion of the
proposed System Energy rate increase. See Note 2 for a further
discussion.
Other
Income tax expense for the three and six months ended June 30,
1997 decreased because of lower pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $212,892 $247,479 $413,220 $451,381
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 26,526 48,080 66,549 87,826
Purchased power 76,215 68,732 146,574 136,044
Other operation and maintenance 33,457 28,828 63,477 56,477
Depreciation and amortization 10,682 10,052 21,381 20,079
Taxes other than income taxes 11,077 11,148 21,413 20,733
Rate deferrals (6,289) (5,372) (13,903) (12,523)
Amortization of rate deferrals 20,829 28,728 44,640 54,992
-------- -------- -------- --------
Total 172,497 190,196 350,131 363,628
-------- -------- -------- --------
Operating Income 40,395 57,283 63,089 87,753
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 286 370 572 643
Miscellaneous - net 563 847 251 769
-------- -------- -------- --------
Total 849 1,217 823 1,412
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 10,790 11,517 21,413 22,556
Other interest - net 987 935 2,323 1,874
Allowance for borrowed funds used
during construction (231) (297) (462) (521)
-------- -------- -------- --------
Total 11,546 12,155 23,274 23,909
-------- -------- -------- --------
Income Before Income Taxes 29,698 46,345 40,638 65,256
Income Taxes 10,299 16,527 12,887 22,513
-------- -------- -------- --------
Net Income 19,399 29,818 27,751 42,743
Preferred Stock Dividend Requirements
and Other 1,014 1,392 2,129 2,640
-------- -------- -------- --------
Earnings Applicable to Common Stock $18,385 $28,426 $25,622 $40,103
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $27,751 $42,743
Noncash items included in net income:
Change in rate deferrals 71,422 62,928
Depreciation and amortization 21,381 20,079
Deferred income taxes and investment tax credits (13,203) (15,472)
Allowance for equity funds used during
construction (572) (643)
Changes in working capital:
Receivables 6,893 (25,853)
Fuel inventory 2,112 1,752
Accounts payable (2,733) 15,136
Taxes accrued 18,235 1,132
Interest accrued (2,204) (2,646)
Other working capital accounts (2,896) 2,985
Change in other regulatory assets (39,006) (19,431)
Other 443 (1,974)
-------- --------
Net cash flow provided by operating activities 87,623 80,736
-------- --------
Investing Activities:
Construction expenditures (25,426) (42,256)
Allowance for equity funds used during construction 572 643
-------- --------
Net cash flow used in investing activities (24,854) (41,613)
-------- --------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds 64,827 -
Retirement of:
First mortgage bonds - (25,000)
Other long-term debt (15) (15)
Redemption of preferred stock (7,000) (9,876)
Changes in short-term borrowings - net (50,253) 2,209
Dividends paid:
Common stock (19,600) (17,000)
Preferred stock (2,142) (2,630)
-------- --------
Net cash flow used in financing activities (14,183) (52,312)
-------- --------
Net increase (decrease) in cash and cash equivalents 48,586 ($13,189)
Cash and cash equivalents at beginning of period 9,498 16,945
-------- --------
Cash and cash equivalents at end of period $58,084 $3,756
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $24,864 $25,928
Income taxes (refund) ($7,039) $23,973
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $6,699 $2,384
Special deposits - 7,114
Temporary cash investments - at cost,
which approximates market 51,385 -
---------- ----------
Total cash and cash equivalents 58,084 9,498
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 31,639 44,809
Associated companies 5,311 4,382
Other 1,769 2,014
Accrued unbilled revenues 54,977 49,383
Fuel inventory - at average cost 4,549 6,661
Materials and supplies - at average cost 20,445 17,567
Rate deferrals 140,807 142,504
Prepayments and other 8,647 7,434
---------- ----------
Total 326,228 284,252
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,850 7,923
---------- ----------
Total 13,381 13,454
---------- ----------
Utility Plant:
Electric 1,650,394 1,633,484
Construction work in progress 52,410 47,373
---------- ----------
Total 1,702,804 1,680,857
Less - accumulated depreciation and amortization 652,362 635,754
---------- ----------
Utility plant - net 1,050,442 1,045,103
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 34,863 104,588
SFAS 109 regulatory asset - net 16,781 11,813
Unamortized loss on reacquired debt 8,829 9,254
Other regulatory assets 85,315 46,309
Other 6,434 6,693
---------- ----------
Total 152,222 178,657
---------- ----------
TOTAL $1,542,273 $1,521,466
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $96,000 $96,015
Notes payable - associated companies - 50,253
Accounts payable:
Associated companies 30,613 32,878
Other 23,233 23,701
Customer deposits 27,145 26,258
Taxes accrued 44,717 26,482
Accumulated deferred income taxes 57,985 58,634
Interest accrued 18,705 20,909
Other 3,259 3,065
---------- ----------
Total 301,657 338,195
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 244,588 249,522
Accumulated deferred investment tax credits 24,669 25,422
Other 18,333 19,445
---------- ----------
Total 287,590 294,389
---------- ----------
Long-term debt 464,075 399,054
Preferred stock with sinking fund - 7,000
Shareholder's Equity:
Preferred stock without sinking fund 57,881 57,881
Common stock, no par value, authorized
15,000,000 shares; issued and outstanding
8,666,357 shares 199,326 199,326
Capital stock expense and other (42) (143)
Retained earnings 231,786 225,764
----------- ----------
Total 488,951 482,828
----------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $1,542,273 $1,521,466
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 68.7 $ 82.7 ($ 14.0) (17)
Commercial 61.9 66.7 (4.8) (7)
Industrial 40.5 44.0 (3.5) (8)
Governmental 6.4 7.1 (0.7) (10)
-----------------------------
Total retail 177.5 200.5 (23.0) (11)
Sales for resale
Associated companies 10.7 13.2 (2.5) (19)
Non-associated companies 4.3 6.4 (2.1) (33)
Other 20.4 27.4 (7.0) (26)
-----------------------------
Total $ 212.9 $ 247.5 ($ 34.6) (14)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 830 972 (142) (15)
Commercial 834 831 3 -
Industrial 750 735 15 2
Governmental 77 83 (6) (7)
-----------------------------
Total retail 2,491 2,621 (130) (5)
Sales for resale
Associated companies 233 301 (68) (23)
Non-associated companies 81 168 (87) (52)
-----------------------------
Total 2,805 3,090 (285) (9)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 143.9 $ 160.2 ($ 16.3) (10)
Commercial 126.4 129.0 (2.6) (2)
Industrial 83.5 84.8 (1.3) (2)
Governmental 13.1 14.0 (0.9) (6)
-----------------------------
Total retail 366.9 388.0 (21.1) (5)
Sales for resale
Associated companies 21.7 26.8 (5.1) (19)
Non-associated companies 9.4 11.7 (2.3) (20)
Other 15.2 24.9 (9.7) (39)
-----------------------------
Total $ 413.2 $ 451.4 ($ 38.2) (8)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,821 2,027 (206) (10)
Commercial 1,653 1,608 45 3
Industrial 1,473 1,429 44 3
Governmental 157 164 (7) (4)
-----------------------------
Total retail 5,104 5,228 (124) (2)
Sales for resale
Associated companies 430 570 (140) (25)
Non-associated companies 183 284 (101) (36)
-----------------------------
Total 5,717 6,082 (365) (6)
=============================
</TABLE>
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 due to a decrease in electric and gas operating revenues and an
increase in taxes other than income taxes, partially offset by a
decrease in income tax expense.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.3) ($4.3)
Fuel cost recovery (8.8) (2.5)
Sales volume/weather (3.7) (3.4)
Other revenue (including unbilled) (1.0) (0.9)
Sales for resale 3.7 2.9
------ -----
Total ($13.1) ($8.2)
====== =====
Electric operating revenues decreased for the three and six
months ended June 30, 1997 as a result of a decrease in base
revenues, fuel adjustment revenues, and sales volume, partially
offset by an increase in sales for resale. Fuel adjustment revenues
decreased because of lower gas prices. Base revenues decreased due
to rate reductions implemented during the current period. Sales
volume decreased due to milder weather during the current periods.
The increase in sales for resale is the result of an increase in
electric sales to associated companies primarily due to changes in
the generation requirements and availability among the domestic
utility companies.
Gas operating revenues decreased for the three and six months
ended June 30, 1997 due to a lower unit purchase price for gas
purchased for resale and a reduction in sales. Milder weather in the
current period is primarily responsible for the reduction in sales.
Expenses
Operating expenses decreased for the three and six months ended
June 30, 1997 because of a decrease in fuel and purchased power
expenses partially offset by an increase in taxes other than income
taxes and the amortization of rate deferrals. The decrease in fuel
and purchased power expenses is the result of lower gas prices. Also
contributing to the change in fuel and purchased power expenses are
the lower generation requirements due to the decrease in electric
sales. Taxes other than income taxes increased because of higher
franchise taxes resulting from a December 1996 Council order
increasing Entergy New Orleans' annual franchise fee from 2.5% to 5%
of gross revenues. The increase in the amortization of rate
deferrals in the three and six
<PAGE>
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
months ended June 30, 1997 is primarily a result of increased over-
recovery of Grand Gulf 1 related costs in 1997 compared to 1996.
Other
Income tax expense decreased for the three and six months ended
June 30, 1997 due to lower pretax income.
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $92,588 $105,701 $182,149 $190,384
Natural gas 17,215 22,128 52,610 64,725
-------- -------- -------- --------
Total 109,803 127,829 234,759 255,109
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 25,658 31,584 68,440 73,020
Purchased power 36,382 41,302 72,964 80,041
Other operation and maintenance 17,427 19,065 32,682 35,489
Depreciation and amortization 5,398 5,011 10,591 9,982
Taxes other than income taxes 8,606 6,757 17,492 13,620
Rate deferrals (1,620) (1,384) (3,581) (2,785)
Amortization of rate deferrals 8,552 5,886 18,016 10,382
-------- -------- -------- --------
Total 100,403 108,221 216,604 219,749
-------- -------- -------- --------
Operating Income 9,400 19,608 18,155 35,360
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 80 81 160 155
Miscellaneous - net (11) 288 20 1,062
-------- -------- -------- --------
Total 69 369 180 1,217
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 3,436 3,953 7,059 8,012
Other interest - net 288 320 579 602
Allowance for borrowed funds used
during construction (63) (63) (126) (122)
-------- -------- -------- --------
Total 3,661 4,210 7,512 8,492
-------- -------- -------- --------
Income Before Income Taxes 5,808 15,767 10,823 28,085
Income Taxes 2,770 5,407 4,967 9,690
-------- -------- -------- --------
Net Income 3,038 10,360 5,856 18,395
Preferred Stock Dividend Requirements
and Other 241 241 482 482
-------- -------- -------- --------
Earnings Applicable to Common Stock $2,797 $10,119 $5,374 $17,913
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $5,856 $18,395
Noncash items included in net income:
Change in rate deferrals 16,839 15,972
Depreciation and amortization 10,591 9,982
Deferred income taxes and investment tax credits (4,964) 1,167
Allowance for equity funds used during (160) (155)
construction
Changes in working capital:
Receivables 3,129 1,102
Accounts payable 6,217 (3,571)
Taxes accrued 5,471 2,295
Interest accrued (631) (501)
Other working capital accounts (9,265) (19,728)
Other (3,924) (9,992)
------- -------
Net cash flow provided by operating activities 29,159 14,966
------- -------
Investing Activities:
Construction expenditures (3,909) (17,991)
Allowance for equity funds used during construction 160 155
------- --------
Net cash flow used in investing activities (3,749) (17,836)
------- --------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds - 39,608
Retirement of:
First mortgage bonds (12,000) (23,250)
General and refunding mortgage bonds - (30,000)
Dividends paid:
Common stock (14,700) (18,900)
Preferred stock (724) (482)
-------- --------
Net cash flow used in financing activities (27,424) (33,024)
-------- --------
Net decrease in cash and cash equivalents (2,014) (35,894)
Cash and cash equivalents at beginning of period 17,510 49,746
-------- --------
Cash and cash equivalents at end of period $15,496 $13,852
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $7,969 $8,698
Income taxes - net $4,928 $6,299
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $2,082 $1,015
Temporary cash investments - at cost,
which approximates market:
Associated companies 3,871 7,435
Other 9,543 9,060
-------- --------
Total cash and cash equivalents 15,496 17,510
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1997 and 1996) 22,049 27,430
Associated companies 1,223 714
Other 2,881 1,764
Accrued unbilled revenues 17,690 17,064
Deferred electric fuel and resale gas costs 5,486 7,290
Materials and supplies - at average cost 13,065 9,904
Rate deferrals 37,838 37,692
Prepayments and other 10,813 7,157
-------- --------
Total 126,541 126,525
-------- --------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
Utility Plant:
Electric 511,432 503,061
Natural gas 128,076 122,700
Construction work in progress 8,184 18,247
-------- --------
Total 647,692 644,008
Less - accumulated depreciation and amortization 356,851 347,790
-------- --------
Utility plant - net 290,841 296,218
-------- --------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 82,513 99,498
SFAS 109 regulatory asset - net 4,242 6,051
Unamortized loss on reacquired debt 1,530 1,647
Other regulatory assets 18,313 15,908
Other 884 890
-------- --------
Total 107,482 123,994
-------- --------
TOTAL $528,123 $549,996
======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $ - $12,000
Accounts payable:
Associated companies 12,780 18,757
Other 26,324 14,130
Customer deposits 19,169 18,974
Taxes accrued 6,675 1,204
Accumulated deferred income taxes 5,506 5,584
Interest accrued 4,694 5,325
Provision for rate refund 15,149 19,465
Other 1,390 1,521
-------- --------
Total 91,687 96,960
-------- --------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 67,227 72,895
Accumulated deferred investment tax credits 7,691 7,984
Accumulated provision for property insurance 15,666 15,666
Other 23,367 24,713
-------- --------
Total 113,951 121,258
-------- --------
Long-term debt 168,920 168,888
Shareholders' Equity:
Preferred stock without sinking fund 19,780 19,780
Common Shareholder's Equity:
Common stock, $4 par value, authorized
10,000,000 shares; issued and outstanding
8,435,900 shares 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings subsequent to the elimination of
the accumulated deficit on November 30, 1988 63,747 73,072
-------- --------
Total 153,565 162,890
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $528,123 $549,996
======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
<S> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 27.2 $ 33.8 ($ 6.6) (20)
Commercial 32.6 36.1 (3.5) (10)
Industrial 5.7 6.2 (0.5) (8)
Governmental 12.9 13.9 (1.0) (7)
----------------------------
Total retail 78.4 90.0 (11.6) (13)
Sales for resale
Associated companies 5.1 0.4 4.7 1175
Non-associated companies 1.9 2.9 (1.0) (34)
Other 7.2 12.4 (5.2) (42)
----------------------------
Total $ 92.6 $ 105.7 ($ 13.1) (12)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 386 451 (65) (14)
Commercial 488 504 (16) (3)
Industrial 125 120 5 4
Governmental 239 230 9 4
----------------------------
Total retail 1,238 1,305 (67) (5)
Sales for resale
Associated companies 178 14 164 1171
Non-associated companies 38 74 (36) (49)
----------------------------
Total 1,454 1,393 61 4
============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 55.9 $ 65.5 ($ 9.6) (15)
Commercial 68.9 69.3 (0.4) (1)
Industrial 11.9 11.8 0.1 1
Governmental 26.5 26.1 0.4 2
----------------------------
Total retail 163.2 172.7 (9.5) (6)
Sales for resale
Associated companies 7.0 2.3 4.7 204
Non-associated companies 3.6 5.4 (1.8) (33)
Other 8.4 10.0 (1.6) (16)
----------------------------
Total $ 182.2 $ 190.4 ($ 8.2) (4)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 760 842 (82) (10)
Commercial 966 969 (3) -
Industrial 239 231 8 3
Governmental 460 442 18 4
----------------------------
Total retail 2,425 2,484 (59) (2)
Sales for resale
Associated companies 225 59 166 281
Non-associated companies 61 126 (65) (52)
----------------------------
Total 2,711 2,669 42 2
============================
</TABLE>
<PAGE>
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income for the three and six months ended June 30, 1997
increased slightly primarily as a result of lower interest charges
and income tax expense, partially offset by increased nuclear
refueling outage expenses and depreciation, amortization, and
decommissioning expenses.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues," "Expenses," and "Other"
below.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt allocable
to its investment in Grand Gulf 1. Operating revenues remained
relatively unchanged for the three and six months ended June 30,
1997. See Note 2 herein for a discussion of System Energy's proposed
rate increase.
Expenses
Operating expenses increased for the three and six months ended
June 30, 1997 due to higher nuclear refueling outage expenses and
higher depreciation, amortization, and decommissioning expenses.
Nuclear refueling outage expenses increased due to costs that were
deferred from the November 1996 outage, which are now being amortized
over an 18 month period beginning December 1996. Prior to this
outage, such costs were expensed as incurred and none were incurred
during the six months ended June 30, 1996. The increase in
depreciation, amortization, and decommissioning expense is due to the
recognition of additional depreciation associated with the sale and
leaseback in 1989 of a portion of Grand Gulf 1, in accordance with
regulatory approval.
Other
Interest charges decreased for the three and six months ended
June 30, 1997 due to the refinancing of higher cost long-term debt in
1996. Income taxes decreased for the three and six months ended June
30, 1997 primarily due a decrease in pretax income and an increase in
the amortization of the deferred tax liability.
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Operating Revenues $161,021 $160,369 $316,682 $316,793
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 12,441 12,171 24,458 25,011
Nuclear refueling outage expenses 3,907 - 7,624 -
Other operation and maintenance 28,407 26,591 48,797 48,332
Depreciation, amortization, and decommissioning 35,917 32,014 74,713 64,013
Taxes other than income taxes 6,781 6,699 13,206 13,605
-------- -------- -------- --------
Total 87,453 77,475 168,798 150,961
-------- -------- -------- --------
Operating Income 73,568 82,894 147,884 165,832
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 280 297 561 647
Miscellaneous - net 1,919 627 3,241 1,466
-------- -------- -------- --------
Total 2,199 924 3,802 2,113
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 31,103 37,021 61,861 74,974
Other interest - net 1,830 2,707 3,611 4,698
Allowance for borrowed funds used
during construction (279) (283) (557) (637)
-------- -------- -------- --------
Total 32,654 39,445 64,915 79,035
-------- -------- -------- --------
Income Before Income Taxes 43,113 44,373 86,771 88,910
Income Taxes 19,020 20,991 38,333 41,998
-------- -------- -------- --------
Net Income $24,093 $23,382 $48,438 $46,912
======== ======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
<S> <C> <C>
Net income $48,438 $46,912
Noncash items included in net income:
Depreciation, amortization, and decommissioning 74,713 64,013
Deferred income taxes and investment tax credits (23,444) (16,354)
Allowance for equity funds used during
construction (561) (647)
Changes in working capital:
Receivables (7,290) (2,835)
Accounts payable 5,297 (967)
Taxes accrued 8,374 17,497
Interest accrued 3,212 9,192
Other working capital accounts 6,353 (3,531)
Decommissioning trust contributions (6,315) (9,073)
FERC Settlement - refund obligation (2,199) (1,942)
Provision for estimated losses and reserves 20,699 23,932
Other 4,308 3,151
--------- --------
Net cash flow provided by operating activities 131,585 129,348
--------- --------
Investing Activities:
Construction expenditures (8,466) (3,624)
Allowance for equity funds used during construction 561 647
Nuclear fuel purchases (39) (1,135)
Proceeds from sale/leaseback of nuclear fuel 39 402
--------- --------
Net cash flow used in investing activities (7,905) (3,710)
--------- --------
Financing Activities:
Proceeds from the issuance of long term debt - 89,192
Retirement of long term debt - (92,700)
Changes in short-term borrowings - net - (2,990)
Common stock dividends paid (58,700) (46,300)
--------- --------
Net cash flow used in financing activities (58,700) (52,798)
--------- --------
Net increase in cash and cash equivalents 64,980 72,840
Cash and cash equivalents at beginning of period 92,315 240
--------- --------
Cash and cash equivalents at end of period $157,295 $73,080
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $57,634 $66,790
Income taxes $42,853 $30,944
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($1,041) ($1,055)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents:
Cash $134 $26
Temporary cash investments - at cost,
which approximates market:
Associated companies 45,351 41,600
Other 111,810 50,689
---------- ----------
Total cash and cash equivalents 157,295 92,315
Accounts receivable:
Associated companies 77,807 71,337
Other 3,342 2,522
Materials and supplies - at average cost 65,965 66,302
Deferred nuclear refueling outage costs 16,498 24,005
Prepayments and other 5,976 4,929
---------- ----------
Total 326,883 261,410
---------- ----------
Other Property and Investments:
Decommissioning trust fund 72,372 62,223
---------- ----------
Utility Plant:
Electric 3,010,761 2,994,445
Electric plant under leases 441,467 447,409
Construction work in progress 39,454 41,362
Nuclear fuel under capital lease 65,501 83,558
---------- ----------
Total 3,557,183 3,566,774
Less - accumulated depreciation and amortization 1,032,062 974,472
---------- ----------
Utility plant - net 2,525,121 2,592,302
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 254,511 264,758
Unamortized loss on reacquired debt 54,585 57,785
Other regulatory assets 197,711 207,214
Other 14,880 15,601
---------- ----------
Total 521,687 545,358
---------- ----------
TOTAL $3,446,063 $3,461,293
========== ==========
See Notes to Financial Statements.
</TABEL>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Currently maturing long-term debt $70,000 $10,000
Accounts payable:
Associated companies 25,665 18,245
Other 16,713 18,836
Taxes accrued 76,197 67,823
Interest accrued 37,407 34,195
Obligations under capital leases 28,000 28,000
Other 1,862 2,306
---------- ----------
Total 255,844 179,405
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 591,474 624,020
Accumulated deferred investment tax credits 101,909 103,647
Obligations under capital leases 37,501 55,558
FERC Settlement - refund obligation 50,640 52,839
Other 198,451 165,517
---------- ----------
Total 979,975 1,001,581
---------- ----------
Long-term debt 1,359,068 1,418,869
Common Shareholder's Equity:
Common stock, no par value, authorized
1,000,000 shares; issued and outstanding
789,350 shares 789,350 789,350
Retained earnings 61,826 72,088
---------- ----------
Total 851,176 861,438
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $3,446,063 $3,461,293
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Cajun - River Bend (Entergy Corporation and Entergy Gulf States)
Entergy Gulf States and Cajun, respectively, own 70% and 30%
undivided interests in River Bend (operated by Entergy Gulf States),
and 42% and 58% undivided interests in Big Cajun 2, Unit 3 (operated
by Cajun). These relationships have spawned a number of long-
standing disputes and claims between the parties. An agreement
setting forth terms for the resolution of all such disputes has been
reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the
RUS, and was approved by the United States District Court for the
Middle District of Louisiana (District Court) on August 26, 1996
(Cajun Settlement). On September 6, 1996, the Committee of Unsecured
Creditors in the Cajun bankruptcy proceeding filed a Notice of Appeal
to the United States Court of Appeals for the Fifth Circuit (Fifth
Circuit), objecting that the order approving the settlement was
separate from the approval of a plan of reorganization and,
therefore, improper. On August 5, 1997, the Fifth Circuit ruled that
the District Court's order approving the settlement was proper.
Approvals by the appropriate regulatory agencies have been obtained.
The SEC and FERC have approved the transfer of certain Cajun
transmission assets to Entergy Gulf States. Management believes that
it is probable that the Cajun Settlement will be consummated prior to
the end of 1997. See Note 9 of the Form 10-K for additional
information regarding the Cajun litigation, Cajun's bankruptcy
proceedings, and related filings.
The Cajun Settlement includes, but is not limited to, the
following elements: (i) Cajun's interest in River Bend has been
turned over to the RUS, which has the option to retain the interest,
sell it to a third party, or transfer it to Entergy Gulf States at no
cost; (ii) Cajun will set aside a total of $125 million for its share
of the decommissioning costs of River Bend; (iii) Cajun will transfer
certain transmission assets to Entergy Gulf States; (iv) Cajun and
Entergy Gulf States will settle transmission disputes and release
each other from claims for payment under transmission arrangements,
as discussed under "Cajun - Transmission Service" below; (v) all
funds paid by Entergy Gulf States into the registry of the District
Court will be returned to Entergy Gulf States; (vi) Cajun will be
released from its unpaid past, present, and future liability for
River Bend costs and expenses; and (vii) all remaining litigation
between Cajun and Entergy Gulf States will be dismissed. Based on
the District Court's approval of the Cajun Settlement, a litigation
accrual established in 1994 for possible losses associated with the
Cajun-River Bend litigation was reversed in September 1996.
Cajun has not paid its full share of capital costs, operating
and maintenance expenses, and other costs for repairs and
improvements to River Bend since 1992. Cajun's unpaid portion of
River Bend operating and maintenance expenses (including nuclear
fuel) and capital costs for the six months ended June 30, 1997 was
approximately $23.9 million. The cumulative cost to Entergy Gulf
States resulting from Cajun's failure to pay its full share of River
Bend-related costs, reduced by the proceeds from the sale by Entergy
Gulf States of Cajun's share of River Bend power and payments into
the registry of the District Court for Entergy Gulf States' portion
of expenses for Big Cajun 2, Unit 3, was $4.8 million as of June 30,
1997. Cajun's unpaid portion of the River Bend related costs is
reflected in long-term receivables which is substantially reserved
for in other deferred credits. As discussed above, the Cajun
Settlement will conclude all disputes regarding the non-payment by
Cajun of River Bend operating and maintenance expenses. Cajun
continues to pay its share of decommissioning costs for River Bend.
The RUS entered into an agreement on February 11, 1997 for the
sale of Cajun's 30% interest in River Bend to PECO Energy Company
(PECO) pursuant to authorization granted in the Cajun Settlement.
On July 10, 1997, PECO terminated this agreement with the RUS and
announced that it would not go forward with the acquisition of the
Cajun River Bend interest.
Cajun - Transmission Service (Entergy Corporation and Entergy Gulf
States)
Entergy Gulf States and Cajun are parties to FERC proceedings
relating to transmission service charge disputes. As a result of the
proposed Cajun Settlement, FERC has dismissed or placed in abeyance
various proceedings pending before it, to which Cajun or the Cajun
bankruptcy trustee are parties, that would be resolved by the Cajun
Settlement. See Note 9 in the Form 10-K for additional information
regarding these FERC proceedings and FERC orders issued as a result
of such proceedings.
Under Entergy Gulf States' interpretation of a 1992 FERC order,
as modified by FERC's orders issued on August 3, 1995, and October 2,
1995, and as agreed to by the Cajun bankruptcy trustee, Cajun would
owe Entergy Gulf States approximately $73.1 million as of June 30,
1997. Entergy Gulf States further estimates that if it were to
prevail in its May 1992 motion for rehearing and on certain other
issues decided adversely to Entergy Gulf States in the February 1995,
August 1995, and October 1995 FERC orders, which Entergy Gulf States
has appealed, Cajun would owe Entergy Gulf States approximately
$163.8 million as of June 30, 1997. If Cajun were to prevail in its
May 1992 motion for rehearing to FERC, and if Entergy Gulf States
were not to prevail in its May 1992 motion for rehearing to FERC, and
if Cajun were to prevail in appealing FERC's August and October 1995
orders, Entergy Gulf States estimates it would owe Cajun
approximately $117.4 million as of June 30, 1997. The above amounts
are exclusive of a $7.3 million payment by Cajun on December 31,
1990, which the parties agreed to apply to the disputed transmission
service charges. Pending FERC's ruling on the May 1992 motions for
rehearing, Entergy Gulf States has continued to bill Cajun utilizing
the historical billing methodology and has recorded underpaid
transmission charges, including interest, in the amount of $147.6
million as of June 30, 1997. This amount is reflected in long-term
receivables with an offsetting reserve in other deferred credits.
FERC has determined that the collection of the pre-petition debt of
Cajun is an issue properly decided in the bankruptcy proceeding.
Refer to "Cajun - River Bend" above for a discussion of the Cajun
Settlement.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
On January 13, 1997, Entergy Gulf States filed a declaratory
judgment action in the U.S. Bankruptcy Court where the Cajun
bankruptcy is pending, seeking a ruling that Entergy Gulf States
would not be liable for damages to certain coal suppliers for Big
Cajun 2, Unit 3, if the Cajun bankruptcy trustee were to reject their
coal contracts as a part of a plan of reorganization in the
bankruptcy proceeding. In its pleading, Entergy Gulf States takes
the position that it is not a party to, and has no liability under,
those coal contracts.
On February 12, 1997, the coal suppliers and the Cajun
bankruptcy trustee filed a response in the declaratory judgment
action and made certain counterclaims and crossclaims. The coal
suppliers contend that Entergy Gulf States' declaratory judgment
action should be dismissed and, in the alternative, argue that Cajun
is Entergy Gulf States' agent in the procurement of coal for Big
Cajun 2, Unit 3, and that Entergy Gulf States is a party to and has
liability under the coal supply contracts. While Entergy Gulf States
believes that it has no obligation under these contracts, the
potential liability if Entergy Gulf States' position is not
sustained, could be materially adverse to Entergy Gulf States and
Entergy Corporation.
This matter, which has not been scheduled for a hearing, will be
strongly contested by Entergy Gulf States. However, at present there
is no basis upon which to predict the timing or outcome of this
litigation.
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the Form 10-K for information on the domestic
utility companies' and System Energy's construction expenditures
(excluding nuclear fuel), for the years 1997, 1998, and 1999 and long-
term debt and preferred stock maturities and cash sinking fund
requirements for the period 1997-1999.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the Form 10-K for information on nuclear
liability, property and replacement power insurance, related NRC
regulations, the disposal of spent nuclear fuel, other high-level
radioactive waste, and decommissioning costs associated with ANO,
River Bend, Waterford 3, and Grand Gulf 1.
The FASB issued an exposure draft of a proposed SFAS (which
proposed a 1997 effective date) in February 1996 regarding the
recognition, measurement and classification of decommissioning costs
for nuclear power plants. The proposed SFAS would require
measurement of the liability for closure and removal of long-lived
assets (including decommissioning) based on discounted future cash
flows. Those future cash flows should be determined by estimating
current costs and adjusting for inflation, efficiencies that may be
gained from experience with similar activities, and consideration of
reasonable future advances in technology.
After receiving comments on the exposure draft, the FASB has
decided that the effective date for the proposed SFAS will be later
than 1997, although a final effective date has not yet been
announced. If current electric utility industry accounting practices
with respect to nuclear decommissioning and other closure costs are
changed, annual provisions for such costs could increase, the
estimated cost for decommissioning/closure could be recorded as a
liability rather than as accumulated depreciation, and trust fund
income from decommissioning trusts could be reported as investment
income rather than as a reduction to decommissioning expense.
ANO Matters (Entergy Corporation and Entergy Arkansas)
Cracks in certain steam generator tubes at ANO 2 were discovered
and repaired during an outage in March 1992. Further inspections and
repairs were conducted at subsequent refueling and mid-cycle outages,
including the most recent refueling outage in May 1997. Turbine
modifications were installed in May 1997 to restore most of the
output lost due to steam generator fouling and tube plugging. The
unit may be approaching the current limit for the number of steam
generator tubes that can be plugged with the unit in operation. If
the established limit is reached during a future outage, it could
become necessary for Entergy Operations to insert sleeves in steam
generator tubes that were previously plugged. On October 25, 1996,
Entergy Corporation's Board of Directors authorized Entergy
Operations to negotiate a contract, with appropriate cancellation
provisions, for the fabrication and replacement of the steam
generators at ANO 2. Entergy estimates the cost of fabrication and
replacement of the steam generators to be approximately $150 million.
Entergy Operations has entered into letters of intent for the
fabrication and installation, which include a commitment for not
more than $7.7 million through August 1997. Contracts are expected
to be entered into in 1997. It is anticipated that the steam
generators will be installed during a planned refueling outage in
2000. Entergy Operations periodically meets with the NRC to discuss
the results of inspections of the steam generator tubes, as well as
the timing of future inspections.
Environmental Issues
(Entergy Arkansas)
In May 1995, Entergy Arkansas was named as a defendant in a suit
by Reynolds Metals Company (Reynolds), seeking to recover a share of
the costs associated with the clean-up of hazardous substances at a
site south of Arkadelphia, Arkansas. Reynolds alleges that it has
spent $11.2 million to clean-up the site, and that the site was
contaminated with PCBs for which Entergy Arkansas bears some
responsibility. Entergy Arkansas, voluntarily, at its expense,
completed remediation at a nearby substation site and believes that
it has no liability for contamination at that portion of the site
that is subject to the Reynolds suit and is contesting the lawsuit.
An August 1997 trial date has been tentatively scheduled. Regardless
of the outcome, Entergy Arkansas does not believe this matter will
have a materially adverse effect on its financial condition or
results of operations. See "Environmental Regulation" in Item 1 of
Part I of the Form 10-K for additional information on the PCB
contamination at the two former Reynolds plant sites in Arkansas to
which Entergy Arkansas had supplied power.
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially
responsible party (PRP) for the clean-up of certain hazardous waste
disposal sites. Entergy Gulf States is currently negotiating with the
EPA and state authorities regarding the clean-up of certain of these
sites. As of June 30, 1997, a remaining recorded liability of $19.8
million existed relating to the clean-up of the sites at which
Entergy Gulf States has been designated a PRP. See "Environmental
Regulation" in Item 1 of Part I of the Form 10-K for additional
discussion of the sites where Entergy Gulf States has been designated
as a PRP by the EPA and related litigation.
(Entergy Louisiana)
During 1993, the Louisiana Department of Environmental Quality
issued new rules for solid waste regulation, including regulation of
wastewater impoundments. Entergy Louisiana has determined that
certain of its power plant waste water impoundments were affected by
these regulations and chose to upgrade or close them. A remaining
recorded liability in the amount of $6.7 million existed at June 30,
1997, for waste water upgrades and closures to be completed by the
end of 1997. Cumulative expenditures relating to the upgrades and
closures of waste water impoundments were $7.1 million as of June 30,
1997.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
transactions for the sale and leaseback of undivided interests
(aggregating approximately 9.3%) in Waterford 3. Upon the occurrence
of certain events, Entergy Louisiana may be obligated to pay amounts
sufficient to permit the Owner Participants to withdraw from the
lease transactions, and Entergy Louisiana may be required to assume
the outstanding bonds issued by the Owner Trustee to finance, in
part, its acquisition of the undivided interests in Waterford 3. See
Note 10 to the Form 10-K and Note 4 herein for further information.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement,
System Energy has agreed to a number of covenants relating to the
maintenance of certain capitalization and fixed charge coverage
ratios. System Energy agreed, during the term of the agreement, to
maintain its equity at not less than 33% of its adjusted
capitalization (defined in the agreement to include certain amounts
not included in capitalization for financial statement purposes). In
addition, System Energy must maintain, with respect to each fiscal
quarter during the term of the agreement, a ratio of adjusted net
income to interest expense (calculated, in each case, as specified in
the agreement) of at least 1.60 times earnings. System Energy was in
compliance with the above covenants at June 30, 1997. See Note 9 to
the Form 10-K for further information.
Employment Litigation
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See Note 9 to the Form 10-K for further information relating to
lawsuits filed by former employees asserting they were wrongfully
terminated and/or discriminated against on the basis of age, race,
and/or sex.
(Entergy Corporation and Entergy Arkansas)
Entergy Corporation and Entergy Arkansas are defendants in a
number of lawsuits filed in federal court on behalf of a total of
approximately 62 plaintiffs who claim they were illegally terminated
from their jobs due to discrimination on the basis of age or race.
The first of these lawsuits, originally involving 29 plaintiffs,
was tried before a jury beginning in April 1997. Settlements were
reached with two of the plaintiffs prior to the trial. On May 1,
1997, the jury rendered findings as to 22 of the plaintiffs
indicating that Entergy had no liability to them for discrimination.
The jury did find that Entergy had intentionally discriminated
against the remaining 5 plaintiffs on the basis of age. As a result,
these plaintiffs will be awarded damages equal to twice their back
pay plus lost future wages and attorneys' fees. A date for the next
phase of the case has not yet been set.
A trial date for another suit involving 18 plaintiffs,
originally scheduled for May 1997, has been continued with no new
date set. Another of the suits is set for trial in November 1997.
No trial dates have been set for the remaining cases.
(Entergy Corporation and Entergy Gulf States)
Entergy Corporation and Entergy Gulf States were defendants in a
lawsuit involving approximately 176 plaintiffs filed in state court
in Texas by former employees who claim that they lost their jobs as a
result of the Merger. The plaintiffs in these cases asserted various
claims, including discrimination on the basis of age, race, and/or
sex. The court made a preliminary ruling that each plaintiff's claim
should be tried separately. However, all of these claims were
settled before reaching trial in June 1997.
NOTE 2. RATE AND REGULATORY MATTERS
River Bend (Entergy Corporation and Entergy Gulf States)
In 1988, the PUCT granted Entergy Gulf States a permanent
increase in annual revenues of $59.9 million resulting from the
inclusion in rate base of approximately $1.6 billion of company-wide
River Bend plant investment and approximately $182 million of related
Texas retail jurisdiction deferred River Bend costs (Allowed
Deferrals). At the same time, the PUCT disallowed as imprudent $63.5
million of company-wide River Bend plant costs and placed in
abeyance, with no finding as to prudence, approximately $1.4 billion
of company-wide River Bend plant investment and approximately $157
million of Texas retail jurisdiction deferred River Bend operating
and carrying costs (Abeyed Deferrals).
The PUCT's order has been the subject of several appellate
proceedings, culminating in an appeal to the Texas Supreme Court
(Supreme Court). On January 31, 1997, the Supreme Court issued an
opinion reversing the PUCT's order and remanding the case to the PUCT
for further proceedings. The Supreme Court found that the PUCT had
prejudiced Entergy Gulf States' rights by attempting to defer a
ruling on the abeyed plant costs and incorrectly determined the
amount of federal income tax expense that should have been allowed in
rates. The Supreme Court ruled that the PUCT could choose either to
conduct hearings and take further evidence or to decide the case on
the original evidence. On February 18, 1997, the Texas Office of
Public Utility Counsel filed a motion for rehearing of the Supreme
Court's decision, arguing that the Supreme Court's remand should have
instructed the PUCT as to how the case should be dealt with on
remand. On July 31, 1997, the Supreme Court overruled the motion for
rehearing and issued its mandate that the case be returned to the
PUCT for further deliberations. No procedural schedule has yet been
issued by the PUCT concerning the case on remand.
As of June 30, 1997, the River Bend plant costs disallowed for
retail ratemaking purposes in Texas and the River Bend plant costs
held in abeyance totaled (net of taxes and depreciation)
approximately $12 million and $261 million, respectively. The
Allowed Deferrals were approximately $74 million, net of taxes and
amortization, as of June 30, 1997. Entergy Gulf States estimates it
has collected approximately $215 million of revenues as of June 30,
1997, as a result of the originally ordered rate treatment by the
PUCT of these deferred costs. If recovery of the Allowed Deferrals
is not upheld, future refunds could be required and future revenues
based upon the Allowed Deferrals could also be lost. However,
management believes that it is probable that the Allowed Deferrals
will continue to be recovered in rates.
As a result of the application of SFAS 121, Entergy Gulf States
wrote off Abeyed Deferrals of $169 million, net of tax, effective
January 1, 1996. In light of the continuing proceedings before the
PUCT and the courts (including the January 31, 1997 decision of the
Texas Supreme Court), Entergy Gulf States has made no write-offs or
reserves for the River Bend plant-related costs. At this time,
management and legal counsel are unable to predict the amount of the
abeyed and previously disallowed River Bend plant costs, if any, that
may ultimately be allowed in Entergy Gulf States' Texas retail rates.
In prior proceedings involving other utilities, the PUCT has
held that the original cost of nuclear power plants will be
recoverable in electric rates to the extent those costs were
prudently incurred. In another proceeding Entergy Gulf States has
previously filed with the PUCT a cost reconciliation study prepared
by Sandlin Associates, management consultants with expertise in the
cost analysis of nuclear power plants, which supports the
reasonableness of the River Bend costs held in abeyance by the PUCT.
This reconciliation study determined that approximately 82% of the
River Bend cost increase above the amount included by the PUCT in
rate base was a result of changes in federal nuclear safety
requirements, and provided other support for the remainder of the
abeyed amounts. In particular, there have been four other rate
proceedings in Texas involving nuclear power plants. Disallowed
investment in the plants ranged from 0% to 15%. Each case was
unique, and the disallowances in each were made for different
reasons. Appeals of two of these PUCT decisions are currently
pending. Based upon the PUCT's prior decisions, management believes
that River Bend construction costs were prudently incurred and that
it is reasonably possible that it will recover through rates, or
otherwise through means such as a deregulated asset plan, all or
substantially all of the abeyed River Bend plant costs. In the event
of an adverse ruling in this case, a net of tax write-off, as of June
30, 1997, of up to $273 million and up to $215 million in refunds of
previously collected revenue could be required.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In October 1996, Entergy Arkansas filed a proposal with the APSC
designed to achieve an orderly transition to retail electric
competition in Arkansas. Entergy Arkansas supplemented its proposal
with a May 1, 1997 filing. The proposal includes a rate decrease
totaling $158 million over a two year period beginning January 1998
and provides for a universal service charge for customers that remain
connected to Entergy Arkansas' electric facilities but choose to
purchase their electricity from another source. Although these
proposals allow for the complete recovery of the remaining plant
investment associated with ANO 1, ANO 2, and Entergy Arkansas'
portion of Grand Gulf 1 as of December 31, 1995, over a seven year
period, the NRC operating licenses for these plants permit continued
operation until the years 2014, 2018, and 2022, respectively.
Hearings are expected to begin in September 1997.
Filings with the PUCT (Entergy Corporation and Entergy Gulf States)
In December 1995, Entergy Gulf States filed a petition with the
PUCT for reconciliation of fuel and purchased power expenses for the
period January 1, 1994, through June 30, 1995. Entergy Gulf States
believes that there was an under-recovered fuel balance, including
interest, of $22.4 million as of June 1995. Hearings were concluded
in October 1996, and in April 1997 the PUCT issued an order which
approved recovery of approximately $18.8 million of the under-
recovered fuel balance, including interest. In June 1997, the PUCT
issued a subsequent order based on a rehearing, which reduced the
approved recovery to $18.5 million.
In accordance with the Merger agreement, Entergy Gulf States
filed a rate proceeding with the PUCT in November 1996. In April
1996, certain cities served by Entergy Gulf States (Cities)
instituted investigations of the reasonableness of Entergy Gulf
States' rates. In May 1996, the Cities agreed to forego their
pending investigation based on the assurance that any rate decrease
ordered in the November 1996 filing will be retroactive to June 1,
1996, and will accrue interest until refunded. The agreement further
provides that no base rate increase will be retroactive. Subsequent
to the November 1996 filing, the Cities passed ordinances reducing
Entergy Gulf States' rates by $43.6 million. Entergy Gulf States has
appealed these ordinances to the PUCT, and these appeals have been
consolidated in the pending rate proceeding. Included in the
November 1996 filing was a proposal to achieve an orderly transition
to retail electric competition in Texas, similar to the filing
described below that Entergy Gulf States made with the LPSC. This
filing with the PUCT will be litigated in four phases as follows: (i)
fuel factor/fuel reconciliation phase, of which Entergy Gulf States
believes there was an under-recovered fuel balance of $41.4 million,
including interest, for the period July 1, 1995 through June 30,
1996; (ii) revenue requirement phase; (iii) cost allocation/rate
design phase; and (iv) competitive issues phase. Hearings on the
first two phases began in June and July 1997, respectively. No
assurance can be given as to the outcome of these hearings.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
On May 31, 1995, Entergy Gulf States filed its second required
post-Merger earnings analysis with the LPSC. Hearings on this review
were held in December 1995. On October 4, 1996, the LPSC issued an
order requiring a $33.3 million annual base rate reduction and a $9.6
million refund. One component of the rate reduction removes from
base rates approximately $13.4 million annually of costs that will be
recovered in the future through the fuel adjustment clause. On
October 23, 1996, Entergy Gulf States appealed the LPSC's order and
obtained an injunction to stay the order, except insofar as it
requires the $13.4 million reduction, which Entergy Gulf States
implemented in November 1996. In addition, pursuant to an October
1996 settlement with the LPSC, Entergy Gulf States will be allowed to
recover $8.1 million annually related to certain gas transportation
and storage facilities costs. This amount will be applied as an
offset against any refund that may be required by a final judgment in
Entergy Gulf States' appeal of the second post-Merger earnings review
order.
On May 31, 1996, Entergy Gulf States filed its third required
post-Merger earnings analysis with the LPSC. Based on this earnings
filing, on June 1, 1996, Entergy Gulf States implemented a $5.3
million annual rate reduction. Hearings on this filing concluded in
March 1997. An additional rate reduction may be required upon the
issuance by the LPSC of a final rate order which is expected by the
end of 1997.
On May 30, 1997, Entergy Gulf States filed its fourth post-
Merger earnings analysis with the LPSC. This filing showed a revenue
deficiency such that no rate reduction is warranted. Entergy Gulf
States' filing will be subject to further review by the LPSC.
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
In October 1996, Entergy Gulf States and Entergy Louisiana filed
proposals with the LPSC designed to achieve an orderly transition to
retail electric competition in Louisiana, while protecting certain
classes of ratepayers from bearing the burden of cost shifting. The
proposals do not increase rates for any customer class. However,
these proposals do provide for a universal service charge for
customers that remain connected to Entergy Gulf States' or Entergy
Louisiana's electric facilities but choose to purchase their
electricity from another source. In addition, the proposals include
a base rate freeze, which would be put into effect for seven years in
the Louisiana areas serviced by Entergy Gulf States and Entergy
Louisiana. Although these proposals allow for the complete recovery
of the remaining plant investment associated with River Bend, and
Waterford 3 as of December 31, 1995, over a seven year period, the
NRC operating licenses for these plants permit continued operation
until the years 2025 and 2024, respectively. Hearings on these
proposals have been delayed until 1998.
In February 1997, the LPSC identified certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals that will be
addressed in those companies' existing rate dockets, and other issues
that will be addressed in an ongoing generic regulatory proceeding
examining electric industry restructuring.
On May 30, 1997, Entergy Louisiana filed its annual formula rate
plan with the LPSC for the 1996 test year. In conjunction with the
filing, Entergy Louisiana proposed to apply one half of the $59
million in 1996 overearnings to accelerate depreciation of the
Waterford 3 nuclear plant. In a June 10, 1997 order, the LPSC denied
Entergy Louisiana's motion and ordered the Company to implement a
prospective rate reduction. Entergy Louisiana implemented this rate
reduction on July 1, 1997.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
On March 15, 1997, Entergy Mississippi filed its annual earnings
review with the MPSC under its formula rate plan for the 1996 test
year. In April 1997, the MPSC issued an order approving a
prospective rate reduction of $11.2 million. This rate reduction
went into effect May 1, 1997.
Entergy Mississippi has initiated discussions with the MPSC
regarding an orderly transition to a more competitive market for
electricity. In August 1996, Entergy Mississippi filed a proposal
with the MPSC for a rate rider to assure recovery of all Grand Gulf
costs incurred to serve customers. The rider would maintain current
rates for electric service provided by Entergy Mississippi and would
apply to customers within Entergy Mississippi's service area who
obtain electricity in the future from a source other than Entergy
Mississippi. Entergy Mississippi designed this rider to assure that
commitments made under the current system of regulation are honored
and that cost burdens are not unfairly transferred from departing
customers to those who remain on the Entergy Mississippi system. On
August 22, 1996, the MPSC remanded this proposal and established a
generic docket to consider competition for retail electric service.
Hearings on this docket concluded in April 1997. The MPSC issued an
order in July 1997 calling for continued study of electric power
industry deregulation by the commission's staff, with a report due to
the MPSC by November 1, 1997.
Filings with the Council (Entergy Corporation and Entergy New
Orleans)
The Council issued a resolution in February 1997 indicating that
it will conduct an investigation of the justness and reasonableness
of Entergy New Orleans' allowed rate of return, base rates, and
adjustment clauses. The Council conducted hearings in April 1997 on
the issue of rate of return, and directed Entergy New Orleans to make
a cost of service and revenue requirement filing on May 1, 1997. In
April 1997, Entergy New Orleans proposed a $16 million prospective
rate reduction in order to resolve the disputed rate of return and
other issues raised in the first phase of the proceeding. The
proposed settlement would also postpone the cost of service and
revenue requirement filing until September 1997. A settlement
conference was held in June 1997 and Entergy New Orleans increased
the proposed rate reduction to $18 million. The Council accepted the
settlement offer and Entergy New Orleans implemented the $18 million
rate reduction (retroactive to May 1, 1997) in July 1997. A
procedural schedule has not been set with respect to the other
issues.
Proposed Rate Increase
(System Energy)
System Energy filed an application with FERC on May 12, 1995,
for a $65.5 million rate increase. The request seeks changes to
System Energy's rate schedule, including increases in the revenue
requirement associated with decommissioning costs, the depreciation
rate, and the rate of return on common equity. The request also
includes a proposed change in the accounting recognition of nuclear
refueling outage costs from that of expensing those costs as incurred
to the deferral and amortization method described in Note 1 in the
Form 10-K with respect to Entergy Arkansas. On December 12, 1995,
System Energy implemented a $65.5 million rate increase, subject to
refund. Management has decided to record a reserve for a portion of
the rate increase. Hearings on System Energy's request began in
January 1996 and were completed in February 1996. On July 11, 1996,
the ALJ issued an initial decision in this proceeding that agreed
with certain of System Energy's proposals, including the change in
accounting for nuclear refueling outage costs, while rejecting a
proposed increase in return on common equity and recommending a
slight decrease. The ALJ also rejected the proposed change in the
decommissioning cost methodology. The decision of the ALJ is
preliminary and may be modified in the final decision from FERC which
is expected at any time. Management is unable to predict the final
outcome of the rate increase request or the amount of any refunds in
excess of reserves that may be required.
(Entergy Mississippi)
Entergy Mississippi's allocation of the proposed System Energy
wholesale rate increase is $21.6 million annually. In July 1995,
Entergy Mississippi filed a schedule with the MPSC that defers the
retail recovery of the System Energy rate increase. The deferral
plan, which was approved by the MPSC, began in December 1995, the
effective date of the System Energy rate increase, and will end after
the issuance of a final order by FERC. The final amount of the
deferred rate increase is to be amortized over 48 months beginning in
October 1998.
(Entergy New Orleans)
Entergy New Orleans' allocation of the proposed System Energy
wholesale rate increase is $11.1 million annually. In February 1996,
Entergy New Orleans filed a plan with the Council to defer 50% of the
amount of the System Energy rate increase. The deferral began in
February 1996 and will end after the issuance of a final order by
FERC.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 1997, Entergy Corporation
issued 372,195 shares of common stock, reducing the amount held
as treasury stock by approximately $10 million. Entergy Corporation
issued these shares to meet the requirements of its various
stock plans. In addition, Entergy Corporation received proceeds
of $158.9 million from the issuance of 6,208,263 shares of common
stock under its dividend reinvestment and stock purchase plan during
the six months ended June 30, 1997.
On July 1, 1997, Entergy Corporation issued 813,161 shares of
common stock at a value of $21.5 million in connection with the
acquisition of the security monitoring company, Ranger American.
NOTE 4. LONG-TERM DEBT
(Entergy Corporation)
See Note 7 of the Form 10-K for a discussion of Entergy Power UK
plc's credit facility. Approximately 1.015 billion British Pounds
(1.67 billion US dollars) of variable rate borrowings were
outstanding under this facility as of June 30, 1997. The weighted
average interest rate on the borrowings outstanding as of June 30,
1997 was 7.92%.
Entergy Power UK plc (Entergy Power UK) entered into several
interest rate swaps to reduce the impact of interest rate changes on
its debt related to the London Electricity acquisition. The interest
rate swap agreements involve the exchange of floating rate interest
payments for fixed rate interest payments over the life of the
agreements. Entergy Power UK recognizes interest expense currently
based on the fixed rate of interest resulting from use of these swap
agreements. If the counterparties to an interest rate swap agreement
were to default on contractual payments, Entergy Power UK could be
exposed to increased costs related to replacing the original
agreement. However, Entergy Power UK does not anticipate
nonperformance by any counterparty to any interest rate swap in
effect at June 30, 1997. At June 30, 1997, Entergy Power UK was a
party to a notional amount of 600 million British Pounds of interest
rate swaps with maturity dates ranging from March 1999 to
September 2001.
An Entergy subsidiary signed an agreement with several banks on
January 5, 1996, to obtain a revolving credit facility for the
acquisition of CitiPower. The subsidiary entered into several
interest rate swaps to reduce the impact of interest rate changes on
its debt related to the CitiPower acquisition. See Note 7 of the
Form 10-K for a discussion of the credit facility and the interest
rate swap agreements. The interest rate swap agreements involve the
exchange of floating rate interest payments for fixed rate interest
payments over the life of the agreements. Interest expense is
recognized currently based on the fixed rate of interest resulting
from use of these swap agreements.
Entergy enters into interest rate swaps as part of its overall
risk management strategy and does not hold or issue material amounts
of derivative financial instruments for trading purposes. Entergy
accounts for its interest rate swaps in accordance with the concepts
established in SFAS 80, "Accounting for Futures Contracts", and
various Emerging Issues Task Force pronouncements. If the interest
rate swaps were to be sold or terminated, any resulting gain or loss
would be deferred and amortized over the remaining life of the debt
instrument being hedged by the interest rate swaps. If the debt
instrument being hedged by the interest rate swaps was to be
extinguished, any resulting gain or loss attributable to the swaps
would be recognized in the period in which the debt was extinguished.
(Entergy Corporation and Entergy Louisiana)
Entergy Louisiana is the lessee of three separate undivided
interests in Unit 3 of the Waterford Steam Electric Generating
Station under three separate, but substantially identical, long-term
net leases. The lessors under such leases acquired the undivided
interests (aggregating approximately 9.3%) in Waterford 3 from
Entergy Louisiana in three separate sale-leaseback transactions that
occurred in 1989. Approximately 87.7% of the aggregate consideration
paid by the Lessors for their respective undivided interests was
provided to the Lessors from the issuance of Waterford 3 Secured
Lease Obligation Bonds (Initial Series Bonds) in 1989. As of June
30, 1997, the outstanding debt consisted of three series of bonds
with interest rates ranging from 10.30% to 10.67% and maturity dates
ranging from 2005 to 2017. In July 1997, Entergy Louisiana issued
$307,632,000 Waterford 3 Secured Lease Obligation Bonds, 8.09% Series
due 2017, to refinance the outstanding Initial Series Bonds.
Upon the occurrence of certain events, Entergy Louisiana may be
obligated to pay amounts sufficient to permit the Owner Participants
to withdraw from the lease transactions, and Entergy Louisiana may be
required to assume the outstanding bonds issued by the Owner Trustee
to finance, in part, its acquisition of the undivided interests in
Waterford 3. See Note 10 to the Form 10-K for further information.
(Entergy Mississippi)
On July 15, 1997, Entergy Mississippi retired $50 million of its
6.95% Series General and Refunding Bonds and $46 million of its
11.20% Series General and Refunding Bonds upon maturity.
(Entergy Gulf States)
On July 1, 1997, Entergy Gulf States retired, pursuant to
sinking fund requirements, $50 million of its 9.72% Series Debentures
due 1998.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 25, 1997, Entergy Corporation's Board of Directors
declared a common stock dividend of 45 cents per share payable on
September 1, 1997, to holders of record on August 13, 1997.
NOTE 6. RESTRUCTURING COSTS (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
In 1994 and 1995, Entergy implemented various restructuring
programs to reduce the number of employees and consolidate offices
and facilities. The programs were designed to reduce costs and
improve operating efficiencies. The restructuring liability
associated with these programs was $3.2 million as of December 31,
1996. Approximately $2.8 million of restructuring charges were
incurred through June 30, 1997, resulting in a remaining liability of
$.4 million. The restructuring charges primarily include employee
severance costs related to the expected termination of approximately
2,750 employees in various groups. As of June 30, 1997,
substantially all of these employees had either been terminated or
accepted voluntary separation packages under the restructuring plan.
In December 1996, Entergy recorded $21.3 million of
restructuring charges (of which $18 million was recorded by Entergy
Services) associated with the transition to competition.
Approximately $11.1 million of charges related to the transition to
competition were incurred through June 30, 1997, resulting in a
remaining liability of $10.2 million.
NOTE 7. ACCOUNTING ISSUES (Entergy Corporation)
New Accounting Standard - In March 1997, the FASB issued SFAS
128, "Earnings per Share", effective for financial statements for
periods ending after December 15, 1997. This statement will simplify
the computation of earnings per share for many companies by
eliminating calculation provisions which were required by the prior
earnings per share standard, Accounting Principles Board Opinion 15.
The adoption of SFAS 128 is not expected to have a material effect on
the calculation of earnings per share for Entergy Corporation.
In May and July, 1997, the EITF of the FASB met regarding EITF
Issues No. 97-4, "Deregulation of the Pricing of Electricity - Issues
Related to the Application of SFAS 71, "Accounting for the Effects of
Certain Types of Regulation", and SFAS 101, "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB Statement
No. 71". As a result of these meetings, a consensus was reached that
SFAS 71 should be discontinued at a date no later than when the
details of the transition to competition plan for that portion of the
entity are known. Additionally, the EITF reached a consensus that
stranded costs which are to be recovered through cash flows derived
from another portion of the entity which continues to apply SFAS 71
should not be written off and considered regulatory assets of that
segment which will continue to apply SFAS 71.
NOTE 8. ACQUISITION OF LONDON ELECTRICITY (Entergy Corporation)
On December 18, 1996, Entergy made a formal cash offer to
acquire London Electricity for $2.1 billion. London Electricity is a
regional electric company serving approximately two million customers
in the metropolitan area of London, England. The offer was approved
by authorities in the United Kingdom, and as of February 7, 1997, the
offer was made unconditional. Entergy, through a wholly owned
subsidiary, now controls 100% of the common shares of London
Electricity. Entergy has included the results of operations of
London Electricity in its results of operations beginning February 1,
1997, based on management's determination that effective control was
achieved on that date. The acquisition was financed with $1.7
billion of debt that is non-recourse to Entergy Corporation and $392
million of equity provided by Entergy Corporation from available cash
and borrowings under its $300 million line of credit.
The cost of the London Electricity license is being amortized on
a straight-line basis over a 40 year period beginning February 1,
1997. As of June 30, 1997, the unamortized balance of the license
was approximately $1.6 billion, which is based on a preliminary
purchase price allocation.
In accordance with the purchase method of accounting, the three
and six months ended June 30, 1997, results of operations for Entergy
Corporation reported in its Statements of Consolidated Income and
Cash Flows do not reflect London Electricity's results of operations
for any period prior to February 1, 1997. The pro forma combined
revenues, net income, and earnings per common share of Entergy
Corporation presented below give effect to the acquisition as if it
had occurred on January 1, 1997. This pro forma information is not
necessarily indicative of the results of operations that would have
occurred had the acquisition been consummated for the period for
which it is being given effect. The three and six months ended June
30, 1996 pro forma information is not available for comparative
purposes.
Six Months Ended
June 30, 1997
(In Thousands of U.S.
Dollars, Except Share Data)
Operating revenues $4,422,537
Net income $ 287,579
Earnings per average common share $ 1.09
On July 31, 1997, the British government enacted into law a one-
time "windfall profits tax" on privatized industries, including
regional electric utilities such as London Electricity. An initial
examination of the proposed tax indicates that London Electricity's
liability is approximately 140 million British Pounds (approximately
$229 million) which will not be deductible for United Kingdom income
tax purposes. Payment of the tax is required in two equal
installments, the first to be due on December 1, 1997, and the
second installment due a year later. The government also decreased
the corporate tax rate in the United Kingdom from the current 33% to
31%, which will be effective as of April 1, 1997. In accordance
with SFAS 109, "Accounting for Income Taxes", this reduction in
United Kingdom income tax rates will result in a one-time reduction
in income tax expense of approximately $65 million to adjust London
Electricity's deferred income tax liability to the new rate.
Accordingly, the liability for the windfall profits tax (with a
corresponding charge against income) and the reduction in London
Electricity's deferred income tax liability (with a corresponding
reduction in income tax expense), were recorded in July 1997.
__________________________________
In the opinion of Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy, the accompanying unaudited condensed
financial statements contain all adjustments (consisting primarily of
normal recurring accruals and reclassifying previously reported
amounts to conform to current classifications) necessary for a fair
statement of the results for the interim periods presented. However,
the business of Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans is subject to
seasonal fluctuations, with the peak period occurring during the
summer months. The results for the interim periods presented should
not be used as a basis for estimating results of operations for a
full year.
<PAGE>
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Employment Litigation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)
See "Employment Litigation" in Item 1 of Part I of the Form 10-K
for information relating to lawsuits filed by former employees
asserting they were wrongfully terminated and/or discriminated
against due to age, race, and/or sex. See "Employment Litigation" in
Note 1 herein for developments that have occurred since the filing of
the Form 10-K.
Federal Income Tax Audit (Entergy Corporation, Entergy Louisiana, and
System Energy)
In August 1994, Entergy received an IRS report covering the
federal income tax audit of Entergy Corporation and subsidiaries for
the years 1988 - 1990. The report asserted an $80 million tax
deficiency for the 1990 consolidated federal income tax returns
related primarily to the utilization of accelerated investment tax
credits associated with Waterford 3 and Grand Gulf. Changes to the
initial report, made in the IRS appeal process, reduced the
assessment to $58 million. In March 1997, Entergy Corporation
received notification that the IRS National Office had resolved the
audit in Entergy's favor and that no additional tax payments would be
due.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun - Coal Contracts" in Note 1 herein for developments
that have occurred since the filing of Form 10-K.
Taxes Paid Under Protest (Entergy Corporation and Entergy Louisiana)
Since the mid-1980's, Entergy Louisiana and the tax authorities
of St. Charles Parish, Louisiana (Parish), the parish in which
Waterford 3 is located, have disputed use taxes on nuclear fuel paid
under protest by Entergy Louisiana. Entergy Louisiana has been
successful in lawsuits in the Parish with regard to recovering these
taxes, plus interest, and also with regard to Parish lease tax issues
pertaining to fuel financing arrangements. In June 1995, Entergy
Louisiana received a favorable decision from the Louisiana Fifth
Circuit Court of Appeals that confirmed that no such use and lease
taxes are due. In May 1997, the Parish and Entergy Louisiana settled
all pending use and lease tax litigation. This settlement includes
returns to Entergy Louisiana of additional payments under protest on
nuclear fuel and the dismissal of nuclear fuel related suits against
Entergy Louisiana and/or the fuel lessors. The suits by Entergy
Louisiana with regard to state use tax paid under protest on nuclear
fuel are still pending.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was
held on May 9, 1997. The following matters were voted on and
received the specified number of votes for, abstentions, votes
withheld (against), and broker non-votes:
1. Election of Directors:
Votes Broker
Name of Nominee Votes For Abstentions Withheld Non-Votes
W. Frank Blount 204,019,263 N/A 1,723,668 N/A
John A. Cooper, Jr. 204,030,546 N/A 1,712,385 N/A
Lucie J. Fjeldstad 204,059,200 N/A 1,683,731 N/A
Norman C. Francis 203,945,806 N/A 1,797,125 N/A
Robert v. d. Luft 204,095,766 N/A 1,647,165 N/A
Edwin Lupberger 203,720,662 N/A 2,022,269 N/A
Kinnaird R. McKee 203,926,940 N/A 1,815,991 N/A
Paul W. Murrill 204,035,147 N/A 1,707,784 N/A
James R. Nichols 204,032,347 N/A 1,710,584 N/A
Eugene H. Owen 204,017,280 N/A 1,725,651 N/A
John N. Palmer, Sr. 204,119,836 N/A 1,623,095 N/A
Robert D. Pugh 203,939,504 N/A 1,803,427 N/A
Wm. Clifford Smith 204,044,210 N/A 1,698,721 N/A
Bismark A. Steinhagen 204,108,780 N/A 1,634,151 N/A
2. Appointment of independent public accountants, Coopers & Lybrand
L.L.P., for the year 1997: 202,841,564 votes for; 2,147,815 votes
against; 753,552 abstentions; and broker non-votes are not
applicable.
(Entergy Arkansas)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Arkansas: Frank F.
Gallaher, Donald C. Hintz, Jerry D. Jackson, R. Drake Keith, Edwin
Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
(Entergy Gulf States)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Gulf States: John J.
Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Karen
R. Johnson, Edwin Lupberger, Jerry L. Maulden, and Gerald D.
McInvale.
(Entergy Louisiana)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Louisiana: John J.
Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Edwin
Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
(Entergy Mississippi)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Mississippi: Frank F.
Gallaher, Donald C. Hintz, Jerry D. Jackson, Edwin A. Lupberger,
Jerry L. Maulden, Gerald D. McInvale, and Donald E. Meiners.
(Entergy New Orleans)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy New Orleans: Frank F.
Gallaher, Jerry D. Jackson, Edwin A. Lupberger, Jerry L. Maulden,
Gerald D. McInvale, and Daniel F. Packer.
(System Energy)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of System Energy: Donald C.
Hintz, Edwin Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
Item 5. Other Information
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, June 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 2.28 3.11(b) 2.32 2.56 2.93 2.63
Entergy Gulf States 1.72 1.54 .36(c) 1.86 1.47 2.32
Entergy Louisiana 2.79 3.06 2.91 3.18 3.16 2.82
Entergy Mississippi 2.37 3.79(b) 2.12 2.92 3.40 2.93
Entergy New Orleans 2.66 4.68(b) 1.91 3.93 3.51 2.73
System Energy 2.04 1.87 1.23 2.07 2.21 2.32
Ratios of Earnings to Combined Fixed Charges and
Preferred Dividends
Twelve Months Ended
December 31, June 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 1.86 2.54(b) 1.97 2.12 2.44 2.27
Entergy Gulf States (a) 1.37 1.21 .29(c) 1.54 1.19 1.91
Entergy Louisiana 2.18 2.39 2.43 2.60 2.64 2.43
Entergy Mississippi 1.97 3.08(b) 1.81 2.51 2.94 2.57
Entergy New Orleans 2.36 4.12(b) 1.73 3.56 3.22 2.48
(a) "Preferred Dividends" in the case of Entergy Gulf States
also include dividends on preference stock.
(b) Earnings for the year ended December 31, 1993, include $81
million, $52 million, and $18 million for Entergy Arkansas,
Entergy Mississippi, and Entergy New Orleans, respectively,
related to the change in accounting principle to provide
for the accrual of estimated unbilled revenues.
(c) Earnings for the year ended December 31, 1994, for Entergy
Gulf States were not adequate to cover fixed charges and
combined fixed charges and preferred dividends by $144.8
million and $197.1 million, respectively.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
** 4(a) - Eleventh Supplemental Indenture, dated as of June 1,
1997, to Entergy Mississippi's Mortgage and Deed of
Trust, dated as of February 1, 1988 (filed as Exhibit
A-2(a) to Rule 24 Certificate dated June 27, 1997 in
File No. 70-8719).
4(b) - Credit Facility Agreement, dated as of December 17,
1996, for Entergy Power UK PLC and ABN Amro Bank, N.V.,
Bank of America International Limited, Union Bank of
Switzerland as amended by amendments 1, 2, and 3 dated
February 6, 1997, March 18, 1997, and June 30, 1997,
respectively.
23(a) - Consent of Sandlin Associates.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of June 30, 1997.
27(b) - Financial Data Schedule for Entergy Arkansas as of
June 30, 1997.
27(c) - Financial Data Schedule for Entergy Gulf States as of
June 30, 1997.
27(d) - Financial Data Schedule for Entergy Louisiana as of
June 30, 1997.
27(e) - Financial Data Schedule for Entergy Mississippi as of
June 30, 1997.
27(f) - Financial Data Schedule for Entergy New Orleans as of
June 30, 1997.
27(g) - Financial Data Schedule for System Energy as of June
30, 1997.
99(a) - Entergy Arkansas Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(b) - Entergy Gulf States Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(c) - Entergy Louisiana Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(d) - Entergy Mississippi Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 99(g) - Annual Reports on Form 10-K of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the fiscal year ended December
31, 1996, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
** 99(h) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the quarter ended March 31,
1997, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended June 30, 1997, which list, prepared in accordance
with Item 102 of Regulation S-T of the SEC, immediately
precedes the exhibits being filed with this report on Form
10-Q for the quarter ended June 30, 1997.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy
A current report on Form 8-K, dated July 2, 1997, was
filed with the SEC on July 11, 1997, reporting
information under Item 5. "Other Events."
Entergy Louisiana
A current report on Form 8-K, dated June 26, 1997,
was filed with the SEC on July 14, 1997, reporting
information under Item 5. "Other Events" and Item 7.
" Financial Statements and Exhibits."
EXPERTS
The statements attributed to Sandlin Associates regarding the
analysis of River Bend construction costs of Entergy Gulf States in
Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial
Statements, "Rate and Regulatory Matters," have been reviewed by such
firm and are included herein upon the authority of such firm as
experts.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Louis E. Buck
Louis E. Buck
Vice President, Chief Accounting
Officer and Assistant Secretary
(For each Registrant and for each as
Principal Accounting Officer)
Date: August 8, 1997
Exhibit 4(b)
AGREEMENT
DATED 17th December, 1996
1,250,000,000 Pounds
CREDIT FACILITY
FOR
ENTERGY POWER UK PLC
ARRANGED BY
ABN AMRO BANK N.V.
BANK OF AMERICA INTERNATIONAL LIMITED
UNION BANK OF SWITZERLAND
<PAGE>
THIS AGREEMENT is dated 17th December, 1996 between:-
(1) ENTERGY POWER UK PLC (Registered No. 3261188) (the
"Company");
(2) ABN AMRO BANK N.V., BANK OF AMERICA INTERNATIONAL LIMITED
and UNION BANK OF SWITZERLAND as arrangers (in this
capacity the "Arrangers");
(3) ABN AMRO BANK N.V. as issuing bank (in this capacity the
"Issuing Bank");
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as banks
(the "Banks"); and
(5) ABN AMRO BANK N.V. as agent (in this capacity the
"Agent").
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 Definitions
In this Agreement:-
"Accounting Date"
means the last day of each financial quarter of the
Company.
"Accounting Period"
means any period of approximately three months or one
year ending on an Accounting Date for which accounts are
required to be prepared for the purposes of this
Agreement.
"Acquisition"
means the acquisition by the Company of any Shares
pursuant to the Offer and/or pursuant to open market
purchases.
"Act"
means the Electricity Act 1989 and, unless the context
otherwise requires, all subordinate legislation made
pursuant to it.
"Adjusted Capital and Reserves"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Affiliate"
means a Subsidiary or a Holding Company of a person and
any other Subsidiary of that Holding Company.
"Applicable Accounting Principles"
means accounting principles and practices, which at the
date of this Agreement are generally accepted in the
United Kingdom and approved by the Institute of Chartered
Accountants of England and Wales and which are consistent
with the accounting principles and practices applied in
the preparation of the Base Financial Statements.
"Auditors"
means Coopers and Lybrand or any other "Big Six" firm of
accountants or any other firm (approved by the Agent) of
independent public accountants of international standing
recognised and authorised by the Institute of Chartered
Accountants of England and Wales which is appointed by
the Company to audit the consolidated annual accounts of
the Company.
"Available Surplus Cashflow"
means that part of any Surplus Cashflow which has,
pursuant to Clause 19.15(b) (Distributions), been paid
(whether by way of dividend, loan repayment, interest or
loan) to the Company by the Target.
"Base Financial Statements"
means the audited annual consolidated accounts of the
Target for and as at the end of the financial year of the
Target ended 31st March, 1996.
"Beneficiary"
means a holder of a Loan Note.
"Bond Issues"
means:
(a) the pounds 100,000,000 8 per cent. bonds due 2003; and
(b) the pounds 100,000,000 8-5/8 per cent. bonds due 2005,
issued by the Target.
"Borrower"
means the Company or, upon its becoming a Borrower in
accordance with Clause 28.4 (Target as Borrower), the
Target.
"Borrower Accession Agreement"
means a letter substantially in the form of Part II of
Schedule 5 with such amendments as the Agent may approve.
"Borrowing"
means Financial Indebtedness (without double counting)
adjusted as follows:
(a) any interest, dividends, commission, fees or other
like financing charges, and any item falling within
paragraph (g) of the definition of Financial
Indebtedness, shall be excluded, save in each case
to the extent capitalised or more than 15 days
overdue for payment;
(b) in respect of any bonds, notes, debentures, loan
stocks and/or other debt securities issued at a
discount or redeemable at a premium and constituting
a Borrowing, the issue price thereof, together with
any applicable discount or premium recognised or
required by the Applicable Accounting Principles to
be recognised at the time of calculation (other than
amounts required by the Applicable Accounting
Principles to be accounted for as interest) in the
accounts of the relevant person (were any then to be
prepared), shall be included;
(c) in respect of paragraphs (d) and (e) of the
definition of Financial Indebtedness (but in the
case of paragraph (d), only where no interest or
similar charge is charged), only the principal
amount thereof as determined by the Applicable
Accounting Principles or (in the case of paragraph
(e)) the capitalised value (as so determined) of any
items falling thereunder shall be included;
(d) any item falling within paragraph (f) of the
definition of Financial Indebtedness which is in
respect of any sum excluded by paragraph (a) or (c)
above shall be excluded; and
(e) any item falling within paragraph (f)(ii) of the
definition of Financial Indebtedness shall be
included only to the extent that the same has been
or (in accordance with the Applicable Accounting
Principles) ought to be given a value in the latest
or next Accounts, or in any notes to those Accounts.
"Business Day"
means a day (other than a Saturday or a Sunday) on which
banks are open for business in London.
"Cancellation Date"
means the date of withdrawal or lapse of the Offer in
accordance with its terms.
"Capitalisation Ratio"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Cashflow"
means, for any period for which it is being tested,
Consolidated EBITDA for that period, but adjusted so as
to:
(a) add back any taxes refunded during that period;
(b) deduct any increase or add any reduction in working
capital which occurs during that period;
(c) deduct any taxes accrued or paid during that period
(adjusted in the case of VAT for any VAT input);
(d) deduct outflows and add inflows of cash effect
resulting from any Extraordinary Items;
(e) deduct any capital expenditure or costs or expenses
of a capital nature paid during that period and any
other expenditure not already taken into account
which is required to be paid under the Licence, any
Licence Undertaking or any applicable law or
regulation during the following financial quarter;
and
(f) take no account of any book profits or losses
arising from the disposal of any assets.
"Certain Funds Period"
means the period beginning on the date of issue of the
Press Release and ending on the earlier of:
(a) the date which falls three months after the
Unconditional Acceptances Date;
(b) the date which falls seven months after the date of
issue of the Press Release; and
(c) the date which falls seven days after the
Cancellation Date;
or, if prior to that date the Company has given notice
under section 429 of the Companies Act 1985 to
shareholders who have not accepted the Offer, any longer
period as may be required to enable the Company to
acquire shares within the period it is permitted to do so
under Section 428 to 430 of the Companies Act 1985
following the announcement of the Offer.
"Clean-Up Date"
means the date falling 180 days after the Target becomes
a Subsidiary of the Company.
"Code"
means the City Code on Takeovers and Mergers.
"Commitment"
means, in respect of a Bank, its Facility A Commitment,
Facility B Commitment or Facility C Commitment, and
"Commitments" means the aggregate of its Facility A
Commitment, Facility B Commitment and Facility C
Commitment.
"Consolidated EBITDA"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Consolidated Net Interest Payable"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Consolidated Net Total Borrowings"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Consolidated Total Interest Payable"
has the meaning given to it in Clause 19.28 (Financial
covenants).
"Dangerous Substance"
means any radioactive emissions, noise, any natural or
artificial substance (whether in the form of a solid,
liquid, gas or vapour) the generation, transportation,
storage, treatment, use or disposal of which (whether
alone or in combination with any other substance)
including (without limitation) any controlled, special,
hazardous, toxic, radioactive or dangerous substance or
waste, gives rise to a risk of causing harm to man or any
other living organism or damaging the Environment or
public health or welfare.
"Debenture"
means a debenture executed by the Company in favour of
the Agent substantially in the form of Schedule 7.
"Default"
means an Event of Default or an event which, with the
giving of notice, expiry of any applicable grace period,
determination of materiality or fulfilment of any other
applicable condition specified (in any such case) in
Clause 20 (Default) (or any combination of the
foregoing), would constitute an Event of Default.
"Director General"
means the person appointed from time to time by the
Secretary of State to hold office as the Director General
of Electricity Supply for the purpose of the Act.
"Double Taxation Treaty"
means any convention between the government of the United
Kingdom and any other government for the avoidance of
double taxation and the prevention of fiscal evasion with
respect to taxes on income and capital gains.
"Drawdown Date"
means the date of the advance of a Loan.
"Environment"
means any of the following media, the air (including,
without limitation, the air within buildings and the air
within other natural or man-made structures above or
below ground), water (including, without limitation,
ground and surface water) and land (including, without
limitation, surface and sub-surface soil).
"Environmental Claim"
means any claim by any person:
(a) in respect of any loss or liability suffered or
incurred by that person as a result of or in
connection with any violation of Environmental Law;
or
(b) that arises as a result of or in connection with
Environmental Contamination and that could give rise
to any remedy or penalty (whether interim or final)
that may be enforced or assessed by private or
public legal action or administrative order or
proceedings, including, without limitation, any such
claim arising from injury to persons, property or
natural resources.
"Environmental Contamination"
means each of the following and their consequences:
(a) any release, emission, leakage or spillage of any
Dangerous Substance at or from any site owned,
occupied or used by any member of the Group into any
part of the Environment; or
(b) any accident, fire, explosion or sudden event at any
site owned, occupied or used by any member of the
Group which is directly or indirectly caused by or
attributable to any Dangerous Substance; or
(c) any other pollution of the Environment.
"Environmental Law"
means all applicable laws (including, without limitation,
common law), regulations, directing codes of practice,
circulars, guidance notices and the like having legal
effect (whether in the United Kingdom or elsewhere)
concerning pollution or the protection of human health,
the Environment, the conditions of the work place or the
generation, transportation, storage, treatment or
disposal of Dangerous Substances.
"Environmental Licence"
means any authorisation required by any Environmental
Law.
"Event of Default"
means an event specified as such in Clause 20.1 (Events
of Default).
"Exceptional Items"
has the meaning given to it in Clause 19.28 (Financial
Covenants).
"Expiry Date"
means the expiry date of the Guarantee, as specified in
the Guarantee.
"Extraordinary Items"
has the meaning given to it in Clause 19.28 (Financial
Covenants).
"Facility"
means Facility A, Facility B or Facility C.
"Facility A"
means the facility referred to as such in Clause 2.1(a)
(Facilities).
"Facility A Commitment"
means:
(a) in relation to a Bank which is a Bank on the date of
this Agreement, the amount in Sterling set out in
the Syndication Letter; and
(b) in relation to a Bank which becomes a Bank after the
date of this Agreement, the amount of a Facility A
Commitment acquired by it under Clause 28 (Changes
to the Parties),
to the extent not transferred, cancelled or reduced under
this Agreement.
"Facility A Final Repayment Date"
means the date which falls five years after the date of
this Agreement.
"Facility A Loan"
means a loan made by the Banks under Facility A or the
principal amount outstanding of that loan.
"Facility A Outstandings"
means, at any time, the aggregate of the Guarantee
Outstandings and the Facility A Loans at that time.
"Facility B"
means the facility referred to as such in Clause 2.1(b)
(Facilities).
"Facility B Commitment"
means:
(a) in relation to a Bank which is a Bank on the date of
this Agreement, the amount in Sterling set out in
the Syndication Letter; and
(b) in relation to a Bank which becomes a Bank after the
date of this Agreement, the amount of a Facility B
Commitment acquired by it under Clause 28 (Changes
to the Parties),
to the extent not transferred, cancelled or reduced under
this Agreement.
"Facility B Final Repayment Date"
means the date falling two years after the date of this
Agreement.
"Facility B Loan"
means, subject to Clause 10 (Interest Periods), a loan
made by the Banks under Facility B or the principal
amount outstanding of that loan.
"Facility B Repayment Date"
means each date for the payment of a Facility B Repayment
Instalment.
"Facility B Repayment Instalment"
means each instalment for the repayment of Facility B
Loans referred to in Clause 8 (Repayment).
"Facility B Term Date"
means the last day of the Certain Funds Period.
"Facility C"
means the facility referred to as such in Clause 2.1(c)
(Facilities).
"Facility C Commitment"
means:
(a) in relation to a Bank which is a Bank on the date of
this Agreement, the amount in Sterling set out in
the Syndication Letter; and
(b) in relation to a Bank which becomes a Bank after the
date of this Agreement, the amount of a Facility C
Commitment acquired by it under Clause 28 (Changes
to the Parties),
to the extent not transferred, cancelled or reduced under
this Agreement.
"Facility C Final Repayment Date"
means the date which falls five years after the date of
this Agreement.
"Facility C Loan"
means a loan made by the Banks under Facility C or the
principal amount outstanding of that loan.
"Facility Office"
means the office notified by a Bank to the Agent:-
(a) on or before the date it becomes a Bank; or
(b) by not less than 5 Business Days' notice,
as the office through which it will perform all or any of
its obligations under this Agreement.
"Fee Letter"
means the letter dated the date of this Agreement between
the Arrangers and the Company, or the letter dated the
date of this Agreement between the Company and the Agent,
setting out the amount of various fees referred to in
Clause 22 (Fees).
"Final Maturity Date"
means the later of the Facility A Final Repayment Date
and the Facility C Final Repayment Date.
"Final Repayment Date"
means the Facility A Final Repayment Date, the Facility B
Final Repayment Date or the Facility C Final Repayment
Date.
"Finance Document"
means:-
(a) this Agreement;
(b) a Fee Letter;
(c) the Debenture;
(d) a Novation Certificate;
(e) the Syndication Agreement;
(f) a Borrower Accession Agreement;
(g) a Subordination Agreement;
(h) a Swap Document; or
(i) any other document designated as such by the Agent
and the Company.
"Finance Party"
means an Arranger, a Bank, the Issuing Bank or the Agent.
"Financial Indebtedness"
means any indebtedness for, or for interest or other
charges relating to, or otherwise in respect of or
pursuant to:-
(a) moneys borrowed or raised, including, without
limitation:
(i) monies raised by the sale of receivables or
other financial assets on terms (and to the
extent) that recourse may be had to the vendor
in the event of non-payment of those
receivables or financial assets when due;
(ii) monies raised under acceptance credit
facilities; and
(iii)monies raised through the issue of bonds,
notes, debentures, bills, loan stocks and other
debt securities (including any debt security
convertible, but not at the relevant time
converted, into share capital);
but any Subordinated Debt or Project Finance
Indebtedness (other than indebtedness referred to in
paragraph (f)(iii) below) shall not constitute
Financial Indebtedness;
(b) the acquisition cost of assets or services to the
extent payable on deferred payment terms after the
time of acquisition or possession by the party
liable (whether or not evidenced by any bond, note,
debenture, bill, loan stock or other debt security),
excluding:
(i) retentions which are normal in the trade
concerned and not entered into primarily as a
means of raising finance;
(ii) any payment relating to construction works or
the acquisition of fixed assets which will
become payable only upon fulfilment of
conditions relating to or comprising completion
or commissioning of certain stages in such
works or in the supply programme or the
granting of any planning permission for such
works or fixed assets and which has not yet
become payable by reason of the non-fulfilment
of any such condition; and
(iii)any such cost payable on deferred payment
terms which are normal in the business
concerned and not entered into primarily as a
means of raising finance, and which do not
involve any deferral of payment of any sum for
more than six months;
(c) moneys received in consideration for the supply of
goods and/or services to the extent received more
than six months before the due date for their supply
(but excluding any liability in respect of bona fide
advance payments and deposits received from
customers in the ordinary course of trade);
(d) instalments under conditional sale agreements
entered into primarily as a method of raising
finance;
(e) payments under leases (whether in respect of land,
machinery, equipment or otherwise) and payments
under hire purchase agreements and similar
agreements and instruments, in each case where those
leases, agreements or instruments are treated as
finance leases in accordance with the Applicable
Accounting Principles;
(f) (i) any guarantee, indemnity, letter of credit or
other legally binding instrument to
assure payment of, or against loss in respect
of non-payment of, any of the indebtedness
specified in this definition and any counter-
indemnity in respect of any thereof; and/or
(ii) any legally binding agreement or other
instrument entered into in connection with any
of the indebtedness specified in this
definition requiring, or giving any person the
right (contingently or otherwise) to require,
that any other person invest in, make advances
to, purchase assets of or maintain the solvency
or financial condition of any other person;
and/or
(iii)any recourse under any form of assurance,
undertaking or support of a type referred to in
paragraph (b)(iii) of the definition of
"Project Finance Indebtedness";
(g) any interest rate and/or currency swap, and any
other interest or currency protection, hedging or
financial futures transaction or arrangement; or
(h) transactions which involve or have the commercial
effect of the borrowing of commodities as part of
an arrangement for or in substitution for the
raising of finance, the value of indebtedness
concerned for this purpose being the sum which must
be paid and/or the value in money terms of the
commodities which must be delivered by the
"borrower" to, or to the order of, the "lender"
"First Test Date"
means the first date on which a financial covenant in
Clause 19.28(c) (Financial covenants) is tested, being:
(a) in the case of Clause 19.28(c)(i) (Financial
covenants), 30th June, 1997; and
(b) in the case of Clause 19.28(c)(ii) (Financial
covenants):
(i) if the Target becomes a member of the Group
within 6 weeks of the end of the then current
quarterly Accounting Period, the last day of
the next quarterly Accounting Period; or
(ii) in all other cases, the last day of the
quarterly Accounting Period in which the Target
becomes a member of the Group.
"Group"
means at any time the Company and its Subsidiaries at
that time.
"Guarantee"
means the guarantee to be issued by the Issuing Bank in
favour of the Beneficiaries, substantially in the form of
Schedule 6.
"Guarantee Outstandings"
means, at any time, the amount of the maximum liability
(whether actual or contingent) of the Banks under the
Guarantee.
"Holding Company"
has the meaning given to it in Section 736 of the
Companies Act 1985.
"Information Memorandum"
means the Information Memorandum prepared by the Company
in connection with the Syndication.
"Initial Capital Injection"
means an amount (in a minimum aggregate amount as
specified in the Syndication Letter) of paid up equity
share capital or paid in capital contributions, or any
combination of the two, to be subscribed for in, or on
lent to, the Company by the Parent prior to any Request
being made.
"Interest Period"
means each period selected in accordance with Clause 10
(Interest Periods).
"Issue Date"
means the date of issue of the Guarantee.
"LIBOR"
means the arithmetic mean (rounded upward to the nearest
four decimal places) of the rates, as supplied to the
Agent at its request, quoted by the Reference Banks to
leading banks in the London interbank market at or about
11.00 a.m. on the first day of an Interest Period for the
offering of deposits in Sterling for a period comparable
to the Interest Period.
"Licence"
means a public electricity supply licence held by a
member of the Group and issued pursuant to Section 6(1)
of the Act, as modified or supplemented from time to
time.
"Licenceholder"
means at any time the member of the Group which then
holds a Licence.
"Licence Undertaking"
means any undertaking or assurance given in connection
with the Offer by any one or more of the Company, the
Target or any Affiliate of any of them to the Director
General or the Secretary of State concerning the
management and/or ownership of and/or other matters
concerning the Target once it has become a Subsidiary of
the Company.
"Loan"
means a Facility A Loan, a Facility B Loan or a
Facility C Loan.
"Loan Note"
means any loan note offered or issued by the Company to
shareholders of the Target in connection with the Offer.
"Major Default"
means an Event of Default arising as a result of an act
of, omission by, or circumstance affecting the Company
(other than one relating to the Target or its
Subsidiaries) and which is referred to in Clause 20.2
(Non-payment) or Clauses 20.6 (Insolvency) to 20.8
(Appointment of receivers and managers) inclusive or
20.10 (Analogous proceedings) to 20.12 (Unlawfulness)
inclusive.
"Majority Banks"
means, at any time, Banks:-
(a) whose participations in all Loans then outstanding
aggregate more than 662/3 per cent. of all Loans
then outstanding; or
(b) if there are no Loans then outstanding, whose
Commitments then aggregate more than 662/3 per cent.
of the Total Commitments; or
(c) if there are no Loans then outstanding and the Total
Commitments have been reduced to zero, whose
Commitments aggregated more than 662/3 per cent. of
the Total Commitments immediately before the
reduction.
"Margin"
means, subject to Clause 11.1(b) (Interest Rate) and to
paragraph (d) below and with effect from each applicable
Margin Adjustment Date:
(a) in respect of a Facility A Loan, at any time when
the Capitalisation Ratio is:
(i) greater than 80 per cent., 1.50 per cent. per
annum;
(ii) equal to or less than 80 per cent., but greater
than 75 per cent., 1.15 per cent. per annum;
(iii)equal to or less than 75 per cent., but
greater than 70 per cent., 0.90 per cent. per
annum;
(iv) equal to or less than 70 per cent., but greater
than 65 per cent., 0.70 per cent. per annum;
(v) equal to or less than 65 per cent., but greater
than 60 per cent., 0.575 per cent. per annum;
(vi) equal to or less than 60 per cent., but greater
than 55 per cent., 0.45 per cent. per annum;
and
(vii)equal to or less than 55 per cent., 0.30
per cent. per annum,
subject to a maximum, until the date falling six
months after the date of this Agreement, of 1.25 per
cent. per annum;
(b) in respect of a Facility B Loan:
(i) for the period from the date of this Agreement
up to (and including) the date falling three
months after the date of this Agreement, 0.25
per cent. per annum; and
(ii) thereafter, the Margin which would be
applicable to a Facility A Loan, as set out in
paragraph (a) above;
(c) in respect of a Facility C Loan:
(i) at any time on or prior to the date on which
the Facility B Loans are prepaid or repaid in
full, the Margin which would be applicable to a
Facility A Loan, as set out in paragraph (a)
above; and
(ii) thereafter, 0.25 per cent. per annum; and
(d) if, on the first anniversary of the date of this
Agreement, the Facility B Loans have not been fully
repaid or prepaid, then either:-
(i) the Company will procure a guarantee of the
outstanding Facility B Loans on terms and from
an entity acceptable to all of the Banks in
their sole discretion in which case:-
(A) the Margin on the Facility B Loans shall
be the same Margin which would be
applicable to a Facility A Loan, as set
out in paragraph (a) above; and
(B) the provisions of paragraph (b) of Clause
8 (Repayment) shall not apply; or
(ii) if the Company has not procured a guarantee of
the outstanding Facility B Loans on terms and
from an entity acceptable to all of the Banks
in their sole discretion, then:-
(A) from the first anniversary of the date of
this Agreement up to the date falling 18
months after the date of this Agreement,
the Margin for Facility A Loans,
Facility B Loans and Facility C Loans
shall increase to 0.50 per cent. per annum
above the rate which otherwise would be
applicable under paragraph (a), (b) or (c)
above; and
(B) from the date falling 18 months after the
date of this Agreement up to and including
the Facility B Final Repayment Date, the
Margin on Facility A Loans, Facility B
Loans and Facility C Loans shall increase
to 1 per cent. per annum above the rate
which otherwise would be applicable under
paragraph (a), (b) or (c) above.
"Margin Adjustment Date"
means in respect of a Loan:
(a) the Business Day following any Subsequent Capital
Injection;
(b) the first day of the first Interest Period for that
Loan commencing after each determination of the
Capitalisation Ratio following delivery by the
Company of a certificate under Clause 19.2(c)(i) or
(ii) (Financial information); and
(c) if paragraph (d)(ii) of the definition of Margin is
applicable, the first anniversary of the date of
this Agreement and/or the date falling 18 months
after the date of this Agreement, as appropriate.
"Material Subsidiary"
means:
(a) the Target;
(b) any member of the Group (other than the Company and
any Project Finance Subsidiary):
(i) which is the Licenceholder; or
(ii) whose pre-tax profits represent at least ten
per cent. of the consolidated pre-tax profits
of the Group; or
(iii) the book value of whose gross assets
represents at least ten per cent. of the
consolidated gross assets of the Group,
and for this purpose:
(A) in the case of a company which itself has
Subsidiaries, the calculation shall be made by
using the consolidated pre-tax profits or gross
assets, as the case may be, of it and its
Subsidiaries;
(B) all calculations of consolidated pre-tax
profits or gross assets shall be made by
reference to:
(1) the latest accounts of the relevant
company (or, as the case may be, a
consolidation of the accounts of it and
its Subsidiaries) used for the purpose of
the then latest unaudited quarterly or
audited annual consolidated accounts of
the Group delivered to the Agent under
Clause 19.2 (Financial information); and
(2) those unaudited quarterly or, as the case
may be, audited annual consolidated
accounts of the Group;
and shall be made in accordance with the
Applicable Accounting Principles; or
(c) any member of the Group (other than the Company and
any Project Finance Subsidiary) which is not
otherwise a Material Subsidiary under this
definition but to which any Material Subsidiary
transfers in any annual Accounting Period all or
substantially all of its assets; the Material
Subsidiary from which the assets were transferred
shall cease to be a Material Subsidiary unless and
until it is shown to be a Material Subsidiary under
any other paragraph of this definition.
In the event of any dispute as to whether a Subsidiary is
or is not at any time a Material Subsidiary the question
shall be referred to the Auditors for determination
according to the provisions of this definition (acting as
experts at the cost of the Company) and their decision
shall be conclusive and binding on the Parties in the
absence of manifest error.
"Minimum Subsequent Capital Injection"
means the minimum aggregate amount (as specified in the
Syndication Letter) of Subsequent Capital Injections.
"MLA Cost"
means the cost imputed to the Banks of compliance with
the Mandatory Liquid Assets requirements of the Bank of
England during each Interest Period, determined in
accordance with Schedule 3.
"MMC Referral"
means a referral of the Offer by the Secretary of State
to the Monopolies and Mergers Commission.
"Novation Certificate"
has the meaning given to it in Clause 28.3 (Procedure for
novations).
"Offer"
means the offer made or proposed to be made for the
Shares by or on behalf of the Company to the shareholders
of the Target substantially on the terms referred to in
the Press Release, as such offer may be amended,
extended, varied and/or waived.
"Offer Costs"
means all costs, fees and expenses (including taxes or
similar charges thereon) and all stamp, documentary,
registration and similar taxes or charges incurred by or
on behalf of the Company in connection with the Offer,
including the preparation, negotiation and entry into of
the Finance Documents.
"Offer Documents"
means each of the documents issued or to be issued by the
Company to the shareholders of the Target (including the
forms of acceptance) in respect of the Offer.
"Offer Utilisation"
means any of the following Utilisations:-
(a) a Facility A Loan or Facility B Loan borrowed for
the purpose of financing or refinancing the costs of
the Acquisition or consideration payable to Share
Option Holders and Loan Note Holders in connection
with the Acquisition; or
(b) the Guarantee.
"Panel"
means The Panel on Takeovers and Mergers.
"Parent"
means Entergy Power UK Holding Limited (Registered No.
3261305).
"Party"
means a party to this Agreement.
"Permitted Transaction"
means:
(a) a reconstruction, amalgamation, reorganisation,
merger or consolidation of a Borrower or a Material
Subsidiary on terms approved by the Majority Banks;
(b) a disposal of assets permitted by the terms of this
Agreement; or
(c) a solvent liquidation, dissolution or winding-up of
a Material Subsidiary (other than the Target or the
Licenceholder) which does not have a Material
Adverse Effect.
"Pooling and Settlement Agreement"
means the agreement dated 30th March, 1990 made by the
Target with the National Grid Company plc and others
setting out the rules and procedures for the operation of
an electricity trading pool and of a settlement system.
"Press Release"
means the press release referred to in Part I of Schedule
2 to be made by or on behalf of the Company announcing
the terms of the Offer.
"Project Finance Indebtedness"
means any Borrowing which finances the acquisition,
development, ownership and/or operation of an asset:
(a) which is incurred by a Project Finance Subsidiary;
or
(b) in respect of which the person or persons to whom
the Borrowing is or may be owed by the relevant
debtor (whether or not a member of the Group) has or
have no recourse whatsoever to any member of the
Group (other than to a Project Finance Subsidiary)
for its repayment other than:
(i) recourse to the debtor for amounts limited to
the cash flow or net cash flow (other than
historic cash flow or historic net cash flow)
from the asset; and/or
(ii) recourse to the debtor for the purpose only of
enabling amounts to be claimed in respect of
that Borrowing in an enforcement of any
Security Interest given by the debtor over the
asset or the income, cash flow or other
proceeds deriving from the asset (or given by
any shareholder or the like in the debtor over
its shares or like interest in the capital of
the debtor) to secure the Borrowing but only
if:
(A) the extent of the recourse to the
debtor is limited solely to the amount of
any recoveries made on any such
enforcement; and
(B) that person or persons are not
entitled, by virtue of any right or claim
arising out of or in connection with that
Borrowing, to commence proceedings for the
winding up or dissolution of the debtor or
to appoint or procure the appointment of
any receiver, trustee or similar person or
officer in respect of the debtor or any of
its assets (other than the assets the
subject of that Security Interest); and/or
(iii) recourse to the debtor generally, or
directly or indirectly to a member of the
Group, under any form of assurance, undertaking
or support, which recourse is limited to a
claim for damages (other than liquidated
damages and damages required to be calculated
in a specified way) for breach of an obligation
(other than a payment obligation or an
obligation to procure payment by another or an
indemnity in respect thereof or any obligation
to comply or to procure compliance by another
with any financial ratios or other tests of
financial condition) by the person against whom
such recourse is available.
"Project Finance Subsidiary"
means any Subsidiary of the Company (other than the
Licenceholder):
(a) which is a company whose principal assets and
business are constituted by the ownership,
acquisition, development and/or operation of an
asset whether directly or indirectly;
(b) none of whose Borrowings in respect of the financing
of the ownership, acquisition, development and/or
operation of an asset benefits from any recourse
whatsoever to any member of the Group (other than
the Subsidiary itself or another Project Finance
Subsidiary) in respect of its repayment, except as
expressly referred to in paragraph (b)(iii) of the
definition of Project Finance Indebtedness in this
Clause 1.1 (Definitions); and
(c) which has been designated as such by the Company by
notice to the Agent. However, the Company may give
notice to the Agent at any time that any Project
Finance Subsidiary is no longer a Project Finance
Subsidiary, whereupon it shall cease to be a Project
Finance Subsidiary.
"Qualifying Bank"
means:-
(a) a bank as defined in Section 840A of the Income and
Corporation Taxes Act 1988 which, for the purposes
of Section 349 of the Income and Corporation Taxes
Act 1988, is within the charge to United Kingdom
corporation tax as regards any interest received by
it under this Agreement, except that, if that
Section is repealed, modified, extended or re-
enacted, the Agent may at any time and from time to
time (acting reasonably) amend this definition to
reflect such repeal, modification, extension or
enactment by giving notice of the amended definition
to the Company; or
(b) a person carrying on a bona fide banking business
who is resident (as such term is defined in the
appropriate Double Taxation Treaty) in a country
with which the United Kingdom has an appropriate
Double Taxation Treaty giving residents of that
country full exemption from United Kingdom taxation
on interest and does not carry on business in the
United Kingdom through a permanent establishment
with which the indebtedness under this Agreement in
respect of which the interest is paid is effectively
connected.
"Reduction Date"
means the date falling three years after the date of this
Agreement.
"Reference Banks"
means, subject to Clause 28.5 (Reference Banks), the
principal London offices of ABN AMRO Bank N.V., Bank of
America National Trust and Savings Association and Union
Bank of Switzerland.
"Relevant Percentage"
means, in relation to a Bank, the proportionate liability
of that Bank under the Guarantee, being the proportion
its Commitments bear to the Total Commitments, expressed
as a percentage.
"Repayment Date"
means a Facility B Repayment Date or the last day of the
Interest Period of a Facility A Loan or a Facility C
Loan.
"Request"
means a request made by a Borrower for a Loan or the
Guarantee, substantially in the form of Schedule 4.
"Rollover Loan"
means a Facility A Loan or a Facility C Loan, the
principal amount of which is less than or equal to an
outstanding Facility A Loan or Facility C Loan, as the
case may be, and whose Drawdown Date coincides with the
Repayment Date of that outstanding Facility A Loan or
Facility C Loan, as the case may be.
"Secretary of State"
means the Secretary of State as referred to in the Act.
"Security Account"
has the meaning given to it in the Debenture.
"Security Interest"
means any mortgage, pledge, lien, charge, assignment,
hypothecation or security interest or any other agreement
or arrangement having the effect of conferring security.
"Share Option"
means an option to acquire shares in the Target.
"Share Option Holder"
means any holder of a Share Option.
"Shares"
means all the issued shares (and Share Options) in the
capital of the Target (including any shares of the Target
issued while the Offer remains open for acceptance).
"Sterling"
means the lawful currency for the time being of the
United Kingdom.
"Subordinated Debt"
means a separate unsecured loan to the Company from a
shareholder, or an Affiliate of a shareholder, of the
Company and/or any other person permitted under this
Agreement which:
(a) has a maturity date falling after the later of
Facility A Final Repayment Date and the Facility C
Final Repayment Date;
(b) is not capable of acceleration (other than in the
event of insolvency or an insolvency proceeding)
whilst any amount may be or become payable by any
Borrower under the Finance Documents or any of the
Commitments remain in effect; and
(c) is subordinated (as regards priority of payment,
ranking, rights of enforcement and all other rights)
as to principal, interest and all other amounts
payable on or in respect thereof and any and all
claims (including for damages) related thereto to
all amounts which may be or become payable by the
Borrowers under the Finance Documents,
all in accordance with a Subordination Agreement.
"Subordination Agreement"
means a subordination agreement entered, or to be
entered, into by the Agent, the Company and any other
person in respect of Subordinated Debt, substantially in
the form of Schedule 9.
"Subsequent Capital Injection"
means (following the Initial Capital Injection) either:
(a) another contribution of paid up equity capital in
the Company either by way of the issuing by the
Company of additional share capital or by way of
capital contribution; and/or
(b) another loan to the Company, constituting
Subordinated Debt,
where the aggregate of the proceeds of the equity capital
issued, transferred or contributed and/or the principal
amount of the Subordinated Debt are to be applied in
prepayment of the Loans to the extent required by
Clause 9.6 (Mandatory prepayment/cancellation).
"Subsidiary"
means:-
(a) a subsidiary within the meaning of Section 736 of
the Companies Act 1985, as amended by Section 144 of
the Companies Act 1989; and
(b) for the purposes of Clauses 19.28 (Financial
covenants) and any financial information relating to
the Group, a subsidiary undertaking within the
meaning of Section 21 of the Companies Act 1989.
"Surplus Cashflow"
means, for any period for which Cashflow is calculated,
Cashflow for that period less the obligations of the
Group in respect of Financial Indebtedness which are
actually paid during that period.
"Swap Document"
means any interest rate hedging agreement (substantially
in the form agreed by the Company and the Agent prior to
the date of this Agreement) entered into by the Company
with any of the Banks party to this Agreement as at the
date of this Agreement and any confirmation entered into
pursuant to any such agreement.
"Syndication"
means the primary syndication (including the initial
syndication to sub-underwriters and the subsequent
general syndication) by the Arrangers of the Facilities.
"Syndication Agreement"
means an agreement substantially in the form of Part III
of Schedule 5.
"Syndication Letter"
means a letter dated the date of this Agreement from the
Arrangers to the Company in respect of the Syndication
and other matters.
"Target"
means London Electricity plc (Registered no. 2366852).
"Total Commitments"
means the aggregate of the Total Facility A Commitments,
the Total Facility B Commitments and the Total Facility C
Commitments, being 1,250,000,000 pounds at the date of this
Agreement.
"Total Facility A Commitments"
means the aggregate for the time being of the Facility A
Commitments, being the amount agreed in the Syndication
Letter.
"Total Facility B Commitments"
means the aggregate for the time being of the Facility B
Commitments, being the amount agreed in the Syndication
Letter.
"Total Facility C Commitments"
means the aggregate for the time being of the Facility C
Commitments, being the amount agreed in the Syndication
Letter.
"Unconditional Acceptances Date"
means the date on which the Offer is declared or becomes
unconditional as to acceptances.
"Utilisation"
means a Loan or the Guarantee.
"Utilisation Date"
means a Drawdown Date or the Issue Date.
1.2 Construction
(a) In this Agreement, unless the contrary intention appears,
a reference to:
(i) "assets" includes properties, revenues and rights of
every description;
an "authorisation" includes an authorisation,
consent, approval, resolution, licence, exemption,
filing, registration and notarisation;
something having a "Material Adverse Effect" is to
its having, or being reasonably likely to have, a
material adverse effect on the ability of a Borrower
to perform and comply with:
(A) its payment obligations under any Finance
Document; or
(B) its obligations under Clause 19.28 (Financial
Covenants); or
(C) any other of its material obligations under the
Finance Documents;
a "month" is a reference to a period starting on one
day in a calendar month and ending on the
numerically corresponding day in the next calendar
month, except that:
(1) if there is no numerically corresponding day in
the month in which that period ends, that
period shall end on the last Business Day in
that calendar month; or
(2) if an Interest Period commences on the last
Business Day of a calendar month, that Interest
Period shall end on the last Business Day in
the calendar month in which it is to end; and
a "regulation" includes any regulation, rule,
official directive, request or guideline (whether or
not having the force of law, but if not having the
force of law being of a type with which the person
concerned is accustomed to comply) of any
governmental body, agency, department or regulatory,
self-regulatory or other authority or organisation;
(ii) a provision of a law is a reference to that
provision as amended or re-enacted;
(iii) a Clause or a Schedule is a reference to a
clause of or a schedule to this Agreement;
(iv) a person includes its successors and permitted
assigns;
(v) a Finance Document or another document is a
reference to that Finance Document or that other
document as amended, novated, supplemented, replaced
or renewed; and
(vi) a time of day is a reference to London time.
(b) Unless the contrary intention appears, a term used in any
other Finance Document or in any notice given under or in
connection with any Finance Document has the same meaning
in that Finance Document or notice as in this Agreement.
(c) The index to and the headings in this Agreement are for
convenience only and are to be ignored in construing this
Agreement.
2. THE FACILITIES
2.1 Facilities
Subject to the terms of this Agreement, the Banks
irrevocably grant to the Borrowers the following
facilities:-
(a) Facility A - a committed guarantee and revolving
credit facility under which, when requested by the
Company:-
(i) the Issuing Bank shall issue the Guarantee in
an amount which, when aggregated with the
amount of any Facility A Loans outstanding at
that time, does not exceed the Total Facility A
Commitments at that time; or
(ii) the Banks shall make to the Company Loans up to
an aggregate amount which, when aggregated with
the Guarantee Outstandings at that time, does
not exceed the Total Facility A Commitments at
that time;
(b) Facility B - a committed term loan facility under
which the Banks shall, when requested by the
Company, make to the Company Loans up to an
aggregate amount not exceeding, at any time, the
Total Facility B Commitments at that time; and
(c) Facility C - a committed revolving credit facility
under which the Banks shall, when requested by the
Target, make to the Target Loans up to an aggregate
amount not exceeding, at any time, the Total
Facility C Commitments at that time.
No Bank is obliged to lend at any time more than its
Commitment(s).
2.2 Nature of a Finance Party's rights and obligations
(a) The obligations of a Finance Party under the Finance
Documents are several. Failure of a Finance Party to
carry out those obligations does not relieve any other
Party of its obligations under the Finance Documents. No
Finance Party is responsible for the obligations of any
other Finance Party under the Finance Documents.
(b) The rights of a Finance Party under the Finance Documents
are divided rights. A Finance Party may, except as
otherwise stated in the Finance Documents, separately
enforce those rights.
2.3 Change of currency
(a) If more than one currency or currency unit are at the
same time recognised by the laws of any country as the
lawful currency of that country, then:
(i) any reference in the Finance Documents to, and any
obligations arising under the Finance Documents in,
the currency of that country shall be translated
into, or paid in, the lawful currency or currency
unit of that country designated by the Agent; and
(ii) any translation from one currency or currency unit
to another shall be at the official rate of exchange
legally recognised by the central bank for the
conversion of that currency or currency unit into
the other, rounded up or down by the Agent acting
in accordance with any applicable law on rounding
or, if there is no such law, acting reasonably in
accordance with its market practice.
(b) If a change in any currency of a country occurs, this
Agreement will be amended to the extent the Agent (acting
reasonably) specifies to be necessary to reflect the
change in currency and to put the Banks (and, if possible
and practicable, the Borrowers) in the same position, so
far as possible, that they would have been in if no
change in currency had occurred.
3. PURPOSE AND AVAILABILITY
(a) (i) The Company shall apply each Facility A Loan
made to it towards:-
(A) financing or refinancing the cost of the
Acquisition and the fees, costs and expenses
associated with the Acquisition, including
under the procedures in Sections 428-430 of the
Companies Act 1985;
(B) financing or refinancing the consideration
payable to Share Option Holders and Loan Note
Holders in connection with the Acquisition; or
(C) its working capital or general corporate
purposes.
(ii) The Guarantee is to be issued for the purpose of
guaranteeing the obligations of the Company under
the Loan Notes.
(iii) Facility A Loans may be borrowed and the
Guarantee may be issued, subject to the terms of
this Agreement, at any time after the Unconditional
Acceptances Date and prior to the Facility A Final
Repayment Date.
(b) (i) The Company shall apply each Facility B Loan
made to it towards:-
(A) financing or refinancing the cost of the
Acquisition and the fees, costs and expenses
associated with the Acquisition, including
under the procedures in Sections 428-430 of the
Companies Act 1985;
(B) financing or refinancing the consideration
payable to Share Option Holders and Loan Note
Holders in connection with the Acquisition; or
(C) financing the purchase of Shares in the market
up to a maximum aggregate shareholding of 29.9
per cent. of the Shares.
(ii) Facility B Loans may be borrowed, subject to the
terms of this Agreement, at any time on or before
the Facility B Term Date.
(c) (i) Upon its becoming a Borrower, the Target shall
apply each Facility C Loan made to it towards:-
(A) refinancing any facilities of the Target
(excluding the refinancing of any Bond Issues)
outstanding at the date on which the Target
becomes a Subsidiary of the Company; or
(B) its working capital and general corporate
purposes.
(ii) Facility C Loans may be borrowed by the Target,
subject to the terms of this Agreement, at any time
after the Target becomes a Borrower and prior to the
Facility C Final Repayment Date.
(d) Without affecting the obligations of any Borrower in any
way, no Finance Party is bound to monitor or verify the
application of any Utilisation.
4. CONDITIONS PRECEDENT
4.1 Documentary conditions precedent
(a) The obligations of each Finance Party to the Borrowers
under this Agreement are subject to the condition
precedent that the Agent has notified the Company and the
Banks that it has received all of the documents set out
in Part I of Schedule 2.
(b) The documents referred to in paragraph (a) above must be
(except for those mentioned in paragraph 4 of Part I of
Schedule 2) in a form agreed by the Company and the Agent
prior to the date of this Agreement or in form and
substance satisfactory to the Agent. The Agent shall
promptly notify the Company and the Banks of receipt of
those documents.
4.2 Further conditions precedent
Subject to Clause 4.3 (Conditions precedent during the
Certain Funds Period), the obligations of each Bank to
participate in a Utilisation are subject to the further
conditions precedent that:-
(a) on both the date of the Request and the Utilisation
Date:-
(i) the representations and warranties in Clause 18
(Representations and warranties) to be repeated
on those dates are correct in all material
respects and will be correct in all material
respects immediately after the Utilisation is
made; and
(ii) no Default or (in the case of a Rollover Loan)
no Event of Default is outstanding or will
result from the Utilisation;
(b) it would not cause the Facility A Outstandings, the
Facility B Loans or the Facility C Loans to exceed
the Total Facility A Commitments, the Total
Facility B Commitments or the Total Facility C
Commitments, as the case may be; and
(c) it would not result in there being more than 15
Utilisations outstanding at any time.
4.3 Conditions precedent during the Certain Funds Period
Notwithstanding Clause 4.2 (Further conditions precedent)
but without prejudice to Clause 4.1 (Documentary
conditions precedent), the obligations of a Bank to
participate in an Offer Utilisation during the Certain
Funds Period is only subject to the conditions precedent
that:-
(a) on both the date of the Request and the Drawdown
Date for that Offer Utilisation:-
(i) the representations and warranties to be made
by the Company in respect of itself and set out
in Clauses 18.2(a) (Status), 18.3 (Power and
authority), 18.4 (Legal validity) and 18.5 (Non-
conflict) are correct in all material respects
and will be correct in all material respects
immediately after the Utilisation is made;
(ii) no Major Default is outstanding or will result
from the Utilisation; and
(iii) the Office of Fair Trading has indicated
in writing that there will be no MMC Referral
or, in the case of a Facility B Loan for the
purpose referred to in Clause 3(b)(i)(C)
(Purpose and Availability), there has been no
MMC Referral;
(b) in the case of the first Loan borrowed during the
Certain Funds Period, all of the Initial Capital
Injection has been, or together with the proceeds of
that Loan will on the Drawdown Date be, applied in
financing or refinancing the cost of the Acquisition
and the fees, costs and expenses associated with the
Acquisition;
(c) it would not cause the Facility A Outstandings to
exceed the Total Facility A Commitments or the
Facility B Loans to exceed the Total Facility B
Commitments; and
(d) it would not result in there being more than 15
Utilisations outstanding at any time.
4.4 Lapse of the Offer
If the Offer is withdrawn or lapsed, then, without
prejudice to the other terms of this Agreement, no
further Loans may be made on or after the Cancellation
Date.
5. UTILISATIONS
5.1 Receipt of Requests
(a) A Borrower may utilise a Facility by way of a Loan
if the Agent receives, not later than the relevant
time, a duly completed Request.
(b) The Company may utilise Facility A by way of the
Guarantee if the Agent receives, not later than the
relevant time, a duly completed Request.
(c) The relevant time for:
(i) a Loan to be made to finance purchases of
Shares in the market is 4.00 p.m. on the
Business Day before its Drawdown Date;
(ii) any other Loan is 9.00 a.m. on the Business Day
before its Drawdown Date; and
(iii) the Guarantee is 9.00 a.m. on the Business
Day before the Issue Date.
5.2 Completion of Requests for Loans
A Request for a Loan will not be regarded as having been
duly completed unless:-
(a) it specifies whether the Loan is a Facility A Loan,
a Facility B Loan or a Facility C Loan and the
purpose for which the Loan is to be used;
(b) the Drawdown Date is a Business Day falling:
(i) in the case of a Facility A Loan, on or after
the Unconditional Acceptances Date and before
the Facility A Final Repayment Date;
(ii) in the case of a Facility B Loan, after
the date of this Agreement and before the
Facility B Term Date; and
(iii) in the case of a Facility C Loan, on or
after the Unconditional Acceptances Date and
before the Facility C Final Repayment Date;
(c) the principal amount of the Loan is a minimum of
10,000,000 pounds and an integral multiple of 5,000,000
pounds;
(d) the Interest Period specified complies with
Clause 10 (Interest Periods); and
(e) the payment instructions comply with Clause 12
(Payments).
Each Request is irrevocable.
5.3 Completion of Request for the Guarantee
The Request for the Guarantee will not be regarded as
having been duly completed unless it specifies:
(a) the maximum amount of the Guarantee, which must be a
minimum amount of 10,000,000 pounds and an amount which
would not cause the Facility A Outstandings to
exceed the Total Facility A Commitments;
(b) the Issue Date, being a Business Day falling after
the Unconditional Acceptances Date and before the
Facility A Repayment Date;
(c) the Expiry Date, which shall be not later than
Facility A Repayment Date;
(d) the delivery instructions for the Guarantee; and
(e) the form of the Guarantee, which must be attached to
the Request and be substantially in the form of
Schedule 6.
Each Request is irrevocable.
5.4 Amount of each Bank's participation in the Utilisation
(a) The amount of a Bank's participation in a Loan will be
the proportion of the Loan which its Commitments bear to
the Total Commitments on the proposed Drawdown Date.
(b) The amount of a Bank's participation in the Guarantee
will be the proportion of the maximum amount of the
Guarantee which its Commitments bears to the Total
Commitments.
5.5 Notification of the Banks
(a) The Agent shall promptly notify each Bank of the details
of the requested Loan and the amount of its participation
in the Loan.
(b) The Agent shall notify the Issuing Bank and each Bank of
the details of the requested Guarantee, including, in the
case of each Bank, its Relevant Percentage in relation to
the Guarantee.
5.6 Payment of Proceeds
Subject to the terms of this Agreement, each relevant
Bank shall make its participation in a Loan available to
the Agent for the relevant Borrower on the relevant
Drawdown Date.
5.7 Delivery of Guarantee
Subject to the terms of this Agreement:
(a) the Issuing Bank will execute the Guarantee prior to
or on (but to be effective from) the date requested
in the Request as the Issue Date; and
(b) the Issuing Bank shall (through the Agent) issue the
Guarantee on the Issue Date.
If the Guarantee is executed by the Issuing Bank before
the Issue Date and/or the amount of the Guarantee is
known, then, subject to the terms of this Agreement, the
Agent is authorised to insert, on behalf of the Issuing
Bank, the Issue Date and/or the relevant amount in the
Guarantee on receipt of the relevant Request.
6. CLAIMS UNDER THE GUARANTEE
6.1 Notification of claim
If a Beneficiary makes a claim under the Guarantee in
accordance with its terms, the Issuing Bank shall
promptly notify the Agent of the claim. If a claim has
been made on the Issuing Bank and notified to the Agent,
the Agent shall promptly notify the Company and each Bank
specifying:-
(a) the latest date on which payment may be made in
respect of the claim (the "Payment Date");
(b) the amount of the claim (the "Claimed Amount") and
each Bank's Relevant Percentage of the Claimed
Amount; and
(c) the details of the Issuing Bank's account to which
payment is to be made.
6.2 Payment by the Company
The Company shall, not later than 9.30 a.m. on the
Business Day preceding the Payment Date, pay to the
Issuing Bank the Claimed Amount.
6.3 Payment by the Banks
(a) If the Issuing Bank has not received the Claimed Amount
from the Company by 9.30 a.m. on the Business Day
preceding the Payment Date, it shall notify the Agent by
not later than 10.30 a.m. on that day.
(b) The Agent shall, if notified under paragraph (a) above,
notify each Bank not later than 12.00 noon on the same
day.
(c) Each Bank shall, if notified under paragraph (b) above,
pay to the Issuing Bank, not later than 12.00 noon on the
Payment Date, that Bank's Relevant Percentage of the
unpaid amount of the Claimed Amount.
6.4 Default by Banks
(a) If any Bank (a "Defaulting Bank") fails to make any
payment due from it for the account of the Issuing Bank
under Clause 6.3 (Payment by the Banks), then until the
Issuing Bank has been reimbursed in respect thereof in
full (but without prejudice to the obligations of that
Defaulting Bank to make such payment):
(i) the Defaulting Bank shall hold on trust for the
Issuing Bank the benefit of any security now or
hereafter created to secure the obligations of the
Borrowers under this Agreement and to which that
Defaulting Bank would have been entitled had it made
such payment; and
(ii) for the purposes of determining the constitution of
the Majority Banks:
(A) the Issuing Bank shall be treated as having a
Facility A Commitment equal to that of the
Defaulting Bank (in addition to the Facility A
Commitment (if any) which the Issuing Bank
already had in its capacity as a Bank); and
(B) that Defaulting Bank shall be treated, for such
purpose only, as having no Facility A
Commitment.
(b) The rights conferred upon the Issuing Bank in this
Clause 6.4 are in addition to any other rights which it
may have against a Defaulting Bank.
6.5 Indemnity by the Banks
Without limiting the liability of the Company under this
Agreement, each Bank shall forthwith on demand indemnify
the Issuing Bank for its Relevant Percentage of any
liability or loss incurred by the Issuing Bank in any way
relating to or arising out of its acting as the Issuing
Bank, except to the extent that the liability or loss
arises directly from the Issuing Bank's gross negligence
or wilful misconduct.
7. COUNTER-INDEMNITY
7.1 Indemnity from the Company
(a) The Company agrees to pay to the Agent for the account of
each Bank on demand from the Agent an amount equal to and
in the same currency as each amount demanded in
accordance with paragraph (b) below of, or paid out by,
the Bank under Clause 6.3 (Payment by the Banks) in
respect of the Guarantee and undertakes to indemnify and
hold harmless each Finance Party from and against all
liabilities, costs, losses, damages and expenses (other
than those of the type dealt with by Clauses 13.1 (Gross-
up) and 15.1 (Increased costs)) which any Finance Party
may incur or sustain by reason of or arising in any way
whatsoever in connection with or by reference to the
issue of the Guarantee or its performance of the
obligations expressed to be assumed by it under the
Guarantee save to the extent that any such liability,
cost, loss, damage or expense:
(i) is caused by the wilful misconduct, default or gross
negligence of the Finance Party concerned; or
(ii) represents a day to day cost of the Finance Party
incurred by it in the ordinary course of its
business in connection with or by reference to the
issue of the Guarantee or the performance of the
obligations expressed to be assumed by it under or
related to the Guarantee.
(b) The Company and each Bank unconditionally and
irrevocably:
(i) authorises and directs the Issuing Bank to pay any
prima facie valid demand under and in accordance
with the Guarantee issued for its account without
requiring proof of the agreement of the Company or
any Bank that the amounts so demanded or paid are or
were due and notwithstanding that the Company may
dispute the validity of any such request, demand or
payment;
(ii) confirm that the Issuing Bank deals in documents
only and shall not be concerned with the legality of
the claim or any other underlying transaction or any
set off, counterclaim or defence as between the
Company and any Beneficiary of the Guarantee; and
(iii) agree that the Issuing Bank need not have
regard to the sufficiency, accuracy or genuineness
of any such demand or any certificate or statement
in connection therewith or any incapacity of or
limitation upon the powers of any person signing or
issuing such demand, certificate or statement which
appears on its face to be in order and agree that
the Issuing Bank shall not be obliged to enquire as
to any such matters and may assume that any such
demand, certificate or statement which appears on
its face to be in order is correct and properly
made.
7.2 Waiver of defences
The Company agrees that its obligations under this
Clause 7 shall not be affected by any act, omission,
matter or thing which but for this provision might
operate to release or otherwise exonerate the Company
from its obligations under this Clause 7 in whole or in
part, including without limitation and whether or not
known to the Company:-
(a) any time or waiver granted by or composition with
any Finance Party, a Beneficiary or any other
person;
(b) any taking, variation, compromise, renewal or
release of, or refusal or neglect to perfect or
enforce, any rights, remedies or securities
available to any Finance Party or any other person
arising under the Finance Documents; or
(c) any variation or replacement of any Finance Document
or any other document so that references to that
Finance Document or other document shall include
each such variation or replacement.
7.3 Continuing indemnity
(a) The obligations of the Company under this Clause 7 shall
be continuing obligations, shall extend to the ultimate
balance of all amounts expressed to be payable by each
Borrower under the Finance Documents and shall continue
in force notwithstanding any intermediate payment in
whole or in part of amounts payable under this Clause 7.
(b) A certificate in writing signed by one of the Agent's
officers and certifying the total amount due from the
Company shall be prima facie evidence of the matters so
certified.
7.4 Rights of subrogation
Until all amounts which are or may become payable by the
Borrowers under the Finance Documents have been
irrevocably paid in full, the Company shall not, by
virtue of any payment made by it under or in connection
with or referable to this Clause 7 or otherwise, be
subrogated to any rights, security or moneys held or
received by any Finance Party or be entitled at any time
to exercise, claim or have the benefit of any right of
contribution or subrogation or similar right against any
Finance Party.
7.5 Additional Security
The obligations of the Company under this Clause 7 shall
be in addition to and shall not be in any way prejudiced
by any collateral or other security now or hereafter held
by any Finance Party as security or any lien to which
that Finance Party may be entitled.
7.6 Preservation of Rights
No invalidity or unenforceability of all or any part of
this Clause 7 shall affect any rights of indemnity or
otherwise which any Finance Party would or may have in
the absence of or in addition to this Clause 7.
8. REPAYMENT
(a) Subject to paragraph (b) below, each Borrower shall repay
each Loan made to it in full on its Repayment Date to the
Agent for the Banks.
(b) (i) The Company shall, subject to sub-paragraph
(ii) below, repay each Facility B Loan on
the Facility B Final Repayment Date.
(ii) If, on the first anniversary of the date of this
Agreement:
(1) any amount is owing to the Banks under or in
respect of any Facility B Loan; and
(2) the Company has not procured an effective
guarantee of such amount on terms and from an
entity acceptable to all the Banks in their
sole discretion;
then Facility B Loans shall be repaid by the Company
on each date set out below in an amount equal to the
relevant percentage set opposite that date of the
then outstanding Facility B Loans:
Date Repayment Instalment
1st anniversary of the 20 per cent. of the
date Facility B Loans then
of this Agreement outstanding
15 months after the date 25 per cent. of the
of this Agreement Facility B Loans then
outstanding
18 months after the date 33 1/3 per cent. of the
of this Agreement Facility B Loans then
outstanding
21 months after the date 50 per cent. of the
of this Agreement Facility B Loans then
outstanding
2nd anniversary of the date 100 per cent. of the
of this Agreement Facility B Loans then
outstanding.
(c) Subject to the terms of this Agreement, amounts repaid
under Facility A or Facility C may subsequently be re-
borrowed.
9. PREPAYMENT AND CANCELLATION
9.1 Automatic cancellation of the Total Commitments
(a) The Facility A Commitment of each Bank shall be
automatically cancelled at close of business on the
Facility A Final Repayment Date.
(b) The Facility B Commitment of each Bank shall be
automatically cancelled at close of business on the
Facility B Term Date.
(c) The Facility C Commitment of each Bank shall be
automatically cancelled at close of business on the
Facility C Final Repayment Date.
9.2 Voluntary cancellation
(a) The Company may, by giving not less than 2 Business Days'
prior notice to the Agent, cancel the unutilised portion
of the Total Facility A Commitments or the Total
Facility B Commitments in whole or in part (but, if in
part, in a minimum amount of 10,000,000 pounds and an
integral multiple of 5,000,000 pounds). Any cancellation
in part shall be applied against the relevant Commitment
of each Bank pro rata.
(b) The Target may, by giving not less than 2 Business Days'
prior notice to the Agent, cancel the unutilised portion
of the Total Facility C Commitments in whole or in part
(but, if in part, in a minimum amount of 10,000,000 pounds
and an integral multiple of 5,000,000pounds). Any cancellation
in part shall be applied against the Facility C Commitment
of each Bank pro rata.
9.3 Voluntary prepayment
A Borrower may at any time, by giving not less than 5
Business Days' prior notice to the Agent, prepay a Loan
in whole or in part (but, if in part, in minimum amounts
of 10,000,000 pounds), subject to Clause 25 (Indemnities).
9.4 Additional right of prepayment and cancellation
If any Borrower is required to pay any amount to a Bank
under Clause 13 (Taxes) or Clause 15 (Increased Costs),
the Borrower may, whilst the circumstances giving rise to
the requirement continue, serve a notice of prepayment
and cancellation on that Bank through the Agent. In this
event:-
(a) on the date falling 5 Business Days after the date
of service of the notice:
(i) each Borrower shall prepay that Bank's
participation in any Loans made to it together
with all other amounts payable by it to that
Bank under this Agreement; and
(ii) the Company shall pay cash cover into a
Security Account in an amount equal to that
Bank's Relevant Percentage of the maximum
aggregate actual and contingent liability of
the Banks under the Guarantee; and
(b) the Bank's Commitments shall be cancelled on the
date of service of the notice.
9.5 Mitigation
If circumstances arise which would, or would on the
giving of notice, result in:
(a) any additional amounts becoming payable under
Clause 13.1 (Gross-up); or
(b) any amount becoming payable under Clause 15.1
(Increased costs); or
(c) any prepayment or cancellation under Clause 16
(Illegality),
then, without limiting the obligations of the Borrowers
under this Agreement and without prejudice to the terms
of Clauses 13.1 (Gross-up), 15.1 (Increased costs) and 16
(Illegality), each Bank shall, in consultation with the
Company, take such reasonable steps as may be open to it
to mitigate or remove the relevant circumstance,
including (without limitation) the transfer with the
Company's consent as specified in Clause 28.2 (Transfers
by Banks) of its rights and obligations under this
Agreement to another bank or financial institution,
unless to do so might (in the opinion of the Bank) have a
material adverse effect on its business, operations or
financial condition or be contrary to its banking
policies or be otherwise prejudicial to it.
9.6 Mandatory prepayment/cancellation
(a) (i) At any time when the Capitalisation Ratio is
stated (in a compliance certificate provided at the
end of each quarterly Accounting Period under
Clause 19.2(c)(ii) (Financial information)) to
exceed 65 per cent., the Company shall provide a
calculation of Available Surplus Cashflow, Surplus
Cashflow and Cashflow in that compliance
certificate.
(ii) At the same time as the Company delivers to the
Agent the compliance certificate referred to in
paragraph (a) above, it shall pay an amount equal
to:
(1) if, at that time, the Capitalisation
Ratio exceeds 70 per cent., 100 per cent. of
the Available Surplus Cashflow (or such lesser
amount as will, when applied by the Agent under
paragraph (c) below, reduce the Capitalisation
Ratio to 70 per cent.); and
(2) if, at that time, the Capitalisation
Ratio exceeds 65 per cent. but is equal to or
lower than 70 per cent., 50 per cent. of the
Available Surplus Cashflow at that time (or
such lesser amount as will, when applied by the
Agent under paragraph (c) below, reduce the
Capitalisation Ratio to 65 per cent.),
to the Agent to be placed in a Security Account.
(b) The Company shall, immediately upon receipt, pay an
amount equal to the net proceeds of any Subsequent
Capital Injection into a Security Account.
(c) (i) Subject to sub-paragraph (ii) below, the Agent
shall, on the last day of each Interest Period for a
Facility B Loan, apply the amount standing to the
credit of a Security Account and referred to in
paragraphs (a) and (b) above, together with any
interest accrued on that amount, in or towards
prepayment of the Facility B Loans.
(ii) The Company may require the Agent to apply the
net proceeds of a Subsequent Capital Injection at
any time prior to the date the Agent is required to
do so under sub-paragraph (i) above by giving 5
Business Days' notice to the Agent.
(d) Any amount in a Security Account in excess of the
Facility B Loans outstanding on the date of application
by the Agent under paragraph (c) above shall be applied
as follows:
(i) if applicable, an amount equal to the Minimum
Subsequent Capital Injection less the amount applied
in prepayment of the Facility B Loans will
(notwithstanding any other term of this Agreement)
be treated as Cashflow and, to the extent required
under paragraph (a) above, be applied in prepayment
of the Facility A Loans in accordance with this
Clause; and
(ii) if the net proceeds of any Subsequent Capital
Injection received by the Company exceed the Minimum
Subsequent Capital Injection, the amount of any
excess may, unless a Default is outstanding, be
distributed by the Company to the Parent.
The Total Facility B Commitments and the Total Facility A
Commitments shall be cancelled by the amount of any
prepayment of Facility B Loans or Facility A Loans, as
the case may be, on the date of the prepayment.
(e) If a MMC Referral occurs, then the unutilised portion of
the Total Commitments shall be automatically cancelled on
the following Business Day as though this was a voluntary
cancellation under Clause 9.2 (Voluntary cancellation).
The Company shall notify the Agent forthwith upon
becoming aware of a MMC Referral.
9.7 Mandatory reduction of Commitments
On the Reduction Date, the Total Facility A Commitments
and the Total Facility C Commitments shall be reduced by
the amount (if any) required to ensure that the
Capitalisation Ratio on that date does not exceed 65 per
cent.
9.8 Miscellaneous provisions
(a) Any notice of prepayment and/or cancellation under this
Agreement is irrevocable. The Agent shall notify the
Banks promptly of receipt of any such notice.
(b) All prepayments under this Agreement shall be made
together with accrued interest on the amount prepaid.
(c) No prepayment or cancellation is permitted except in
accordance with the express terms of this Agreement.
(d) (i) Subject to the terms of this Agreement, amounts
prepaid under Facility A and Facility C pursuant to
Clause 9.3 (Voluntary prepayment) may subsequently
be re-borrowed.
(ii) No other amount prepaid may subsequently be re-
borrowed.
(iii) No amount of the Total Commitments
cancelled under this Agreement may subsequently be
reinstated.
10. INTEREST PERIODS
10.1 Interest Periods
(a) Each Facility B Loan will have successive Interest
Periods. The first Interest Period will commence on the
Drawdown Date for that Facility B Loan and subsequent
Interest Periods will commence on expiry of its preceding
Interest Period.
(b) Each Facility A Loan and each Facility C Loan will have
one Interest Period only.
(c) Interest Periods may, subject to the other provisions of
this Clause 10, be for an approved duration or an
optional duration and:-
(i) "approved duration" means a period of 1, 3 or 6
months; and
(ii) "optional duration" means any other period (other
than an approved duration) of up to 12 months.
10.2 Selection of Interest Periods
(a) The Company may select an Interest Period for a
Facility B Loan in its Request (in the case of the first
Interest Period) or in a notice received by the Agent not
later than 9.00 a.m. on the Business Day before the
commencement of that Interest Period (in the case of
subsequent Interest Periods).
(b) If a Borrower fails to select a subsequent Interest
Period for a Facility B Loan in accordance with the
notice specified in paragraph (a) above, the Interest
Period will, subject to the other provisions of this
Clause 10, be 3 months.
(c) The relevant Borrower may select an Interest Period for
each Facility A Loan or Facility C Loan, as the case may
be, in its Request.
10.3 Selection of an optional duration
(a) If a Borrower selects an Interest Period of an optional
duration, it may also select in the relevant Request or
notice an Interest Period of an approved duration to
apply if the selection of an Interest Period of an
optional duration becomes ineffective in accordance with
paragraph (b) below.
(b) If:-
(i) a Borrower requests an Interest Period of an
optional duration; and
(ii) the Agent receives notice from a Bank not later than
3.00 p.m. on the Business Day before the beginning
of that Interest Period that it does not agree to
the request,
the Interest Period for the proposed Loan shall be the
alternative period of an approved duration specified in
the relevant Request or notice or, in the absence of any
alternative selection, 3 months.
(c) If the Agent receives a notice from a Bank under
paragraph (b) above, it shall notify the relevant
Borrower and the Banks promptly of the new Interest
Period for the proposed Loan.
10.4 Repayment Dates and the Reduction Date
(a) If an Interest Period for a Facility B Loan would
otherwise overrun the Facility B Final Repayment Date,
that Interest Period shall be shortened so that it ends
on the Facility B Final Repayment Date. If Clause
8(b)(ii) (Repayment) is applicable, the Agent may also
shorten any Interest Period for a Facility B Loan (and
may redesignate any Facility B Loan as two Facility B
Loans) to ensure that the aggregate principal amount of
Facility B Loans with an Interest Period ending on a
Facility B Repayment Date is not less than the Facility B
Repayment Instalment due on that Facility B Repayment
Date.
(b) If an Interest Period for a Facility A Loan or a
Facility C Loan would otherwise overrun the Reduction
Date or (as appropriate) the Facility A Final Repayment
Date or the Facility C Final Repayment Date, it shall be
shortened so that it ends on the Reduction Date or the
relevant Repayment Date, as the case may be.
10.5 Consolidation
Notwithstanding Clause 10.2 (Selection of Interest
Periods), the first Interest Period of each Facility B
Loan shall end on the same day as the then current
Interest Period for any other Facility B Loan. On the
last day of those Interest Periods, those Facility B
Loans shall be consolidated and treated as one Facility B
Loan.
10.6 Splitting
(a) The Company may give notice to the Agent by not later
than 9.00 am on the Business Day before the commencement
of an Interest Period for a Facility B Loan that it
wishes that Facility B Loan to be split into two or more
Facility B Loans, each such part being a minimum of
10,000,000 pounds.
(b) Each such part of a Facility B Loan will be treated as a
separate Facility B Loan.
(c) The Company may not split any Facility B Loan if, as a
result, there would then be more than 15 Utilisations
outstanding at that time.
10.7 Other adjustments
The Agent and the Company may enter into such other
arrangements as they may agree for the adjustment of
Interest Periods and the consolidation and/or splitting
of Facility B Loans.
10.8 Notification
The Agent shall notify the relevant Borrower and the
Banks of the duration of each Interest Period promptly
after ascertaining its duration.
11. INTEREST
11.1 Interest rate
(a) The rate of interest on each Loan for each of its
Interest Periods is the rate per annum determined by the
Agent to be the aggregate of the applicable:-
(i) Margin;
(ii) LIBOR; and
(iii) MLA Cost.
(b) If, in respect of any Accounting Period, the Company does
not comply with its obligations under Clause 19.2 (a)(i),
(b)(i) or (c) (Financial information), the applicable
Margin in respect of each Loan from the date of the
Company's non-compliance until the date on which that non-
compliance is remedied, shall be adjusted so that:
(i) prior to the date on which the Facility B Loans are
repaid or prepaid in full, the applicable Margin for
each Loan shall be 1.50 per cent. per annum
(adjusted, if necessary, to take into account the
application of paragraph (d) of the definition of
"Margin" in Clause 1.1 (Definitions)) or (if the non-
compliance occurs prior to the date falling six
months after the date of this Agreement) 1.25 per
cent. per annum; and
(ii) subsequently, the Margin applicable to each Facility
A Loan or Facility C Loan shall be the next
Increment up from the applicable Margin for that
Loan in the previous quarterly Accounting Period.
(c) For the purposes of paragraph (b) above, an "Increment"
is the difference between each level of the Margin in sub-
paragraphs (i) to (vii) of paragraph (a) of the
definition of "Margin" in Clause 1.1 (Definitions).
11.2 Due dates
Except as otherwise provided in this Agreement, accrued
interest on each Loan is payable by the relevant Borrower
on the last day of each Interest Period and also, in the
case of a Loan with an Interest Period longer than six
months, on the date falling six months after the
commencement of the Interest Period.
11.3 Default interest
(a) (i) If a Borrower fails to pay any amount payable
by it under the Finance Documents, it shall
forthwith on demand by the Agent pay interest on the
overdue amount from the due date up to the date of
actual payment, as well after as before judgement,
at a rate (the "default rate") determined by the
Agent to be 1 per cent per annum (or, at any time
prior to the date on which the Facility B Loans are
repaid or prepaid in full, 2 per cent. per annum)
above, subject to sub-paragraph (ii) below, the rate
which would have been payable if the overdue amount
had, during the period of non-payment, constituted a
Sterling Loan for such successive Interest Periods
of such duration as the Agent may reasonably
determine having regard to the likely duration of
the default (each a "Designated Interest Period").
(ii) If the overdue amount is a principal amount of a
Loan and it becomes due and payable prior to the
last day of an Interest Period for that Loan, then:-
(1) the first Designated Interest Period for that
overdue sum will be the unexpired portion of
that Interest Period; and
(2) the rate of interest on the overdue amount for
that first Designated Interest Period will be 1
per cent per annum or (at any time prior to the
date on which the Facility B Loans are repaid
or prepaid in full) 2 per cent. per annum above
the rate on the overdue amount under
Clause 11.1 (Interest rate) immediately before
the due date.
After the expiry of the first Designated Interest
Period for that overdue amount, the rate on the
overdue amount will be calculated in accordance with
sub-paragraph (i) above.
(b) The default rate will be determined on each Business Day
or the first day of the relevant Designated Interest
Period, as appropriate.
(c) If the Agent determines that Sterling deposits are not at
the relevant time being made available by the Reference
Banks to leading banks in the London interbank market,
the default rate will be determined by reference to the
cost of funds to the Banks from whatever sources Banks
may reasonably select, having due regard to the likely
duration of the default.
(d) Default interest will be compounded at the end of each
Designated Interest Period.
11.4 Notification of rates of interest
The Agent shall promptly notify each relevant Party of
the determination of a rate of interest under this
Agreement.
12. PAYMENTS
12.1 Place
All payments by a Borrower or a Bank under the Finance
Documents shall be made to the Agent to its account at
such office or bank in the U.K. as it may notify to that
Borrower or Bank for this purpose.
12.2 Currency and Funds
Payments under the Finance Documents to the Agent shall
be made in Sterling for value on the due date at such
times as the Agent may specify to the Party concerned as
being customary at the time for the settlement of
transactions in Sterling.
12.3 Distribution
(a) Each payment received by the Agent under this Agreement
for another Party shall, subject to the paragraphs below,
be made available by the Agent to that Party by payment
to its account with such bank in the U.K. as it may
notify to the Agent for this purpose by not less than 5
Business Days' prior notice.
(b) Where the Repayment Date for an outstanding Facility A
Loan or Facility C Loan coincides with the Drawdown Date
for a new Facility A Loan or Facility C Loan, as the case
may be, the Agent shall apply the relevant new Loan in or
towards repayment of the relevant outstanding Loan so
that:-
(i) where the amount of the outstanding Loan exceeds the
amount of the new Loan, the relevant Borrower shall
only be required to repay the excess; and
(ii) where the amount of the outstanding Loan is exactly
the same as the amount of the new Loan, the relevant
Borrower shall not be required to make any payment.
(c) The Agent may apply any amount received by it for a
Borrower in or towards payment (on the date and in the
currency and funds of receipt) of any amount due from a
Borrower under this Agreement or in or towards the
purchase of any amount of any currency to be so applied.
(d) Where a sum is to be paid under this Agreement to the
Agent for the account of another Party, the Agent is not
obliged to pay that sum to that Party until it has
established that it has actually received that sum. The
Agent may, however, assume that the sum has been paid to
it in accordance with this Agreement and, in reliance on
that assumption, make available to that Party a
corresponding amount. If the sum has not been made
available but the Agent has paid a corresponding amount
to another Party, that Party shall forthwith on demand
refund the corresponding amount to the Agent together
with interest on that amount from the date of payment to
the date of receipt, calculated at a rate determined by
the Agent to reflect its cost of funds.
12.4 Set-off and counterclaim
All payments made by a Borrower under the Finance
Documents shall be made without set-off or counterclaim.
12.5 Non-Business Days
(a) If a payment under the Finance Documents is due on a day
which is not a Business Day, the due date for that
payment shall instead be the next Business Day in the
same calendar month (if there is one) or the preceding
Business Day (if there is not).
(b) During any extension of the due date for payment of any
principal under this Agreement interest is payable on the
principal at the rate payable on the original due date.
12.6 Partial payments
(a) If the Agent receives a payment insufficient to discharge
all the amounts then due and payable by the Borrowers
under the Finance Documents, the Agent shall apply that
payment towards the obligations of the Borrowers under
the Finance Documents in the following order:-
(i) first, in or towards payment pro rata of any unpaid
fees, costs and expenses of the Agent and the
Issuing Bank under this Agreement;
(ii) secondly, in or towards payment pro rata of any
accrued fees due but unpaid under Clause 22.2
(Commitment fee);
(iii) thirdly, in or towards payment pro rata of any
accrued interest and guarantee fee due but unpaid
under this Agreement;
(iv) fourthly, in or towards payment pro rata of any
principal due but unpaid under this Agreement and
any amount payable under the Swap Documents; and
(v) fifthly, in or towards payment pro rata of any other
sum due but unpaid under this Agreement.
(b) The Agent shall, if so directed by all the Banks, vary
the order set out in sub-paragraphs (a)(ii) to (v) above.
(c) Paragraphs (a) and (b) above shall override any
appropriation made by a Borrower.
13. TAXES
13.1 Gross-up
All payments by a Borrower under the Finance Documents
shall be made without any deduction and free and clear of
and without deduction for or on account of any taxes,
except to the extent that the Borrower is required by law
to make payment subject to any taxes. If any tax or
amounts in respect of tax must be deducted, or any other
deductions must be made, from any amounts payable or paid
by a Borrower, or paid or payable by the Agent to a Bank,
under the Finance Documents, the Borrower shall pay such
additional amounts as may be necessary to ensure that the
relevant Bank receives a net amount equal to the full
amount which it would have received had payment not been
made subject to tax or other deduction.
13.2 Tax receipts
All taxes required by law to be deducted or withheld by a
Borrower from any amounts paid or payable under the
Finance Documents shall be paid by the relevant Borrower
when due and the Borrower shall, within 15 days of the
payment being made, deliver to the Agent for the relevant
Bank evidence satisfactory to that Bank (including all
relevant tax receipts) that the payment has been duly
remitted to the appropriate authority.
13.3 Refund of Tax Credits
If:-
(a) a Borrower makes a payment under Clause 13.1 (Gross-
up) (a "Tax Payment") in respect of a payment to a
Bank under the Finance Documents; and
(b) that Bank determines in good faith that it has
obtained a refund of tax or obtained and used a
credit against tax on its overall net income (a "Tax
Credit") which that Bank is able to identify in good
faith as attributable to that Tax Payment,
then, if it determines, acting in good faith, that it can
do so without any adverse consequences for the Bank, that
Bank shall forthwith reimburse that Borrower, such amount
as that Bank in its absolute discretion determines to be
such proportion of that Tax Credit as will leave that
Bank (after that reimbursement) in no better or worse
position in respect of its worldwide tax liabilities than
it would have been in if no Tax Payment had been
required. A Bank shall have an absolute discretion as to
whether to claim any Tax Credit (and, if it does claim,
the extent, order and manner in which it does so) and
whether any amount is due from it under this Clause 13.3)
(and, if so, what amount and when). No Bank shall be
obliged to disclose any information regarding its tax
affairs and computations.
13.4 Qualifying Bank
(a) Each Bank party to this Agreement on the date of this
Agreement represents that it is a Qualifying Bank on the
date of this Agreement. Any bank or financial
institution which becomes a Bank after the date of this
Agreement represents to the Company on the date it
becomes a Party that, as at that date, it is a Qualifying
Bank.
(b) If, otherwise than as a result of the introduction of,
change in, or any change in the interpretation,
administration or application of, any law or regulation,
any Double Taxation Treaty or any practice or concession
of the United Kingdom Inland Revenue occurring after the
date a Bank becomes a Party, the Bank is not or ceases to
be a Qualifying Bank, the Company will not be liable to
pay to that Bank under Clause 13.1 (Gross-up) any amount
in respect of taxes levied or imposed by the United
Kingdom or any taxing authority of or in the United
Kingdom in excess of the amount it would have been
obliged to pay if that Bank had been or had not ceased to
be a Qualifying Bank.
(c) Any Bank which falls within paragraph (b) of the
definition of Qualifying Bank shall deliver to the
Company, on the date it becomes a Bank, a duly completed
form from the tax authorities in the country in which it
is booking its participation in a Loan such that the
Company may apply to the Inland Revenue for a direction
to the Company under the Double Taxation Relief (Taxes on
Income) (General) Regulations 1970 that the Company
should not, on account of the relevant Double Taxation
Treaty, pay any interest due to the Bank under the
Finance Documents under deduction of United Kingdom tax.
The Bank concerned shall, upon the request of the
Company, promptly and duly (if it is able to do so)
execute and deliver any and all such further instruments
and documents which are required for the purpose of
obtaining such a direction.
(d) Each Bank shall notify the Company through the Agent as
soon as it is aware that it ceases to be a Qualifying
Bank.
14. MARKET DISRUPTION
(a) If a Reference Bank does not supply an offered rate by
11.30 a.m. on a Drawdown Date, the applicable LIBOR
shall, subject to paragraph (b) below, be determined on
the basis of the quotations of the remaining Reference
Banks.
(b) If, in relation to any proposed Loan:-
(i) no, or only one, Reference Bank supplies a rate for
the purposes of determining the applicable LIBOR or
the Agent otherwise determines that adequate and
fair means do not exist for ascertaining the
applicable LIBOR; or
(ii) the Agent receives notification from Banks whose
participations in a Loan exceed 50 per cent. of that
Loan that, in their opinion:-
(A) matching deposits may not be available to them
in the London interbank market in the ordinary
course of business to fund their participations
in that Loan for the relevant Interest Period;
or
(B) the cost to them of matching deposits in the
London interbank market would be in excess of
the relevant LIBOR,
the Agent shall promptly notify the Company and the
relevant Banks of the fact and that this Clause 14 is in
operation.
(c) After any notification under paragraph (b) above:-
(i) (A) in the case of a Loan which has not been
made, unless the relevant Borrower notifies the
Agent to the contrary before close of business
on the day it received the notification under
paragraph (b) above, the Loan shall still be
made but it shall have an Interest Period of
one month and the interest payable on that Loan
shall be determined in accordance with sub-
paragraphs (ii) to (vi) below; and
(B) in the case of a Facility B Loan after it has
been borrowed, that Facility B Loan shall
continue but it shall have an Interest Period
of one month and the interest payable on that
Loan shall be determined in accordance with sub-
paragraphs (ii) to (vi) below;
(ii) promptly after receipt of the notification, the
relevant Borrower and the Agent shall enter into
negotiations in good faith for a period of not more
than one month with a view to agreeing a substitute
basis for determining the rate of interest and/or
funding applicable to the Loan affected by the
notification;
(iii) any substitute basis agreed under sub-paragraph
(ii) above shall be, with the prior consent of all
the Banks, binding on all the Parties;
(iv) if no substitute basis is agreed under sub-
paragraph (ii) above, each Bank (through the Agent)
shall certify on or before the last day of the
Interest Period to which the notification relates an
alternative basis for maintaining its participation
in that Loan;
(v) any alternative basis referred to in sub-paragraph
(iv) above may include an alternative method of
fixing the interest rate, alternative Interest
Periods or alternative currencies but it must
reflect the cost to the Banks of funding their
participations in that Loan from whatever sources
each relevant Bank may reasonably select (each
Bank's cost of funding being certified by that Bank
with a copy to the Agent) plus the Margin and (if
applicable) any MLA Cost; and
(vi) each alternative basis so certified shall be binding
on the Borrowers and the certifying Bank and treated
as part of this Agreement.
15. INCREASED COSTS
15.1 Increased costs
(a) Subject to Clause 15.2 (Exceptions), the Company shall
forthwith on demand by a Finance Party pay that Finance
Party the amount of any increased cost incurred by it as
a result of:
(i) the introduction of, or any change in, or any change
in the interpretation or application of, any law or
regulation after the date of this Agreement; or
(ii) compliance with any regulation made after the date
of this Agreement,
including any law or regulation relating to taxation,
change in currency of a country or reserve asset, special
deposit, cash ratio, liquidity or capital adequacy
requirements or any other form of banking or monetary
control.
(b) In this Agreement "increased cost" means:-
(i) an additional cost incurred by a Finance Party or
its Holding Company as a result of the Finance Party
having entered into, or performing, maintaining or
funding its obligations under, this Agreement; or
(ii) that portion of an additional cost incurred by a
Finance Party or its Holding Company in the Finance
Party making, funding or maintaining all or any
advances comprised in a class of advances formed by
or including the participations in the Loans made or
to be made under this Agreement as is attributable
to the Finance Party making, funding or maintaining
those participations; or
(iii) a reduction in any amount payable to a Finance
Party or its Holding Company or the effective return
to a Finance Party under this Agreement or on its
capital or that of its Holding Company; or
(iv) the amount of any payment made by a Finance Party or
its Holding Company, or the amount of interest or
other return foregone by a Finance Party or its
Holding Company, calculated by reference to any
amount received or receivable by a Finance Party
from any other Party under this Agreement.
15.2 Exceptions
Clause 15.1 (Increased costs) does not apply to any
increased cost:-
(a) compensated for by the payment of the MLA Cost;
(b) compensated for by the operation of Clause 13
(Taxes) or which would have been compensated for but
for the operation of Clause 13.4(b) (Qualifying
Bank);
(c) attributable to any change in the rate of tax on the
overall net income of a Bank or its Holding Company
(or the overall net income of a division or branch
of the Bank or its Holding Company) imposed in the
jurisdiction in which its principal office or
Facility Office is situate;
(d) attributable to the relevant Bank (or its Holding
Company) having entered into a commitment to lend to
a third party which is, at the time of that
commitment, in breach of the relevant law or
regulation; or
(e) incurred in consequence of the implementation, as
contemplated at the date of this Agreement, of the
matters set out in:
(i) the report of the Basle Committee on Bank
Regulation and Supervisory Practices dated July
1988 and entitled "International Convergence of
Capital Measurement and Capital Standards"
(including in particular but without limitation
any directive of the Bank of England
implementing that report in the United
Kingdom);
(ii) the Directive of the Council of the European
Communities on a Solvency Ratio for Credit
Institutions (89/647/EEC of 18 December 1989);
and/or
(iii) the Directive of the Council of the
European Communities on Own Funds of Credit
Institutions (89/299/EEC of 17 April 1989),
unless it results from any change after the date of
this Agreement in, or in the interpretation or
application of, those matters as contemplated on the
date of this Agreement.
16. ILLEGALITY
If it is or becomes unlawful or contrary to any
regulation in any jurisdiction for a Bank to give effect
to any of its obligations as contemplated by this
Agreement or to fund or maintain its participation in any
Loan, then:-
(a) the Bank shall promptly notify the Company through
the Agent accordingly; and
(b) (i) each Borrower shall, on the latest day
permitted by the relevant law or regulation,
prepay that Bank's participation in all Loans
made to it together with all other amounts
payable by it to that Bank under this
Agreement; and
(ii) the Bank's Commitments shall be cancelled;
(iii) if the Bank is the Issuing Bank and the
Guarantee has not yet been issued, the
Guarantee shall not be issued; and
(iv) if the Guarantee has been issued, demand that
the Company shall, on the latest date permitted
by the relevant law or regulation, provide cash
cover to it in a Security Account in an amount
equal to that Bank's Relevant Percentage of
(or, if the Bank is the Issuing Bank, an amount
equal to) the maximum aggregate actual and
contingent liability of the Banks under the
Guarantee. In this event, the Company shall
use reasonable endeavours to procure the
release of the Bank from its obligations under
the Finance Documents and, to the extent that
the Bank is released from its obligations under
the Finance Documents, the Bank shall repay to
the Company any amount provided to that Bank by
way of cash cover together with interest on the
amount which that Bank reasonably considers
that it has earned on the amount during the
period for which the cash cover was retained by
it.
17. GUARANTEE
17.1 Guarantee
The Company irrevocably and unconditionally:-
(a) as principal obligor guarantees to each Finance
Party prompt performance by the Target of all its
obligations under the Finance Documents;
(b) undertakes with each Finance Party that whenever the
Target does not pay any amount when due under or in
connection with any Finance Document, the Company
shall within two Business days of demand by the
Agent pay that amount as if the Company instead of
the Target were expressed to be the principal
obligor; and
(c) indemnifies each Finance Party on demand against any
loss or liability suffered by it if any obligation
so guaranteed by the Company is or becomes
unenforceable, invalid or illegal.
17.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend
to the ultimate balance of all sums payable by the Target
under the Finance Documents, regardless of any
intermediate payment or discharge in whole or in part.
17.3 Reinstatement
(a) Where any discharge (whether in respect of the
obligations of the Target or any security for those
obligations or otherwise) is made in whole or in part or
any arrangement is made on the faith of any payment,
security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without
limitation, the liability of the Company under this
Clause 17 (Guarantee) shall continue as if the discharge
or arrangement had not occurred.
(b) Each Finance Party may concede or compromise any claim
that any payment, security or other disposition is liable
to avoidance or restoration.
17.4 Waiver of defences
The obligations of the Company under this Clause 17
(Guarantee) will not be affected by an act, omission,
matter or thing which, but for this provision, would
reduce, release or prejudice any of its obligations under
this Clause 17 (Guarantee) or prejudice or diminish those
obligations in whole or in part, including (whether or
not known to it or any Finance Party):-
(a) any time or waiver granted to, or composition with,
the Target or other person;
(b) the taking, variation, compromise, exchange, renewal
or release of, or refusal or neglect to perfect,
take up or enforce, any rights against, or security
over assets of, the Target or other person or any
non-presentation or non-observance of any formality
or other requirement in respect of any instrument or
any failure to realise the full value of any
security;
(c) any incapacity or lack of powers, authority or legal
personality of or dissolution or change in the
members or status of the Target or any other person;
(d) any variation (however fundamental) or replacement
of a Finance Document or any other document or
security so that references to that Finance Document
in this Clause 17 (Guarantee) shall include each
variation or replacement;
(e) any unenforceability, illegality or invalidity of
any obligation of any person under any Finance
Document or any other document or security, to the
intent that the obligations of the Company under
this Clause 17 (Guarantee) shall remain in full
force and its guarantee be construed accordingly, as
if there were no unenforceability, illegality or
invalidity; or
(f) any postponement, discharge, reduction, non-
provability or other similar circumstance affecting
any obligation of the Target under a Finance
Document resulting from any insolvency, liquidation
or dissolution proceedings or from any law,
regulation or order so that each such obligation
shall for the purposes of the obligations of the
Company under this Clause 17 (Guarantee) be
construed as if there were no such circumstance.
17.5 Immediate recourse
The Company waives any right it may have of first
requiring any Finance Party (or any trustee or agent on
its behalf) to proceed against or enforce any other
rights or security or claim payment from the Target
before claiming from the Company under this Clause 17
(Guarantee).
17.6 Appropriations
Until all amounts which may be or become payable by the
Target under or in connection with the Finance Documents
have been irrevocably paid in full, each Finance Party
(or any trustee or agent on its behalf) may:-
(a) refrain from applying or enforcing any other moneys,
security or rights held or received by that Finance
Party (or any trustee or agent on its behalf) in
respect of those amounts, or apply and enforce the
same in such manner and order as it sees fit
(whether against those amounts or otherwise) and the
Target shall not be entitled to the benefit of the
same; and
(b) hold in an interest bearing suspense account any
moneys received from the Company or on account of
the liability of the Company under this Clause 17
(Guarantee).
17.7 Non-competition
Until all amounts which may be or become payable by the
Target under or in connection with the Finance Documents
have been irrevocably paid in full, the Company shall not
after a claim has been made or by virtue of any payment
or performance by it under this Clause 17 (Guarantee):-
(a) be subrogated to any rights, security or moneys
held, received or receivable by any Finance Party
(or any trustee or agent on its behalf) or be
entitled to any right of contribution or indemnity
in respect of any payment made or moneys received on
account of the Company's liability under this
Clause 17 (Guarantee);
(b) claim, rank, prove or vote as a creditor of the
Target or its estate in competition with any Finance
Party (or any trustee or agent on its behalf); or
(c) receive, claim or have the benefit of any payment,
distribution or security from or on account of the
Target, or exercise any right of set-off as against
the Target.
The Company shall hold in trust for and forthwith pay or
transfer to the Agent for the Finance Parties any payment
or distribution or benefit of security received by it
contrary to this Clause 17.7.
17.8 Additional security
This guarantee is in addition to and is not in any way
prejudiced by any other security now or subsequently held
by any Finance Party.
18. REPRESENTATIONS AND WARRANTIES
18.1 Representations and warranties
(a) The Company makes the representations and warranties set
out in this Clause 18 (Representations and warranties) to
each Finance Party.
(b) The Target makes the representations and warranties
expressed to be made by it in this Clause 18
(Representations and warranties) in respect of itself and
its Subsidiaries only.
18.2 Status
(a) It is a limited liability company, duly incorporated and
validly existing under the Companies Act 1985;
(b) it has the power to own its assets and carry on its
business as it is being conducted; and
(c) as at the date of this Agreement, the Parent is the
beneficial owner of all the shares in the Company.
18.3 Powers and authority
It has the power to enter into and perform, and has taken
all necessary action to authorise the entry into,
performance and delivery of, the Finance Documents to
which it is or will be a party and the transactions
contemplated by those Finance Documents.
18.4 Legal validity
Each Finance Document to which it is or will be a party
constitutes, or when executed in accordance with its
terms will constitute, its legal, valid, binding and
enforceable obligation.
18.5 Non-conflict
The entry into and performance by it of, and the
transactions contemplated by, the Finance Documents do
not and will not:-
(a) conflict with any law or regulation, judicial or
official order or any Licence or Licence
Undertaking; or
(b) conflict with its constitutional documents; or
(c) conflict with any document which is binding upon any
member of the Group or any asset of any member of
the Group (other than a financing agreement to which
the Target or any Subsidiary of the Target is a
party, the Borrowing in respect of which is
refinanced prior to the Clean-Up Date) to an extent
or in a manner which has a Material Adverse Effect.
18.6 No default
(a) No Event of Default or (unless this representation is
being repeated or deemed to be repeated on the date of a
Request or a Drawdown Date in respect of a Rollover Loan)
other Default is outstanding or will result from any
Utilisation; and
(b) with effect from the Clean-Up Date, no other event is
outstanding which constitutes a default under any
document which is binding on any member of the Group or
any asset of any member of the Group to an extent or in a
manner which has a Material Adverse Effect.
18.7 Authorisations
Subject to due registration of the Debenture at Companies
House under section 395 of the Companies Act 1985, all
authorisations required by the laws of England or the
terms of any Licence or Licence Undertaking in connection
with the entry into, performance, validity and
enforceability of, and the transactions contemplated by,
the Finance Documents have been obtained or effected (as
appropriate) and are in full force and effect.
18.8 Accounts
(a) In the case of the Company, the audited consolidated
accounts of the Group most recently delivered to the
Agent under this Agreement:-
(i) have been prepared in accordance with Applicable
Accounting Principles; and
(ii) fairly represent the consolidated financial
condition of the Group as at the date to which they
were drawn up.
(b) In the case of the Target, its audited consolidated
accounts most recently delivered to the Agent:-
(i) have been prepared in accordance with Applicable
Accounting Principles; and
(ii) fairly represent its consolidated financial
condition as at the date to which they were drawn
up.
18.9 Litigation
No litigation, arbitration or administrative proceedings
are current or, to its knowledge, pending or threatened:
(a) to restrain the entry into, exercise of any of its
rights, and/or performance or enforcement of or
compliance with any of its obligations, under the
Finance Documents; or
(b) which have a Material Adverse Effect.
18.10 Information
(a) All material written factual information supplied by it
to the Finance Parties (including any such information
contained in any package of information provided or to be
provided by the Arrangers on behalf of the Company to
potential sub-underwriters) in connection with the
Finance Documents before, on or after the date of this
Agreement is true, complete and accurate in all material
respects as at its date;
(b) that information did not omit as at its date any
information which would make the information supplied
misleading in any material respect;
(c) any expressions of opinion or intention and any forecasts
and projections (including, without limitation, in
relation to the financial model referred to in
paragraph 9 of Schedule 2 Part I) contained in that
information were arrived at after careful consideration
and were based on reasonable assumptions;
(d) as at the date of this Agreement, nothing has occurred
(which has not been disclosed to the Arrangers prior to
the date of this Agreement) between the date the
information was provided and the date of this Agreement
which renders the information contained in it untrue or
misleading in any material respect; and
(e) the Press Release and the Offer Documents and any other
public documents relating to the Offer furnished to the
Agent contain all the material terms of the Offer and the
Offer Documents reflect the terms of the Press Release in
all material respects.
18.11 Information Memorandum
(a) All material factual information contained in the
Information Memorandum was true (or, in the case of
information provided by any person other than the Company
or its advisers, was true to the best of its knowledge
and belief) in all material respects at the date (if any)
ascribed to it in the Information Memorandum or (if none)
at the date of the relevant component of the Information
Memorandum;
(b) any expressions of opinion or intention and any forecasts
and projections contained in the Information Memorandum
were arrived at after careful consideration and were
based on reasonable assumptions;
(c) as at the date of the Syndication Agreement, the
Information Memorandum, taken as a whole, was not
misleading in any material respect and did not omit to
disclose any matter failure to disclose which would
result in any material information contained in the
Information Memorandum being misleading in any material
respect in the context of the Finance Documents.
18.12 Environmental Matters
With effect from the Clean-Up Date:
(a) each member of the Group has obtained all material
Environmental Licences required for the carrying on
of its business as then conducted and is in
compliance in all material respects with:
(i) the terms and conditions of those Environmental
Licences; and
(ii) all other applicable Environmental Law,
which, in each case, if not obtained or complied
with, has a Material Adverse Effect and there are,
to its knowledge, no circumstances which may
materially prevent or interfere with such compliance
in the future;
(b) so far as the Company is aware (after due enquiry),
no Dangerous Substance has been used, disposed of,
generated, stored, transported, dumped, released,
deposited, buried or emitted at, on from or under
any site or premises (whether or not owned, leased,
occupied or controlled by any member of the Group
and including any offsite waste management or
disposal location utilised by any member of the
Group) in circumstances where this has a Material
Adverse Effect; and
(c) so far as the Company is aware (after due enquiry),
there is no Environmental Claim (whether in respect
of any site previously or currently owned or
occupied by any member of the Group or otherwise)
pending or threatened, and there are no past or
present acts, omissions, events or circumstances
that would be likely to form the basis of any
Environmental Claim (whether in respect of any site
previously or currently owned or occupied by any
member of the Group or otherwise), against it which,
in each case, is reasonably likely to be determined
against it and which, if so determined, has a
Material Adverse Effect.
18.13 Assets
Each Borrower is the legal and/or beneficial owner of all
its assets free from any Security Interests (other than
any Security Interests permitted under Clause 19.9(b)
(Negative pledge)).
18.14 No Commitment
As at the first Utilisation Date, the Company does not
have any material commitments or Financial Indebtedness
other than those arising under the Finance Documents, the
Offer, any Offer Costs or in respect of the Licence or
any Licence Undertaking.
18.15 Licence
With effect from the Clean-Up Date:
(a) the Licence is in full force and effect;
(b) there exist no material breaches of the terms
of the Licence or Licence Undertakings; and
(c) there are no circumstances in existence which
would entitle the Director General or the Secretary
of State to seek to revoke the Licence.
18.16 Times for making representations and warranties
The representations and warranties set out in this
Clause 18 (Representations and warranties):-
(a) (i) in the case of the Company:
(A) are made by the Company, unless
it is expressly provided to the contrary,
on the date of this Agreement; or
(B) in the case of Clause 18.11
(Information Memorandum), is deemed to be
made by the Company on the date of the
Syndication Agreement (but only if this
date is no longer than 6 months after the
Unconditional Acceptances Date); and
(ii) in the case of the Target, will be deemed to be
made by it on the date it executes a Borrower
Accession Agreement; and
(b) (with the exception of Clauses 18.2(c) (Status)
and 18.11 (Information Memorandum)) are deemed to be
made by each Borrower on the date of each Request
and each Drawdown Date with reference to the facts
and circumstances then existing, except that, during
the Certain Funds Period for an Offer Utilisation,
only the representations and warranties of the
Company in Clauses 18.2(a) (Status), 18.3 (Powers
and authority), 18.4 (Legal validity) and 18.5 (Non-
conflict) will be deemed to be made by the Company
on the date of each Request and each Utilisation
Date for an Offer Utilisation with reference to the
facts and circumstances then existing.
18.17 Qualifications to representations
The representations and warranties contained in Clauses
18.4 (Legal validity) and 18.7 (Authorisations) shall
(where applicable) be subject, as to matters of law only,
to the qualifications in the legal opinions referred to
in paragraph 10 of Schedule 2 Part I and paragraph 9 of
Schedule 2 Part II.
19. UNDERTAKINGS
19.1 Duration
The undertakings in this Clause 19 (Undertakings) remain
in force from the date of this Agreement for so long as
any amount is or may be outstanding under this Agreement
or any Commitment is in force.
19.2 Financial information
The Company shall supply to the Agent in sufficient
copies for all the Banks:-
(a) as soon as the same are available (and in any event
within 120 days of the end of each of its financial
years):-
(i) the audited consolidated accounts of the Group
for that financial year; and
(ii) the audited consolidated accounts of the Target
and its Subsidiaries for that financial year;
(b) as soon as the same are available (and in any event
within 60 days of the end of the first half-year of
each of its financial years and within 45 days of
the end of each quarter of each of its financial
years):-
(i) the unaudited consolidated accounts of the
Group for that half-year or that quarter, as
the case may be; and
(ii) the unaudited consolidated accounts of the
Target and its Subsidiaries for that half-year
or that quarter, as the case may be; and
(c) (i) together with the accounts specified
in paragraph (a)(i) above, a certificate signed
by its auditors setting out in reasonable
detail computations establishing compliance or
non-compliance with Clause 19.28 (Financial
covenants) as at the date to which those
accounts were drawn-up;
(ii) together with the accounts specified in
paragraph (b)(i) above, a certificate signed by
two of its senior authorised officers on its
behalf setting out in reasonable detail
computations establishing compliance or non-
compliance with Clause 19.28 (Financial
covenants) as at the date to which those
accounts were drawn-up; and
(d) within 5 Business Days of them being delivered to
the Director General under Condition 2 of Part II of
the Licence, the accounting statements delivered to
the Director General by the Target.
19.3 Information - miscellaneous
Each Borrower shall supply to the Agent:-
(a) all documents despatched by it (in the case of the
Target) to its public shareholders (or any class of
them) or (in the case of either Borrower) its
creditors (or any class of them), other than any
creditors in respect of Subordinated Debt, at the
same time as they are despatched;
(b) promptly upon becoming aware of them, details of any
litigation, arbitration or administrative
proceedings which are current, threatened or
pending, and which:
(i) if adversely determined, have a Material
Adverse Effect; or
(ii) would involve liability or potential liability
of 10,000,000 pounds or more (or its equivalent
in other currencies); or
(iii) involves the Director-General, the
Secretary of State, the Licence or any Licence
Undertaking;
(c) during the period from the date of issue and
approval of the Information Memorandum by the
Company to the earlier of:
(i) the date six months after the Unconditional
Acceptances Date; and
(ii) the close of Syndication as determined and
confirmed to the Company by the Agent,
in reasonable detail notice of any matters of which
it is aware (whether occurring prior to, on or after
the date of approval and issue of the Information
Memorandum) which cause the Information Memorandum
when read without knowledge of such matters to be
inaccurate or misleading in any material respect;
(d) promptly upon becoming aware that any material
modifications to the Licence are being proposed by
the Director General or the Target and/or that any
Licence Undertaking is being requested by the
Director General or the Secretary of State,
reasonable details of those modifications and/or
that Licence Undertaking, to be updated from time to
time to reflect any changes;
(e) unless the Agent has already received them, copies
of any Licence Undertakings in force at the date the
Target becomes a Subsidiary of the Company and,
thereafter, promptly after the giving of any Licence
Undertaking; and
(f) promptly, such further information in the possession
or control of any member of the Group regarding its
financial condition and operations as any Finance
Party may reasonably request and which the Company
is able to provide without breaching any legal
obligation or regulation,
in sufficient copies for all of the Banks, if the Agent
so requests.
19.4 Notification of Default
Each Borrower shall notify the Agent of any Default (and
the steps, if any, being taken to remedy it) promptly
upon becoming aware of its occurrence.
19.5 Compliance certificates/accounting matters
(a) The Company shall supply to the Agent:-
(i) together with the accounts specified in
Clause 19.2(a)(i) and (b)(i) (Financial
Information); and
(ii) promptly at any other time, if the Agent so
requests,
a certificate signed by two of its senior officers on its
behalf certifying that no Default is outstanding or, if a
Default is outstanding, specifying the Default and the
steps, if any, being taken to remedy it.
(b) If, at any time after the date of this Agreement, any
material change is made to the Applicable Accounting
Principles, the Company shall notify the Agent of the
change and, in the absence of any agreement between the
Company and the Agent (acting on the instructions of the
Majority Banks) to the contrary, the Company shall ensure
that the Auditors provide a description of the change and
the adjustments which would be required to be made to the
latest accounts or financial statements so that those
accounts or financial statements reflect the Applicable
Accounting Principles, and any reference to any financial
statements or accounts delivered under this Agreement
shall be construed as a reference to those accounts or
financial statements as adjusted to reflect the
Applicable Accounting Principles.
(c) The Company shall ensure that each set of accounts to be
delivered by it under this Agreement are prepared and
audited (in the case of its annual accounts) by the
Auditors in accordance with the Applicable Accounting
Principles, subject to any variations which are not
material or, if material, have been agreed in writing by
the Majority Banks.
19.6 Authorisations
Each Borrower shall promptly:-
(a) obtain, maintain and comply with the terms of; and
(b) supply certified copies to the Agent of,
any authorisation required under any law or regulation to
enable it to perform its obligations under, or for the
validity or enforceability of, any Finance Document.
19.7 Environmental matters
The Company shall, and shall (after the Clean-Up Date)
procure that each member of the Group will:
(a) obtain all requisite Environmental Licences and
comply in all material respects with:
(i) the terms and conditions of all Environmental
Licences applicable to it; and
(ii) all other applicable Environmental Laws,
in each case where failure to do so has a Material
Adverse Effect; and
(b) promptly upon receipt of the same, notify the Agent
of any claim, notice or other communication served
on it in respect of any alleged breach of or
corrective or remedial obligation or liability under
any Environmental Law which would, if substantiated,
have a Material Adverse Effect.
19.8 Pari passu ranking
Each Borrower shall procure that its payment obligations
under the Finance Documents do and will rank at least
pari passu with all its other present and future
unsecured payment obligations, except for obligations
which are mandatorily preferred by law applying to
companies generally.
19.9 Negative pledge
(a) No Borrower shall, and the Company shall procure that no
other member of the Group will, create or permit to
subsist any Security Interest on any of its assets.
(b) Paragraph (a) does not apply to:
(i) any lien or right of set-off arising by operation of
law (or by an agreement having similar effect) in
the ordinary course of business; or
(ii) pledges of goods, the related documents of title
and/or other related documents arising or created in
the ordinary course of its business as security only
for Financial Indebtedness to a bank or financial
institution directly relating to the goods or
documents on or over which that pledge exists; or
(iii) any Security Interest arising out of title
retention or conditional sale provisions in a
supplier's standard conditions of supply of goods
acquired by any member of the Group in the ordinary
course of its business;
(iv) any Security Interest created under the Pooling and
Settlement Agreement;
(v) any Security Interest existing on an asset at the
time of the acquisition of the asset by any member
of the Group after the date of this Agreement, but
only if:
(A) the Security Interest was not created in
contemplation of the acquisition;
(B) the principal amount secured by the Security
Interest is not increased after the
acquisition; and
(C) the Security Interest is discharged within
180 days of the acquisition; or
(vi) any Security Interest existing on the assets of a
company at the time it becomes a member of the Group
after the date of this Agreement, but only if:
(A) the Security Interest was not created in
contemplation of the relevant company becoming
a member of the Group;
(B) the principal amount secured by the Security
Interest is not increased after the relevant
company becomes a member of the Group; and
(C) the Security Interest is discharged within
180 days of the relevant company becoming a
member of the Group; or
(vii) any Security Interest which:-
(A) constitutes a contractual right of any bank or
financial institution to apply any credit
balance maintained by any member of the Group
with that bank or financial institution against
any amount due and payable to such bank or
financial institution by that or any other
member of the Group; and
(B) arises in connection with the relevant Group
member's ordinary banking arrangements
(including a cash management scheme); or
(viii) any Security Interest created with the approval
of the Majority Banks; or
(ix) any Security Interest created by a Project Finance
Subsidiary, or over the shares of a Project Finance
Subsidiary, securing Project Finance Indebtedness;
or
(x) any other Security Interest not falling within any
of paragraphs (i) to (ix) above so long as the
aggregate principal amount of outstanding
indebtedness secured by all the Security Interests
permitted under this sub-paragraph (x) at any time,
together with the aggregate principal amount of all
outstanding indebtedness permitted under
Clause 19.10(b) (Transactions similar to security)
at that time, does not exceed (prior to the date on
which the Facility B Loans are repaid or prepaid in
full) 25,000,000 pounds or (subsequently)
50,000,000 pounds (or, in each case, its equivalent
in other currencies).
19.10 Transactions similar to security
(a) Subject to paragraph (b) below, no Borrower shall, and
the Company shall procure that no other member of the
Group will:-
(i) sell, transfer or otherwise dispose of any of its
assets on terms whereby it is or may be leased to or
re-acquired or acquired by a member of the Group or
any of its related entities; or
(ii) sell, transfer or otherwise dispose of any of its
receivables on recourse terms, except for the
discounting of bills or notes in the ordinary course
of trading,
in circumstances where the transaction is entered into
primarily as a method of raising finance or of financing
the acquisition of an asset.
(b) Any member of the Group may enter into transactions
otherwise prohibited by sub-paragraph (a)(i) above so
long as the aggregate principal amount of outstanding
indebtedness of the Group in respect of all such
transactions at any time, together with the aggregate
principal amount of all outstanding secured indebtedness
permitted under Clause 19.9(b)(x) (Negative pledge) at
that time, does not exceed (prior to the date on which
the Facility B Loans are repaid or prepaid in full)
25,000,000 pounds or (subsequently) 50,000,000 pounds (or,
in each case, its equivalent in other currencies).
19.11 Disposals
(a) The Company shall not sell, transfer or otherwise dispose
of or cease to exercise control over any of the Shares in
the Target acquired by it.
(b) No Borrower shall, and the Company shall procure that no
other member of the Group will, either in a single
transaction or in a series of transactions, whether
related or not and whether voluntarily or involuntarily,
sell, transfer, grant or lease or otherwise dispose of
all or any part of its assets (all such transactions
being "disposals" for the purpose of this Clause).
(c) Paragraph (b) does not apply to the following disposals
(if made on arm's length terms):-
(i) disposals made in the ordinary course of business of
the disposing entity; or
(ii) disposals of assets in exchange for other assets
comparable or superior as to type, value and
quality; or
(iii) disposals of obsolete or surplus assets no
longer required for the purpose of the relevant
person's business; or
(iv) the payment of cash as consideration for the
acquisition of any asset or services; or
(v) disposals by one member of the Group to another
member of the Group (other than a Project Finance
Subsidiary), but only if, in the case of a
Subsidiary of the Company to whom the assets are
transferred, the Company owns directly or indirectly
at least a corresponding percentage of the ownership
interest in the transferee Subsidiary as in the
transferor Subsidiary; or
(vi) other disposals of assets which are integral to the
distribution and supply of electricity activities of
the Group to the extent that the value of those
assets disposed of during any financial year of the
Company is less than 20,000,000 pounds (as determined
by reference to the audited consolidated balance sheet
of the Company as at the end of the relevant
financial year or, in the case of any such asset
which was not taken into account for the purposes of
that balance sheet, its book value at the date of
disposal); or
(vii) other disposals of assets not referred to in
paragraph (vi) above to the extent that the value of
those assets disposed of during any financial year
of the Company is less than 50,000,000 pounds (as
determined by reference to the audited consolidated
balance sheet of the Company as at the end of the
relevant financial year or, in the case of any such
asset which was not taken into account for the
purposes of that balance sheet, its book value at
the date of disposal); or
(viii) disposals of receivables on arm's length terms
up to a maximum value:
(1) of 20,000,000 pounds, at any time when the
Capitalisation Ratio is in excess of 65 per
cent.; or
(2) of 50,000,000 pounds at any time when the
Capitalisation Ratio is less than or equal to
65 per cent.; or
(3) in excess of the relevant limit of 20,000,000
pounds or 50,000,000 pound, as appropriate, but
only if the net proceeds of any such excess
disposals are applied in accordance with this
Agreement in or towards prepayment of the Facility
B Loans, with any excess being applied first
in or towards prepayment of the Facility A Loans
pro rata and secondly in or towards prepayment of
the Facility C Loans pro rata. The Total
Facility A Commitments, the Total Facility B
Commitments or the Total Facility C
Commitments, as the case may be, shall be
reduced by an amount equal to the relevant
prepayment; or
(ix) any other disposal approved by the Majority Banks.
19.12 Change of business
The Company shall procure that no substantial change is
made to the general nature or scope of the business of
the Company or the Group from that carried on at the date
of this Agreement or those which are usual for
electricity companies in the United Kingdom as at the
date of this Agreement, including, without limitation,
electricity distribution, supply and generation,
electrical contracting and business activities relating
to the gas, telecommunication and water industries.
19.13 Holding Company
The Company shall not carry on any business (other than
the holding of shares in, the making of loans to and the
provision of administrative services to members of the
Group) or acquire any assets other than cash, cash
equivalents or shares in (or loans to) members of the
Group.
19.14 Mergers and acquisitions
(a) No Borrower shall, and the Company shall procure that no
other member of the Group will, enter into any
amalgamation, demerger, merger or reconstruction, except
for any amalgamation, merger or reconstruction between a
member of the Group (other than a Borrower or the
Licenceholder) and any other member of the Group (other
than a Borrower or the Licenceholder).
(b) No Borrower shall, and the Company shall procure that no
other member of the Group will, acquire any assets or
business or make any investment if the assets, business
or investment is substantial in relation to the Group
(other than the Acquisition), except for:
(i) acquisitions or investments made in the ordinary
course of business;
(ii) acquisitions or investments which the Target or any
of its Subsidiaries is legally obliged to make at
the date the Target becomes a member of the Group;
(iii) capital expenditure and any other expenditure,
in either case required to be carried out under the
Licence, any Licence Undertaking or any other
applicable law or regulation; and
(iv) other acquisitions or investments, the consideration
for which does not exceed (on a cumulative basis)
from the Unconditional Acceptances Date:
(A) until the Facility B Loans are repaid or
prepaid in full, 10,000,000 pounds (or its equivalent
in other currencies); or
(B) at any other time, 20 per cent. of the Adjusted
Capital and Reserves at such time (or its
equivalent in other currencies),
but only if, in either case, no Default is then
outstanding or will result from the acquisition or
investment.
19.15 Distributions
(a) The Company shall not declare, recommend, make or pay any
dividend, distribution or payment (including by way of
redemption, repurchase, defeasance, retirement, return or
repayment) to any of its shareholders (other than any
payment due to its shareholders for goods and/or services
received or provided in the ordinary course of business)
or make any payment (including by way of redemption,
repurchase, defeasance, retirement, return or repayment
and including the payment of interest) in respect of any
Subordinated Debt, if:
(i) after the relevant dividend, payment or distribution
is made, the Company is not able to perform its
obligations under Clause 9.6 (Mandatory
prepayment/cancellation); or
(ii) a Default is outstanding or will result from the
relevant dividend, payment or distribution; or
(iii) the Capitalisation Ratio exceeds, or will as a
result of the relevant dividend, payment or
distribution exceed, 70 per cent.
(b) The Company shall procure that, with effect from the date
on which the Target becomes a Subsidiary of the Company
and on a quarterly basis, the Target either:
(i) pays dividends to its shareholders; or
(ii) provides funds by way of the making of a loan or the
payment of interest on a loan or the repayment of a
loan to the Company,
in each case in the maximum amount available to the
Target out of Surplus Cashflow. The Company's obligation
under paragraph (b) above does not extend to procuring
that the Target makes a payment or provides funds if it
would be contrary to any law or regulation or would
breach the Licence or any Licence Undertaking. Without
limiting the above, if the Target could make a payment or
provide funds by complying with Section 155 of the
Companies Act 1985 and the Target is able to do so, then
the Company shall procure that the Target takes the
necessary steps under Section 155-158 of the Companies
Act 1985 to enable the payment to be made or the relevant
funds to be provided.
19.16 Lending and borrowing
(a) The Company will procure that the aggregate Borrowings of
the Target and its Subsidiaries taken together on a
consolidated basis plus (to the extent not otherwise
included in Borrowings of the Target and/or its
Subsidiaries) the amount of any actual or contingent
liabilities of the Target and/or its Subsidiaries:
(i) for Borrowings at that time of any person in which
the Target or any of its Subsidiaries has an
ownership interest; or
(ii) to provide funds by loan, subscription for share
capital or otherwise to any person in which the
Target or any of its Subsidiaries has an ownership
interest,
will not exceed the aggregate of:
(A) the outstanding principal amount from time to time
of the Facility C Loans;
(B) the principal amount of all Borrowings of those
companies outstanding at the Unconditional
Acceptances Date save to the extent refinanced by a
Utilisation of Facility C;
(C) the outstanding principal amount from time to time
of all Borrowings of those companies for which the
only creditor is the Company;
(D) any Borrowing of the Target and/or its Subsidiaries
where there is recourse falling within paragraph
(b)(iii) of the definition of "Project Finance
Indebtedness" in Clause 1.1 (Definitions)
outstanding from time to time; and
(E) the amount which, when aggregated with the amounts
referred to in sub-paragraphs (A), (B) and (D)
above, equals 400,000,000 pounds.
(b) No Borrower will, and each Borrower will procure that no
member of the Group will, be the creditor in respect of
any Borrowings, other than:
(i) any Borrowing entered into with the prior consent of
the Majority Banks;
(ii) any Borrowing under paragraph (b) of the definition
of "Borrowings" where trade credit is extended by
any member of the Group on normal commercial terms
and in the ordinary course of its business on
substantially the same terms (or terms more
favourable to it) and in similar circumstances as
for trade credit extended prior to the date of this
Agreement by the Target or its Subsidiaries;
(iii) loans made by one member of the Group to
another member of the Group; or
(iv) Borrowings not otherwise permitted under to
paragraphs (i) to (iii) above in an aggregate amount
for the Group as a whole at any time outstanding not
exceeding 10,000,000 pounds.
(c) Without prejudice to paragraph (a) above and unless the
Majority Banks otherwise consent (such consent not to be
unreasonably withheld), the Company shall procure that
the Target does not repay or redeem the Bonds otherwise
than as may be required by the relevant bondholders in
accordance with the terms of the Bonds.
19.17 Hedging
(a) Subject to paragraph (b) below, no Borrower shall, and
the Company shall ensure that none of its Subsidiaries
will, enter into any interest rate swap, cap, ceiling,
collar or floor or any currency swap, futures, foreign
exchange or commodity contract or option (whether over
the counter or exchange traded) or any similar treasury
transaction, other than spot foreign exchange contracts
entered into in the ordinary course of business, and
transactions for the hedging of actual or projected
interest rate, currency and/or commodity and/or energy
price exposures arising in the ordinary course of the
business activities of that member of the Group.
(b) (i) It is the policy of the Company to ensure that
the interest rate on at least 50 per cent. of the
aggregate of the outstanding Facility A Loans and
the Facility C Loans is either fixed or subject to a
cap (the level of which must be acceptable to the
Arrangers (acting reasonably)), based on current
market rates at the time the relevant hedging
arrangement is put in place and for an average
period of not less than three years from the
Unconditional Acceptances Date.
(ii) The Company shall enter into such Swap Documents as
are necessary to implement the above policy within
three months of the Unconditional Acceptances Date.
19.18 Insurance
The Company shall, and (after the Clean-Up Date) shall
procure that each member of the Group will:
(a) maintain with underwriters or insurance companies of
repute the policies of insurance in relation to its
business and assets which a prudent person carrying
on a similar business might be expected to maintain
(including policies to cover public and third party
liability and insurance against business
interruption) and any such other insurance as may be
required pursuant to the terms of any Finance
Document; and
(b) from time to time upon request by the Agent, supply
the Agent with copies of all such insurance policies
or certificates of insurance or such other evidence
of the existence of such policies as may be
reasonably acceptable to the Agent.
19.19 Constitutional Documents
No Borrower will, and the Company will procure that no
other member of the Group will, without the prior consent
of the Majority Banks or as required by law, amend or
seek or agree to amend or replace the memorandum or
articles of association or other constitutional documents
or by-laws of any member of the Group in any way which
would be likely materially and adversely to affect the
interests of the Banks under the Finance Documents.
19.20 Arm's length terms
No Borrower will, and the Company will procure that no
other member of the Group will, enter into any material
transaction with any other person otherwise than on arm's
length terms, other than:
(a) transactions previously approved by the Majority
Banks;
(b) loans from or to, or disposals by, one member of the
Group to another which are permitted under the
Finance Documents;
(c) transactions entered into on terms more favourable
to a member of the Group than arm's length terms;
and
(d) other transactions (including the issue of
Subordinated Debt) expressly permitted under the
Finance Documents.
19.21 Share capital and security
The Company shall ensure that no member of the Group
whose shares are charged under the Debenture shall issue
any further shares or alter any rights attaching to its
issued shares in existence at the date of this Agreement
unless those further shares are contemporaneously
charged, by way of fixed charge, to the Agent on the
terms of the Debenture.
19.22 Security perfection
The Company shall take all action required to perfect the
Security Interests created by the Debenture over the
Security Assets (as defined in the Debenture) as soon as
reasonably practicable after the date of the Debenture,
including (without limitation) sending to the Agent in
form and substance satisfactory to it (acting
reasonably):
(a) unless already delivered to the Agent, all share
certificates and all other documents of title in
relation to shares, stocks or other securities
charged under the Debenture together with share
transfer forms executed in blank or other documents
required to enable the Agent or its nominees to
become registered as the owner of the same; and
(b) duly executed notices of charge and acknowledgements
in the form of the relevant schedules to the
Debenture respectively in relation to the relevant
agreements or accounts charged under the Debenture,
but the Company will only be obliged to use
reasonable endeavours to obtain the acknowledgements
referred to above.
19.23 Compliance with laws
Without prejudice to Clause 19.24 (Licences and
regulatory matters), each Borrower will, and the Company
will procure that each other member of the Group will,
comply in all material respects with all applicable laws
and regulations, whether domestic or foreign, having
jurisdiction over it or any of its assets, failure to
comply with which has a Material Adverse Effect.
19.24 Licences and regulatory matters
The Company shall:
(a) with effect from the Clean-Up Date, ensure that the
Target and any Licenceholder (or any other relevant
member of the Group) complies in all material
respects with the terms of its Licence where failure
to comply has a Material Adverse Effect; and
(b) notify the Agent promptly upon receipt by it or any
member of the Group of any notice from the
government, any court or any regulatory authority or
agency which is reasonably likely to give rise to
the revocation, termination, material adverse
amendment, suspension or withdrawal of any Licence
granted in its favour (unless, contemporaneously,
that Licence is to be replaced, substituted or
reissued on the same, substantially the same or
improved terms); and
(c) with effect from the Clean-Up Date, procure that
each other member of the Group will, comply with the
requirements of all rules, regulations, orders and
other requirements of the Secretary of State and the
Director General under the Act or any other law
applicable to the conduct of the business of the
supply or distribution of electricity, where failure
to comply has a Material Adverse Effect.
19.25 Licence Undertakings
The Company will consult with the Banks with regard to
the terms of any Licence Undertaking which it or any
Holding Company of it or the Target may be required to
give to the Director General or the Secretary of State in
connection with the Offer and will not give and will
procure that such Holding Company and (once it has become
a Subsidiary of the Company and under its control and in
any event no later than 30 days after the Target becomes
a Subsidiary of the Company) the Target will not give any
such Licence Undertaking without prior consultation with
the Banks.
19.26 Business Consents
Each Borrower will, and the Company will procure that
each other member of the Group will, obtain, promptly
renew from time to time, and maintain in full force and
effect, and if so requested promptly furnish certified
copies to the Agent of, all such material authorisations
as may be required under any applicable law or regulation
or under the Licence or any Licence Undertaking to carry
on its business as it is being conducted from time to
time, where failure to obtain, renew or maintain any such
authorisation or non-compliance with the terms of the
same has a Material Adverse Effect.
19.27 The Offer
The Company shall:
(a) issue the Press Release within 7 days of the date of
this Agreement;
(b) until the earlier of the date the Offer lapses or is
finally closed, comply in all material respects with
the Financial Services Act 1986 and the Companies
Act 1985 and all other applicable laws and
regulations relevant in the context of the Offer,
including (subject to any waivers by the Panel) the
Code;
(c) provide each of the Arrangers with such information
regarding the progress of the Offer as it may
reasonably request;
(d) unless required to do so by law or under the Code
(and if so required, having notified the Agent as
soon as possible after becoming aware of the
requirement) not issue any press release or make any
statement during the course of the Offer which
contains any information or statement concerning the
Finance Documents or the Finance Parties without
first obtaining the prior approval of the
information or statement from the Arrangers, in each
case such approval not to be unreasonably withheld
or delayed;
(e) not purchase any Shares if to do so would mean that
it must make a mandatory offer under Rule 9 of the
Code;
(f) promptly give notices under Section 429 of the
Companies Act 1985 in respect of the Shares upon the
conditions contained in the Companies Act 1985 for
the giving of those notices being satisfied; and
(g) ensure that no amendment is made or waiver given in
respect of any condition of the Offer which, if not
waived, would entitle the Company to lapse the
Offer, unless the Majority Banks have given their
prior consent (such consent not to be unreasonably
withheld or delayed); however, any such amendment or
waiver must relate to:-
(i) any increase in the purchase price for the
Shares above the level agreed between the
Company and the Banks from time to time; or
(ii) the provisions relating to a material adverse
change affecting the Target.
19.28 Financial covenants
(a) In this Clause 19.28:-
"Adjusted Capital and Reserves"
means the amount (including any share premium) for the
time being paid up or credited as paid up on the issued
share capital of the Company, adjusted as follows:
(i) plus the outstanding amount of any Subordinated
Debt;
(ii) plus the amount standing to the credit (or, as the
case may be, minus the amount standing to the debit)
of the capital and revenue reserves of the Group;
(iii) plus any amount standing to the credit or minus any
amount standing to the debit of the consolidated
profit and loss account of the Group;
(iv) minus any distribution declared or made by the
Company or any of its Subsidiaries (other than to
another member of the Group) out of profits included
within reserves to the extent that those reserves
have not already been reduced on account of it;
(v) minus amounts attributable to the interests (if any)
of outside holders of issued share capital in any
member of the Group other than the Company itself;
and, for the purposes of the foregoing;
(A) no item shall be effectively deducted or added more
than once, all items shall be calculated on a
consolidated basis and (subject only as may be
required in order to reflect the express inclusion
or exclusion of items as specified in this
definition) in accordance with the Applicable
Accounting Principles; and
(B) where the calculation is being made as at the end of
any Accounting Period it shall be determined from
the balance sheet forming part of the relevant
quarterly or annual accounts for that Accounting
Period and, where the calculation is being made on
the Business Day following a Subsequent Capital
Injection for the purposes of paragraph (a) of the
definition of "Margin Adjustment Date", it shall be
determined from a certificate of two senior
authorised officers of the Company delivered to the
Agent following that Subsequent Capital Injection.
"Capitalisation Ratio"
means, at any time, the ratio of Consolidated Net Total
Borrowings to the aggregate of Consolidated Net Total
Borrowings and Adjusted Capital and Reserves, expressed
as a percentage.
"Consolidated EBITDA"
for any period comprising an annual Accounting Period of
the Company or consecutive quarterly Accounting Periods
of the Company (taken together as one period) means the
profit of the Group for such period:
(i) before deducting all depreciation and other
amortisation (including, without limitation,
amortisation of goodwill arising from and upon the
acquisition of the Shares and amortisation of Offer
Costs in accordance with Financial Reporting
Standard 4 issued by the Accounting Standards
Board);
(ii) before taking into account all Extraordinary Items
(whether positive or negative) but after taking into
account all Exceptional Items (whether positive or
negative);
(iii) before deducting tax;
(iv) before taking into account Consolidated Net Interest
Payable for such period;
(v) before deducting any Offer Costs; and
(vi) after deducting any gain, or adding any loss, to
book value arising in favour of the Group on the
sale, lease or other disposal of any asset (other
than on the sale of trading stock) during such
period and deducting any gain, or adding any loss,
arising on revaluation of any asset during such
period, in each case to the extent that it would
otherwise be taken into account, whether as an
Exceptional Item or otherwise,
and, for the purposes of the foregoing, no item shall be
effectively deducted or credited more than once in this
calculation, all items shall be determined on a
consolidated basis and (subject only as may be required
in order to reflect the express inclusion or exclusion of
items as specified in this definition) in accordance with
the Applicable Accounting Principles and as determined
from the consolidated accounts of the Group for that
annual Accounting Period or for the relevant Accounting
Periods falling within that period.
"Consolidated Net Interest Payable"
means Consolidated Total Interest Payable less any
interest or amounts in the nature of interest receivable
during the relevant annual Accounting Period of the
Company or consecutive quarterly Accounting Periods of
the Company (taken together as one period), determined on
the same basis and manner as for Consolidated Total
Interest Payable.
"Consolidated Net Total Borrowings"
at any time means the aggregate at that time of the
Borrowings of the members of the Group from sources
external to the Group,
(i) plus (to the extent not otherwise included) the
amount of any actual or contingent liability of any
member of the Group:
(A) for Borrowings at that time of any person in
which any member of the Group has an ownership
interest; or
(B) to provide funds by loan, subscription for
share capital or otherwise to any person in
which any member of the Group has an ownership
interest;
(ii) less the cash in hand and cash equivalents of the
members of the Group at that time,
calculated on a consolidated basis and (subject only as
may be required in order to reflect the express inclusion
or exclusion of items as specified herein and/or in the
definition of Borrowings in this Clause) in accordance
with the Applicable Accounting Principles and, (1) where
the calculation is being made as at the end of any
Accounting Period for which a consolidated balance sheet
of the Group has been delivered to the Agent, as shown in
that balance sheet; and (2) where the calculation is
being made on any other day following a Subsequent
Capital Injection for the purposes of paragraph (a) of
the definition of "Margin Adjustment Date", it shall be
determined from a certificate of two senior authorised
officers of the Company delivered to the Agent following
that Subsequent Capital Injection.
"Consolidated Total Interest Payable"
for any period comprising an annual Accounting Period of
the Company or consecutive quarterly Accounting Periods
of the Company (taken together as one period) means the
interest (and all amounts required by the Applicable
Accounting Principles to be accounted for as interest)
accrued on Borrowings of the Group during such period as
an obligation of any member or members of the Group
(whether or not paid or capitalised during or deferred
for payment after such period) adjusted to take account
of any amount constituting interest receivable by any
members of the Group under interest rate and/or currency
hedging agreements or instruments under which all parties
are in compliance with their payment and other material
obligations, all determined on a consolidated basis and
(subject only as may be required in order to reflect the
express inclusion or exclusion of items as specified in
this definition) in accordance with the Applicable
Accounting Principles and as shown in the consolidated
accounts of the Group for such annual Accounting Period
or for the Accounting Periods falling within such period.
"Exceptional Items"
has the meaning given to it in Financial Reporting
Standard 3 issued by the Accounting Standards Board (as
in force at the date of this Agreement), but shall
exclude any items falling within the definition of
Extraordinary Items.
"Extraordinary Items"
has the meaning given to it in Financial Reporting
Standard 3 issued by the Accounting Standards Board (as
in force at the date of this Agreement) but in addition
shall include those items listed in paragraph 20 thereof.
(b) (i) All the terms used in paragraph (a) above are
to be calculated in accordance with the Applicable
Accounting Principles.
(ii) If there is a dispute as to any interpretation of or
computation for paragraph (a) above, the
interpretation or computation of the Auditors
prevails.
(c) The Company shall procure that:-
(i) as of each date on which it is tested under
paragraph (d) below, the ratio of Consolidated
EBITDA to Consolidated Net Interest Payable is no
less than:
(A) for the period from the date on which the
Target becomes a Subsidiary of the Company
until the date on which the Facility B Loans
are repaid or prepaid in full, 1.75:1; and
(B) thereafter, 2.0:1; and
(ii) the Capitalisation Ratio shall not, as of each date
on which it is tested under paragraph (e) below,
exceed:
(A) for the period from the date on which the
Target becomes a Subsidiary of the Company
until the date on which the Facility B Loans
are repaid or prepaid in full, 90 per cent.;
(B) for the period from the date on which the
Facility B Loans are repaid or prepaid in full
until the date falling three years after the
date of this Agreement, 75 per cent.; and
(C) thereafter, 65 per cent.
(d) (i) The first test of the covenant set out in
paragraph (c)(i) above shall be made in respect of
the period beginning on the date the Target becomes
a member of the Group and ending on its First Test
Date;
(ii) the next three tests of the covenant set out in
paragraph (c)(i) above shall be made on a cumulative
basis as of the expiry of each subsequent quarterly
Accounting Period; and
(iii)each test of the covenant set out in
paragraph (c)(i) above thereafter shall be made on a
quarterly basis and in respect of the annual
Accounting Period ending on the expiry of the
relevant quarterly Accounting Period.
(e) The tests of the covenant set out in paragraph (c)(ii)
above shall be made as of:
(i) its First Test Date;
(ii) the date of any Subsequent Capital Injection; and
(iii) the last day of each quarterly Accounting Period
after its First Test Date.
20. DEFAULT
20.1 Events of Default
Each of the events set out in Clauses 20.2 (Non-payment)
to 20.20 (Material adverse change) (inclusive) is an
Event of Default (whether or not caused by any reason
whatsoever outside the control of any Borrower or any
other person).
20.2 Non-payment
A Borrower does not pay on the due date any amount
payable by it under the Finance Documents at the place at
and in the currency in which it is expressed to be
payable and (if caused by technical or administrative
error) the non-payment continues unremedied for
3 Business Days from the receipt by it of notice of non-
payment from the Agent.
20.3 Breach of other obligations
(a) The Company fails to comply with any provision of Clauses
19.8 (Pari passu ranking) to 19.15 (Distributions)
inclusive, Clause 19.20 (Arm's length terms) and
Clause 19.28(c)(i) (Financial covenants);
(b) the Company fails to comply with Clause 19.28(c)(ii)
(Financial covenants) and, if that default is capable of
remedy, it is not remedied within 3 Business Days of the
default; or
(c) a Borrower does not comply with any provision of the
Finance Documents (other than those referred to in
Clause 20.2 (Non-payment) or paragraph (a) or (b) above)
and, if that default is capable of remedy, it is not
remedied within 28 days of the earlier of the relevant
Borrower becoming aware of the default and receipt by it
of a notice of default from the Agent.
20.4 Misrepresentation
A representation, warranty or statement made or repeated
in or in connection with any Finance Document or in any
document delivered by or on behalf of any Borrower under
or in connection with any Finance Document is incorrect
in any material respect when made or deemed to be made or
repeated by reference to the facts and circumstances then
subsisting and, if the circumstances causing the
misrepresentation are capable of remedy within that
period, that misrepresentation is not remedied within 28
days of the earlier of the relevant Borrower becoming
aware of the misrepresentation and receipt by it of
notice from the Agent requiring remedy.
20.5 Cross-default
(a) Any Financial Indebtedness of a member of the Group is
not paid when due or within any applicable grace period;
or
(b) an event of default howsoever described occurs under any
document relating to Financial Indebtedness of a member
of the Group; or
(c) any Financial Indebtedness of a member of the Group
becomes prematurely due and payable or is placed on
demand as a result of an event of default (howsoever
described) under the document relating to that Financial
Indebtedness; or
(d) any commitment for, or underwriting of, any Financial
Indebtedness of a member of the Group is cancelled or
suspended as a result of an event of default (howsoever
described) under the document relating to that Financial
Indebtedness; or
(e) any Security Interest securing Financial Indebtedness
over any asset of a member of the Group becomes
enforceable,
unless, in any such case or cases:-
(i) the aggregate amount of Financial Indebtedness is
less than 20,000,000 pounds (or its equivalent in other
currencies) and for this purpose, the amount of any
Financial Indebtedness specified in paragraph (b)
above will be determined after making the
adjustments specified in paragraphs (b) and (c) of
the definition of "Borrowings" contained in
Clause 1.1 (Definitions); or
(ii) the Financial Indebtedness is that of the Target or
a Subsidiary of the Target, the relevant event
occurs prior to the Clean-Up Date and the Financial
Indebtedness is to be refinanced by a Loan prior to
the Clean-Up Date.
20.6 Insolvency
(a) A Borrower or a Material Subsidiary is, or is deemed for
the purposes of any law to be, unable to pay its debts as
they fall due or to be insolvent, or admits inability to
pay its debts as they fall due; or
(b) a Borrower or a Material Subsidiary suspends making
payments on all or any class of its debts or announces an
intention to do so, or a moratorium is declared in
respect of all or any class of its indebtedness; or
(c) a Borrower or a Material Subsidiary by reason of
financial difficulties, begins negotiations with one or
more of its creditors with a view to the readjustment or
rescheduling of all or any class of its indebtedness.
20.7 Insolvency proceedings
(a) Any step (including petition, proposal or convening a
meeting) is taken with a view to a composition,
assignment or arrangement with any creditors of a
Borrower or a Material Subsidiary; or
(b) a meeting of a Borrower or a Material Subsidiary is
convened for the purpose of considering any resolution
for (or to petition for) its winding-up or its
administration or any such resolution is passed; or
(c) any person presents a petition for the winding-up or for
the administration of a Borrower or a Material
Subsidiary, and, in the case of a petition for winding-up
presented by a creditor, it is not withdrawn, discharged
or stayed within 21 days; or
(d) any order is made for the winding-up or administration of
a Borrower or a Material Subsidiary; or
(e) any other step (including petition, proposal or convening
a meeting) is taken with a view to the rehabilitation,
administration, custodianship, liquidation, winding-up or
dissolution of any Borrower or a Material Subsidiary or
any other insolvency proceedings involving Borrower or a
Material Subsidiary, and, in the case of any such step
taken by a creditor, it is not withdrawn, discharged or
stayed within 21 days,
except for any which arises from a Permitted Transaction.
20.8 Appointment of receivers and managers
(a) Any liquidator, trustee in bankruptcy, judicial
custodian, compulsory manager, receiver, administrative
receiver, administrator or the like is appointed in
respect of a Borrower or a Material Subsidiary or any
part of its assets, otherwise than in connection with a
Permitted Transaction; or
(b) the directors of a Borrower or a Material Subsidiary
requests the appointment of a liquidator, trustee in
bankruptcy, judicial custodian, compulsory manager,
receiver, administrative receiver, administrator or the
like, otherwise than in connection with a Permitted
Transaction; or
(c) any other step is taken to enforce any Security Interest
over any part of the assets of a Borrower or a Material
Subsidiary and is not withdrawn, discharged or stayed
within 21 days.
20.9 Creditors' process
Any attachment, sequestration, distress or execution
affects any assets of a Borrower or a Material Subsidiary
having an aggregate value of 20,000,000 pounds (or its
equivalent in other currencies) and is not discharged
within 14 days, unless:
(a) it is being contested in good faith with due
diligence; and
(b) in the reasonable opinion of the Majority Banks, it
does not have a Material Adverse Effect.
20.10 Analogous proceedings
There occurs, in relation to a Borrower or Material
Subsidiary, any event anywhere which, in the opinion of
the Majority Banks, appears to correspond with any of
those mentioned in Clauses 20.6 (Insolvency) to 20.9
(Creditors' process) (inclusive).
20.11 Cessation of business
A Borrower or a Material Subsidiary ceases, or threatens
to cease, to carry on all or a substantial part of its
business, other than in connection with a Permitted
Transaction.
20.12 Unlawfulness
It is or becomes unlawful for any Borrower to perform any
of its material obligations under the Finance Documents.
20.13 Ownership of the Target
At any time after the Clean-Up Date, less than 75 per
cent. of the issued share capital of the Target is
beneficially owned by the Company.
20.14 Ownership of the Company
(a) The Parent transfers any of the shares legally and
beneficially owned by it to an entity other than:
(i) to Entergy Corporation or any of its Subsidiaries;
or
(ii) to an entity, which has (or has an Affiliate which
has) a credit rating of at least BBB- with Standard
& Poor's rating group or a comparable rating with
any other rating agency.
(b) The issued share capital of the Company ceases to be
legally and beneficially owned as to at least 50 per
cent. by Entergy Corporation and/or any of its
Subsidiaries.
(c) The issued share capital of the Company at any time is
owned by more than three persons and, for this purpose,
"person" includes any group of persons which are
Affiliates.
20.15 Licence
(a) The Licence is revoked or surrendered or ceases to be
held by the Target or a wholly-owned Subsidiary of the
Target or the Company, other than in circumstances which
permit the Target or one of its wholly-owned Subsidiaries
to carry on the distribution business of the Target
substantially as envisaged at the date of this Agreement
either without the Licence as a result of any change in
the Act or with a new public electricity supply licence
issued to such person under the Act whose terms are not
materially less favourable than those of the Licence; or
(b) the Licence or any substitute licence contemplated by
paragraph (b) above is materially modified in any manner
which, in the reasonable opinion of the Majority Banks,
has (whether immediately or in the course of time) a
Material Adverse Effect.
20.16 Compliance with the Act
The Licenceholder fails to comply with:
(a) a final order (within the meaning of Section 25 of
the Act); or
(b) a provisional order (within the meaning of that
section) which has been confirmed under that
section,
and, in either case, the order has not been revoked under
that section or the validity of the order has not been
questioned under Section 27 of the Act.
20.17 Pooling and Settlement Agreement
(a) Any notice requiring the Target to cease to be a party to
the Pooling and Settlement Agreement is given to the
Target under the Pooling and Settlement Agreement.
(b) The Target ceases to be a party to the Pooling and
Settlement Agreement.
20.18 Expropriation
The authority or ability of the Company or the Target or
the Licenceholder to conduct its business is wholly or
substantially curtailed by any expropriation or
renationalisation by or on behalf of any governmental
authority.
20.19 Security
The Debenture or the guarantee of the Company or any
Subordination Agreement is ineffective or is alleged by a
Borrower or (in the case of a Subordination Agreement)
the relevant junior creditor to be ineffective for any
reason.
20.20 Material adverse change
Any event or series of events occurs which, in the
reasonable opinion of the Majority Banks, has or is
reasonably likely to have a material adverse effect on
the ability of a Borrower to comply with:
(a) its payment obligations under any Finance Document;
or
(b) its obligations under Clause 19.28 (Financial
covenants).
20.21 Acceleration
On and at any time after the occurrence of an Event of
Default the Agent may, and shall if so directed by the
Majority Banks, by notice to the Company:-
(a) cancel the Total Commitments; and/or
(b) demand that all or part of the Loans, together with
accrued interest, and all other amounts accrued
under this Agreement be immediately due and payable,
whereupon they shall become immediately due and
payable; and/or
(c) demand that all or part of the Loans be payable on
demand, whereupon they shall immediately become
payable on demand by the Agent (acting on the
instructions of the Majority Banks); and/or
(d) demand immediate full cash cover in respect of the
Guarantee whereupon the Company shall immediately
provide to the Agent by way of payment into a
Security Account cash cover in an amount equal to
the Banks' maximum aggregate actual and contingent
liability under the Guarantee.
20.22 Limited rights of rescission
Prior to the end of the Certain Funds Period, no Bank has
or may seek to exercise any right of rescission or other
remedy (including under Clauses 4.2 (Further conditions
precedent) and 20.21 (Acceleration)) in consequence of:
(a) any of the representations or warranties of any
Borrower in the Finance Documents (other than those
made by the Company in respect of itself and
contained in Clauses 18.2(a) (Status), 18.3 (Powers
and authority), 18.4 (Legal validity) and 18.5 (Non-
conflict)) being or being proved to have been
incorrect in any respect; or
(b) the occurrence of a Default other than a Major
Default.
21. THE AGENT AND THE ARRANGERS
21.1 Appointment and duties of the Agent
(a) Each Finance Party (other than the Agent) irrevocably
appoints the Agent to act as its agent under and in
connection with the Finance Documents, and irrevocably
authorises the Agent on its behalf to perform the duties
and to exercise the rights, powers and discretions that
are specifically delegated to it under or in connection
with the Finance Documents, together with any other
incidental rights, powers and discretions. The Agent
shall have only those duties which are expressly
specified in this Agreement. Those duties are solely of a
mechanical and administrative nature.
(b) The Agent agrees to execute a Subordination Agreement,
duly executed by the Company and the relevant junior
creditor, promptly on request by the Company.
21.2 Role of the Arrangers
Except as otherwise provided in this Agreement, no
Arranger has any obligations of any kind to any other
Party under or in connection with any Finance Document.
21.3 Relationship
The relationship between the Agent and the other Finance
Parties is that of agent and principal only. Nothing in
this Agreement constitutes the Agent as trustee or
fiduciary for any other Party or any other person and the
Agent need not hold in trust any moneys paid to it for a
Party or be liable to account for interest on those
moneys.
21.4 Majority Banks' directions
The Agent will be fully protected if it acts in
accordance with the instructions of the Majority Banks in
connection with the exercise of any right, power or
discretion or any matter not expressly provided for in
the Finance Documents. Any such instructions given by the
Majority Banks will be binding on all the Banks. In the
absence of such instructions the Agent may act as it
considers to be in the best interests of all the Banks.
21.5 Delegation
The Agent may act under the Finance Documents through its
personnel and agents.
21.6 Responsibility for documentation
None of the Agent and the Arrangers is responsible to any
other Party for:-
(a) the execution, genuineness, validity, enforceability
or sufficiency of any Finance Document or any other
document;
(b) the collectability of amounts payable under any
Finance Document; or
(c) the accuracy of any statements (whether written or
oral) made in or in connection with any Finance
Document (including the Information Memorandum).
21.7 Default
(a) The Agent is not obliged to monitor or enquire as to
whether or not a Default has occurred. The Agent will not
be deemed to have knowledge of the occurrence of a
Default. However, if the Agent receives notice from a
Party referring to this Agreement, describing the Default
and stating that the event is a Default, it shall
promptly notify the Banks.
(b) The Agent may require from the Banks the receipt of
security satisfactory to it whether by way of payment in
advance or otherwise, against any liability or loss which
it will or may incur in taking any proceedings or action
arising out of or in connection with any Finance Document
before it commences those proceedings or takes that
action.
21.8 Exoneration
(a) Without limiting paragraph (b) below, the Agent will not
be liable to any other Party for any action taken or not
taken by it under or in connection with any Finance
Document, unless directly caused by its gross negligence
or wilful misconduct.
(b) No Party may take any proceedings against any officer,
employee or agent of the Agent in respect of any claim it
might have against the Agent or in respect of any act or
omission of any kind (including negligence or wilful
misconduct) by that officer, employee or agent in
relation to any Finance Document.
21.9 Reliance
The Agent may:-
(a) rely on any notice or document believed by it to be
genuine and correct and to have been signed by, or
with the authority of, the proper person;
(b) rely on any statement made by a director or employee
of any person regarding any matters which may
reasonably be assumed to be within his knowledge or
within his power to verify; and
(c) engage, pay for and rely on legal or other
professional advisers selected by it (including
those in the Agent's employment and those
representing a Party other than the Agent).
21.10 Credit approval and appraisal
Without affecting the responsibility of any Borrower for
information supplied by it or on its behalf in connection
with any Finance Document, each Bank confirms that it:-
(a) has made its own independent investigation and
assessment of the financial condition and affairs of
each Borrower and its related entities in connection
with its participation in this Agreement and has not
relied exclusively on any information provided to it
by the Agent or an Arranger in connection with any
Finance Document; and
(b) will continue to make its own independent appraisal
of the creditworthiness of each Borrower and its
related entities while any amount is or may be
outstanding under the Finance Documents or any
Commitment is in force.
21.11 Information
(a) The Agent shall promptly forward to the person concerned
the original or a copy of any document which is delivered
to the Agent by a Party for that person.
(b) The Agent shall promptly supply a Bank with a copy of
each document received by the Agent under Clause 4
(Conditions precedent) or 28.4 (Target as Borrower) upon
the request and at the expense of that Bank.
(c) Except where this Agreement specifically provides
otherwise, the Agent is not obliged to review or check
the accuracy or completeness of any document it forwards
to another Party.
(d) Except as provided above, the Agent has no duty:-
(i) either initially or on a continuing basis to provide
any Bank with any credit or other information
concerning the financial condition or affairs of any
Borrower or any related entity of any Borrower
whether coming into its possession or that of any of
its related entities before, on or after the date of
this Agreement; or
(ii) unless specifically requested to do so by a Bank in
accordance with this Agreement, to request any
certificates or other documents from any Borrower.
21.12 The Agent and the Arrangers individually
(a) If it is also a Bank, each of the Agent and the Arrangers
has the same rights and powers under the Finance
Documents as any other Bank and may exercise those rights
and powers as though it were not the Agent or an
Arranger.
(b) Each of the Agent and the Arrangers may:-
(i) carry on any business with a Borrower or its related
entities;
(ii) act as agent or trustee for, or in relation to any
financing involving, a Borrower or its related
entities; and
(iii) retain any profits or remuneration in connection
with its activities under this Agreement or in
relation to any of the foregoing.
(c) In acting as Agent for the Banks, the Agent's agency
division shall be treated as a separate entity from any
other of its divisions or departments and,
notwithstanding the foregoing provisions of this
Clause 21, if the Agent should act for any member of the
Group in any capacity in relation to any other matter,
any information given by that member of the Group to the
Agent in such other capacity may be treated as
confidential by the Agent.
21.13 Indemnities
(a) Without limiting the liability of any Borrower under the
Finance Documents, each Bank shall forthwith on demand
indemnify the Agent for its proportion of any liability
or loss incurred by the Agent in any way relating to or
arising out of its acting as the Agent, except to the
extent that the liability or loss arises directly from
the Agent's gross negligence or wilful misconduct.
(b) A Bank's proportion of the liability or loss set out in
paragraph (a) above is the proportion which its
participation in the Utilisations (if any) bear to all
the Utilisations on the date of the demand. If, however,
there are no Utilisations outstanding on the date of
demand, then the proportion will be the proportion which
its Commitments bears to the Total Commitments at the
date of demand or, if the Total Commitments have been
cancelled, bore to the Total Commitments immediately
before being cancelled.
21.14 Compliance
(a) The Agent may refrain from doing anything which might, in
its opinion, constitute a breach of any law or regulation
or be otherwise actionable at the suit of any person, and
may do anything which, in its opinion, is necessary or
desirable to comply with any law or regulation of any
jurisdiction.
(b) Without limiting paragraph (a) above, the Agent need not
disclose any information relating to any Borrower or any
of its related entities if the disclosure might, in the
opinion of the Agent, constitute a breach of any law or
regulation or any duty of secrecy or confidentiality or
be otherwise actionable at the suit of any person.
21.15 Resignation of Agent
(a) Notwithstanding its irrevocable appointment, the Agent
may resign by giving notice to the Banks and the Company,
in which case the Agent may forthwith appoint one of its
Affiliates as successor Agent or, failing that, the
Majority Banks may (after consultation with the Company)
appoint a successor Agent.
(b) If the appointment of a successor Agent is to be made by
the Majority Banks but they have not, within 30 days
after notice of resignation, appointed a successor Agent
which accepts the appointment, the retiring Agent may
appoint a successor Agent.
(c) The resignation of the retiring Agent and the appointment
of any successor Agent will both become effective only
upon the successor Agent notifying all the Parties that
it accepts the appointment. On giving the notification,
the successor Agent will succeed to the position of the
retiring Agent and the term "Agent" will mean the
successor Agent.
(d) The retiring Agent shall, at its own cost, make available
to the successor Agent such documents and records and
provide such assistance as the successor Agent may
reasonably request for the purposes of performing its
functions as the Agent under this Agreement.
(e) Upon its resignation becoming effective, this Clause 21
(The Agent and the Arrangers) shall continue to benefit
the retiring Agent in respect of any action taken or not
taken by it under or in connection with the Finance
Documents while it was the Agent, and, subject to
paragraph (d) above, it shall have no further obligation
under any Finance Document.
(f) If so instructed by the Majority Banks, the Agent shall
resign in accordance with paragraph (a) above. However,
in this event the Agent may not appoint a successor
Agent.
21.16 Banks
The Agent may treat each Bank as a Bank, entitled to
payments under this Agreement and as acting through its
Facility Office(s) until it has received notice from the
Bank to the contrary not less than 5 Business Days prior
to the relevant payment.
21.17 Agent as Trustee
(a) The Agent in its capacity as trustee or otherwise under
the Debenture:-
(i) is not liable for any failure, omission or defect in
perfecting or registering the security constituted
or created by any Finance Document;
(ii) may accept without enquiry such title as the Company
may have to any asset secured by the Debenture; and
(iii) is not under any obligation to hold any Finance
Document or any other document in connection with
the Finance Documents or the assets secured by any
Finance Document (including title deeds) in its own
possession or to take any steps to protect or
preserve the same. The Agent may permit any member
of the Group to retain any Finance Document or other
document in its possession.
(b) Save as otherwise provided in the Finance Documents, all
moneys which under the trusts contained in the Finance
Documents are received by the Agent in its capacity as
trustee or otherwise may be invested in the name of or
under the control of the Agent in any investment
authorised by English law for the investment by trustees
of trust money or in any other investments which may be
selected by the Agent. Additionally, the same may be
placed on deposit in the name of or under the control of
the Agent at such bank or institution (including the
Agent) and upon such terms as the Agent may think fit.
22. FEES
22.1 Front-end fee
The Company shall pay (or procure the payment) to the
Agent for the Arrangers a front-end fee in the amounts
and on the dates agreed in the Fee Letter between the
Company and the Arrangers.
22.2 Commitment fee
(a) The Company shall pay to the Agent for each Bank a
commitment fee computed at the rate of:
(i) (A) during the period from the date of this
Agreement up to (but excluding) the
Unconditional Acceptances Date, 0.15 per cent.
per annum; and
(B) subsequently up to (and including) the
Facility A Final Repayment Date, 50 per cent.
of the applicable Margin,
on the undrawn, uncancelled amount of that Bank's
Facility A Commitment; any change to the commitment
fee under this sub-paragraph takes effect from the
Business Day following receipt of the relevant
compliance certificate providing for a change to the
applicable Margin, even though the applicable Margin
may only apply to Facility A Loans made after that
date, or, in any other case, the relevant Margin
Adjustment Date;
(ii) during the period from the date of this Agreement up
to (and including) the Facility B Term Date, 50 per
cent. of the applicable Margin on the undrawn,
uncancelled amount of that Bank's Facility B
Commitment; and
(iii) (A) during the period from the date of this
Agreement up to (but excluding) the
Unconditional Acceptances Date, 0.15 per cent.
per annum; and
(B) subsequently up to (and including) the
Facility C Final Repayment Date, 50 per cent.
of the applicable Margin,
on the undrawn, uncancelled amount of that Bank's
Facility C Commitment.
(b) Accrued commitment fee is payable quarterly in arrear.
Accrued commitment fee is also payable to the Agent for
the relevant Bank(s) on the cancelled amount of its
Commitment at the time the cancellation takes effect.
22.3 Guarantee fee
(a) The Company shall pay to the Agent for the Banks a
guarantee fee computed at the rate equivalent to the
Margin applicable to Facility A Loans on the Guarantee
Outstandings from the Issue Date of the Guarantee up to
and including the Expiry Date. Any change to the
guarantee fee takes effect from the next date an
instalment of guarantee fee is payable which falls after
the Business Day following receipt of the relevant
compliance certificate providing for a change to the
applicable Margin.
(b) Guarantee fee is payable quarterly in advance from the
Issue Date of the Guarantee, and on the Expiry Date of
the Guarantee.
22.4 Agent's fee
The Company shall pay (or procure the payment) to the
Agent for its own account an agency fee in the amount
agreed in the Fee Letter between the Company and the
Agent. The agency fee is payable annually in advance.
The first payment of this fee is payable on the date of
this Agreement and each subsequent payment is payable on
each anniversary of the date of this Agreement for so
long as any amount is or may be outstanding under this
Agreement or any Commitment is in force.
22.5 Issuing Bank's fee
The Company shall pay to the Issuing Bank for its own
account a fronting fee in the amount and on the dates
agreed in the Fee Letter between the Company and the
Agent.
22.6 VAT
Any fee referred to in this Clause 22 (Fees) is exclusive
of any value added tax or any other tax which might be
chargeable in connection with that fee. If any value
added tax or other tax is so chargeable, it shall be paid
by the Company at the same time as it pays the relevant
fee.
23. EXPENSES
23.1 Initial and special costs
The Company shall forthwith on demand pay (or procure the
payment) to the Agent and the Arrangers the amount of all
reasonable costs and expenses (including legal fees)
reasonably incurred by them in connection with:-
(a) Syndication and the negotiation, preparation,
printing and execution of this Agreement and any
other documents referred to in this Agreement but,
subject to the maximum limit agreed in respect of
legal fees in the Fee Letter referred to in
Clause 22.1 (Front-end fee);
(b) the negotiation, preparation, printing and execution
of any other Finance Document (other than a Novation
Certificate or the Syndication Agreement) executed
after the date of this Agreement; and
(c) any amendment, waiver, consent or suspension of
rights (or any proposal for any of the foregoing)
requested by or on behalf of a Borrower or, in the
case of Clause 2.3 (Change of currency), the Agent
and relating to a Finance Document or a document
referred to in any Finance Document.
23.2 Enforcement costs
The Company shall forthwith on demand pay to each Finance
Party the amount of all reasonable costs and expenses
(including, without limitation, legal fees) incurred by
it in connection with the enforcement of, or the
preservation of any rights under, any Finance Document.
24. STAMP DUTIES
The Company shall pay and forthwith on demand indemnify
each Finance Party against any liability it incurs in
respect of any stamp, registration and similar tax which
is or becomes payable in connection with the entry into,
performance or enforcement of any Finance Document.
25. INDEMNITIES
25.1 Currency indemnity
(a) If a Finance Party receives an amount in respect of a
Borrower's liability under the Finance Documents or if
that liability is converted into a claim, proof,
judgement or order in a currency other than the currency
(the "contractual currency") in which the amount is
expressed to be payable under the relevant Finance
Document:-
(i) that Borrower shall indemnify that Finance Party as
an independent obligation against any loss or
liability arising out of or as a result of the
conversion;
(ii) if the amount received by that Finance Party, when
converted into the contractual currency at a market
rate in the usual course of its business, is less
than the amount owed in the contractual currency,
the Borrower concerned shall forthwith on demand pay
to that Finance Party an amount in the contractual
currency equal to the deficit; and
(iii) the Borrower shall pay to the Finance Party
concerned on demand any exchange costs and taxes
payable in connection with any such conversion.
(b) Each Borrower waives any right it may have in any
jurisdiction to pay any amount under the Finance
Documents in a currency other than that in which it is
expressed to be payable.
25.2 Other indemnities
The Company shall forthwith on demand indemnify each
Finance Party against any loss or liability which that
Finance Party incurs as a consequence of:-
(a) the occurrence of any Default;
(b) a change in currency of a country or the operation
of Clause 2.3 (Change of currency), the operation of
Clause 20.21 (Acceleration) or Clause 31 (Pro rata
sharing);
(c) any payment of principal or an overdue amount being
received from any source otherwise than on its due
date and, for the purposes of this paragraph (c),
the Repayment Date of an overdue amount is the last
day of each Designated Term (as defined in
Clause 11.3 (Default interest));
(d) (other than by reason of negligence or default by
that Finance Party) a Loan not being made after the
Borrower has delivered a Request for that Loan; or
(e) any failure by a member of the Group to comply with
the Environmental Laws applicable to it or any
Environmental Licence held by it.
The Company's liability in each case includes any loss of
margin or other loss or expense on account of funds
borrowed, contracted for or utilised to fund any amount
payable under any Finance Document, any amount repaid or
prepaid or any Loan.
25.3 Acquisition financing indemnity
(a) The Company shall within 5 Business Days of demand
indemnify each Finance Party against any loss or
liability which that Finance Party suffers or incurs as a
consequence of any litigation proceeding arising, pending
or threatened against that Finance Party as a result of
the Offer (whether or not made) or of it agreeing to
finance or refinance any acquisition by the Company or
any person acting in concert with the Company of any
Shares or arising out of the use of proceeds of any
Utilisation ("relevant litigation") except to the extent
caused by its gross negligence or wilful misconduct.
(b) A Finance Party shall notify the Company promptly upon
becoming aware, and in reasonable detail, of any relevant
litigation and shall keep the Company informed of its
progress.
(c) A Finance Party shall conduct any relevant litigation in
good faith and will give careful consideration to the
views of the Company in relation to the appointment of
professional advisers and the conduct of the litigation
taking into account (to the extent practicable) both its
interests and the interests of the Company.
(d) A Finance Party may only concede or compromise any claim
in respect of any relevant litigation if it is acting
reasonably and has consulted the Company before so doing.
(e) Notwithstanding paragraphs (a) to (d) above, a Finance
Party is not required to disclose to the Company any
matter in respect of which it is under a duty of non-
disclosure or which is subject to any attorney/client
privilege, or which relates to a Finance Party's policy
or other extrinsic matters. Any information disclosed by
a Finance Party to the Company under this Clause 25.3
shall be subject to the same conditions of
confidentiality as those set out in Clause 29 (Disclosure
of information) in relation to disclosure to potential
transferees.
26. EVIDENCE AND CALCULATIONS
26.1 Accounts
Accounts maintained by a Finance Party in connection with
this Agreement are prima facie evidence of the matters to
which they relate.
26.2 Certificates and determinations
Any certification or determination by a Finance Party of
a rate or amount under the Finance Documents is prima
facie evidence of the matters to which it relates. Any
determination by a Finance Party of an amount under a
Finance Document shall contain a calculation of the
amount in reasonable detail.
26.3 Calculations
Interest (including any applicable MLA Cost) and the fee
payable under Clause 22.2 (Commitment fee) accrue from
day to day and are calculated on the basis of the actual
number of days elapsed and a year of 365 days or (in the
case of Commitment fee or where market practice so
dictates) 360 days. Guarantee fee is calculated on the
basis of the actual number of days in the relevant period
and a year of 365 days.
27. AMENDMENTS AND WAIVERS
27.1 Procedure
(a) Subject to Clause 27.2 (Exceptions), any term of the
Finance Documents may be amended or waived with the
agreement of the Company, the Majority Banks and the
Agent. The Agent may effect, on behalf of the Banks, an
amendment to which they or the Majority Banks have
agreed.
(b) The Agent shall promptly notify the other Parties of any
amendment or waiver effected under paragraph (a) above,
and any such amendment or waiver shall be binding on all
the Parties.
27.2 Exceptions
An amendment or waiver which relates to:-
(a) the definition of "Majority Banks" in Clause 1.1
(Definitions);
(b) an extension of the date for, or a decrease in an
amount or a change in the currency of, any payment
(including the Margin or any other amount of
interest or any fee) under the Finance Documents;
(c) an increase in a Bank's Commitment;
(d) the release of any security the subject of the
Debenture;
(e) a term of a Finance Document which expressly
requires the consent of each Bank; or
(f) Clause 31 (Pro rata sharing) or this Clause 27
(Amendments and waivers),
may not be effected without the consent of each Bank.
27.3 Waivers and remedies cumulative
The rights of each Finance Party under the Finance
Documents:-
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under
the general law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is
not a waiver of that right.
28. CHANGES TO THE PARTIES
28.1 Transfers by Borrowers
No Borrower may assign, transfer, novate or dispose of
any of, or any interest in, its rights and/or obligations
under this Agreement.
28.2 Transfers by Banks
(a) Subject to paragraph (b) below, a Bank (the "Existing
Bank") may at any time assign, transfer or novate any of
its Commitments and/or rights and/or obligations in whole
or in part under this Agreement to a Qualifying Bank (the
"New Bank"). A partial assignment, transfer or novation
is only permitted in minimum amounts of 10,000,000 pounds
and if the Bank concerned assigns, transfers or novates a
pro rata portion of all its rights and obligations under
Facilities A, B and C.
(b) (i) The prior consent of the Company is required
for any such assignment, transfer or novation
referred to in paragraph (a) above, unless:-
(A) the New Bank is another Bank or an Affiliate of
a Bank; or
(B) a Default is outstanding.
However, the prior consent of the Company must not
be unreasonably withheld or delayed and will be
deemed to have been given if, within 14 days of
receipt by the Company of an application for
consent, it has not been expressly refused.
(ii) If the Guarantee has been, or is scheduled to be,
issued, the prior consent (not to be unreasonably
withheld or delayed) of the Issuing Bank is also
required.
(b) A transfer of obligations will be effective only if
either:-
(i) the obligations are novated in accordance with
Clause 28.3 (Procedure for novations); or
(ii) the New Bank confirms to the Agent and the Company
that it undertakes to be bound by the terms of this
Agreement as a Bank in form and substance
satisfactory to the Agent. On the transfer becoming
effective in this manner the Existing Bank shall be
relieved of its obligations under this Agreement to
the extent that they are transferred to the New
Bank.
(c) Nothing in this Agreement restricts the ability of a Bank
to sub-contract an obligation if that Bank remains liable
under this Agreement for that obligation.
(d) On each occasion (other than pursuant to the Syndication
Agreement) an Existing Bank assigns, transfers or novates
any of its rights and/or obligations under this
Agreement, the New Bank shall, on the date the
assignment, transfer and/or novation takes effect, pay to
the Agent for its own account a fee of 750 pounds.
(e) An Existing Bank is not responsible to a New Bank for:-
(i) the execution, genuineness, validity, enforceability
or sufficiency of any Finance Document or any other
document;
(ii) the collectability of amounts payable under any
Finance Document; or
(iii)the accuracy of any statements (whether written or
oral) made in or in connection with any Finance
Document.
(f) Each New Bank confirms to the Existing Bank and the other
Finance Parties that it:-
(i) has made its own independent investigation and
assessment of the financial condition and affairs of
each Borrower and its related entities in connection
with its participation in this Agreement and has not
relied exclusively on any information provided to it
by the Existing Bank in connection with any Finance
Document; and
(ii) will continue to make its own independent appraisal
of the creditworthiness of each Borrower and its
related entities while any amount is or may be
outstanding under this Agreement or any Commitment
is in force.
(g) Nothing in any Finance Document obliges an Existing Bank
to:-
(i) accept a re-transfer from a New Bank of any of the
rights and/or obligations assigned, transferred or
novated under this Clause; or
(ii) support any losses incurred by the New Bank by
reason of the non-performance by any Borrower of its
obligations under this Agreement or otherwise.
(h) Any reference in this Agreement to a Bank includes a New
Bank, but excludes a Bank if no amount is or may be owed
to or by that Bank under this Agreement and its
Commitment has been cancelled or reduced to nil.
28.3 Procedure for novations
(a) A novation is effected if:-
(i) the Existing Bank and the New Bank deliver to the
Agent a duly completed certificate, substantially in
the form of Part I of Schedule 5 (a "Novation
Certificate"); and
(ii) the Agent executes it.
(b) Each Party (other than the Existing Bank and the New
Bank) irrevocably authorises the Agent to execute any
duly completed Novation Certificate on its behalf.
(c) To the extent that they are expressed to be the subject
of the novation in the Novation Certificate:-
(i) the Existing Bank and the other Parties (the
"existing Parties") will be released from their
obligations to each other (the "discharged
obligations");
(ii) the New Bank and the existing Parties will assume
obligations towards each other which differ from the
discharged obligations only insofar as they are owed
to or assumed by the New Bank instead of the
Existing Bank;
(iii)the rights of the Existing Bank against the existing
Parties and vice versa (the "discharged rights")
will be cancelled; and
(iv) the New Bank and the existing Parties will acquire
rights against each other which differ from the
discharged rights only insofar as they are execrable
by or against the New Bank instead of the Existing
Bank,
all on the date of execution of the Novation Certificate
by the Agent or, if later, the date specified in the
Novation Certificate.
28.4 Target as Borrower
(a) If the Company wishes the Target to become a Borrower,
then it may deliver to the Agent the documents listed in
Part II of Schedule 2.
(b) On delivery of a Borrower Accession Agreement executed by
the Target and the Company, the Target will become a
Borrower. However, it may not utilise Facility C until
the Agent confirms to the other Finance Parties and the
Company that it has received all the documents referred
to in paragraph (a) above in form and substance
satisfactory to it. The Agent shall notify the Company
promptly upon receipt.
(c) Delivery of a Borrower Accession Agreement, executed by
the Target, constitutes confirmation by the Target that
the representations and warranties set out in Clause 18
(Representations and warranties) and to be made by the
Target on the date of the Borrower Accession Agreement
are correct, in respect of itself and its Subsidiaries,
as if made with reference to the facts and circumstances
then existing.
28.5 Reference Banks
If a Reference Bank (or, if a Reference Bank is not a
Bank, the Bank of which it is an Affiliate) ceases to be
one of the Banks, the Agent shall (in consultation with
the Company) appoint another Bank or an Affiliate of a
Bank to replace that Reference Bank.
28.6 Increased costs etc.
If:-
(a) a Bank assigns, transfers or novates any of its
Commitments and/or rights and/or obligations under
the Finance Documents or changes its Facility Office
without the prior consent of the Company; and
(b) as a result of circumstances existing at the date
the assignment, transfer, novation or change occurs,
a Borrower would be obliged to make a payment to the
New Bank or Bank acting through its new Facility
Office under Clause 13 (Taxes) or Clause 15
(Increased costs),
then, notwithstanding the provisions of Clause 13 (Taxes)
or Clause 15 (Increased costs), the relevant New Bank or
Bank acting through its new Facility Office is only
entitled to receive payment under those Clauses from a
Borrower to the same extent as the relevant Existing Bank
or Bank acting through its previous Facility Office would
have been if the assignment, transfer, novation or change
had not occurred
28.7 Register
The Agent shall keep a register of all the Parties and
shall supply any other Party (at that Party's expense)
with a copy of the register on request.
29. DISCLOSURE OF INFORMATION
(a) A Finance Party may disclose to one of its Affiliates or
any person (a "participant") with whom it is proposing to
enter, or has entered into, any kind of transfer,
participation or other agreement in relation to this
Agreement:-
(i) a copy of any Finance Document; and
(ii) any information which that Finance Party has
acquired under or in connection with any Finance
Document,
so long as disclosure of confidential information under
sub-paragraph (ii) above may only be disclosed to a
participant if the participant has agreed in writing with
the relevant Finance Party to keep the information
confidential on the same terms (with consequential
changes) as are set out in paragraph (b) below.
(b) Each Finance Party shall keep confidential and not,
without the prior consent of the Company, use any
information (other than information which is publicly
available other than as a result of a breach of this
paragraph (b)) supplied by or on behalf of any Borrower
under the Finance Documents otherwise than in connection
with the Finance Documents. However, each Finance Party
is entitled to disclose information:
(i) in connection with any legal or arbitration
proceedings arising out of or in connection with a
Finance Document; or
(ii) if required to do so by an order of a court of
competent jurisdiction whether under any procedure
for discovering documents or otherwise; or
(iii)pursuant to any law or regulation in accordance with
which that Bank is required or accustomed to act; or
(iv) to a governmental, banking, taxation or other
regulatory authority of any competent jurisdiction;
or
(v) to its accountants or legal advisers or any other
professional advisers.
30. SET-OFF
A Finance Party may set off any matured obligation owed
by a Borrower under this Agreement (to the extent
beneficially owned by that Finance Party) against any
obligation (whether or not matured) owed by that Finance
Party to that Borrower, regardless of the place of
payment, booking branch or currency of either obligation.
If the obligations are in different currencies, the
Finance Party may convert either obligation at a market
rate of exchange in its usual course of business for the
purpose of the set-off. If either obligation is
unliquidated or unascertained, the Finance Party may set
off in an amount estimated by it in good faith to be the
amount of that obligation. Nothing in this Clause 30
will be effective to create a charge.
31. PRO RATA SHARING
31.1 Redistribution
If any amount owing by a Borrower under this Agreement to
a Finance Party (the "recovering Finance Party") is
discharged by payment, set-off or any other manner other
than through the Agent in accordance with Clause 12
(Payments) (a "recovery"), then:-
(a) the recovering Finance Party shall, within 3
Business Days, notify details of the recovery to the
Agent;
(b) the Agent shall determine whether the recovery is in
excess of the amount which the recovering Finance
Party would have received had the recovery been
received by the Agent and distributed in accordance
with Clause 12 (Payments);
(c) subject to Clause 31.3 (Exceptions), the recovering
Finance Party shall, within 3 Business Days of
demand by the Agent, pay to the Agent an amount (the
"redistribution") equal to the excess;
(d) the Agent shall treat the redistribution as if it
were a payment by the Borrower concerned under
Clause 12 (Payments) and shall pay the
redistribution to the Finance Parties (other than
the recovering Finance Party) in accordance with
Clause 12.6 (Partial payments); and
(e) after payment of the full redistribution, the
recovering Finance Party will be subrogated to the
portion of the claims paid under paragraph (d)
above, and that Borrower will owe the recovering
Finance Party a debt which is equal to the
redistribution, immediately payable and of the type
originally discharged.
31.2 Reversal of redistribution
If under Clause 31.1 (Redistribution):-
(a) a recovering Finance Party must subsequently return
a recovery, or an amount measured by reference to a
recovery, to a Borrower; and
(b) the recovering Finance Party has paid a
redistribution in relation to that recovery,
each Finance Party shall, within 3 Business Days of
demand by the recovering Finance Party through the Agent,
reimburse the recovering Finance Party all or the
appropriate portion of the redistribution paid to that
Finance Party. Thereupon, the subrogation in
Clause 31.1(e) (Redistribution) will operate in reverse
to the extent of the reimbursement.
31.3 Exceptions
(a) A recovering Finance Party need not pay a redistribution
to the extent that it would not, after the payment, have
a valid claim against the Borrower concerned in the
amount of the redistribution pursuant to Clause 31.1(e)
(Redistribution).
(b) A recovering Finance Party is not obliged to share with
any other Finance Party any amount which the recovering
Finance Party has received or recovered as a result of
taking legal proceedings, if that other Finance Party had
an opportunity to participate in those legal proceedings,
but did not do so and did not take separate legal
proceedings.
32. SEVERABILITY
If a provision of any Finance Document is or becomes
illegal, invalid or unenforceable in any jurisdiction,
that shall not affect:-
(a) the legality, validity or enforceability in that
jurisdiction of any other provision of the Finance
Documents; or
(b) the legality, validity or enforceability in other
jurisdictions of that or any other provision of the
Finance Documents.
33. COUNTERPARTS
A Finance Document may be executed in any number of
counterparts, and this has the same effect as if the
signatures on the counterparts were on a single copy of
the Finance Document.
34. NOTICES
34.1 Giving of notices
All notices or other communications under or in
connection with the Finance Documents shall be given in
writing or by telex or facsimile. Any such notice will be
deemed to be given as follows:-
(a) if in writing, when delivered;
(b) if by telex, when despatched, but only if, at the
time of transmission, the correct answerback appears
at the start and at the end of the sender's copy of
the notice; and
(c) if by facsimile, when received.
However, a notice given in accordance with the above but
received on a non-working day or after business hours in
the place of receipt will only be deemed to be given on
the next working day in that place.
34.2 Addresses for notices
(a) The address, telex number and facsimile number of each
Party (other than the Agent) for all notices under or in
connection with the Finance Documents are:-
(i) that notified by that Party for this purpose to the
Agent on or before it becomes a Party; or
(ii) any other notified by that Party for this purpose to
the Agent by not less than five Business Days'
notice.
(b) The address, telex number and facsimile number of the
Agent is:-
101 Moorgate
London EC2M 6SB
Telex No: 887139 ABN ALG
Facsimile No: 0171 588 2975
Attention: Credit Administration
or such other as the Agent may notify to the other
Parties by not less than 5 Business Days' notice.
(c) The Agent shall, promptly upon request from any Party,
give to that Party the address, telex number or facsimile
number of any other Party applicable at the time for the
purposes of this Clause.
34.3 Facsimile notices
Each Borrower shall indemnify the Agent against any loss
or liability which the Agent incurs as a result of the
Agent accepting and/or acting upon any instructions under
the Finance Documents received by the Agent from that
Borrower by facsimile and which may not have been
incurred if, at the time of receipt, the Agent had been
given the instructions other than by facsimile.
35. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the
beginning of this Agreement.
<PAGE>
SCHEDULE 1
BANKS AND COMMITMENTS
Banks Commitments
ABN AMRO BANK N.V. )
BANK OF AMERICA NATIONAL TRUST AND ) AS PER
SAVINGS ASSOCIATION )
SYNDICATION
UNION BANK OF SWITZERLAND ) LETTER
<PAGE>
SCHEDULE 2
CONDITIONS PRECEDENT DOCUMENTS
PART I
TO BE DELIVERED BEFORE THE FIRST LOAN
1. A copy of the memorandum and articles of association and
certificate of incorporation of the Company.
2. A copy of a resolution of the board of directors of the
Company:-
(a) approving the terms of, and the transactions
(including the Acquisition) contemplated by, this
Agreement and resolving that it execute this
Agreement, the Debenture and the Fee Letters;
(b) authorising a specified person or persons to execute
this Agreement and the Fee Letters on its behalf and
its seal be affixed to the Debenture; and
(c) authorising a specified person or persons, on its
behalf, to sign and/or despatch all other documents
and notices to be signed and/or despatched by it
under or in connection with this Agreement.
3. A specimen of the signature of each person authorised by
the resolution referred to in paragraph 2 above.
4. A copy of the Press Release and a copy of the Offer
Document.
5. The Debenture, duly executed by the Company.
6. A certificate of an authorised signatory of the Company
certifying that each copy document specified in
paragraphs 1 and 2 of Part I of this Schedule 2 is
correct, complete and in full force and effect as at a
date no earlier than the date of this Agreement.
7. Written confirmation from the Company that, as at the
date on which the Press Release is issued, the board of
directors of the Target has recommended to the
shareholders of the Target acceptance of the Offer.
8. Written confirmation from the Parent and the Company that
equity and/or capital contributions of a minimum amount
agreed in the Syndication Letter has been subscribed for
in, or on lent to, the Company and confirmation from the
Company that that amount has been or, together with the
proceeds of the drawdown of the first Loan will be,
applied in full on or prior to the first Drawdown Date in
accordance with the terms of this Agreement.
9. A report from Coopers & Lybrand on the financial model
(and its assumptions) in relation to the Acquisition,
prepared by the Company or its advisers and addressed to
the Finance Parties.
10. A legal opinion of Allen & Overy, legal advisers to the
Arrangers, addressed to the Finance Parties,
substantially in the form of Part I of Schedule 8.
PART II
TO BE DELIVERED BY THE TARGET
1. A Borrower Accession Agreement, duly executed by the
Target and the Company.
2. A copy of the memorandum and articles of association and
certificate of incorporation of the Target.
3. A copy of a resolution of the board of directors of the
Target:-
(a) approving the terms of, and the transactions
contemplated by, the Borrower Accession Agreement
and resolving that it execute the Borrower Accession
Agreement;
(b) authorising a specified person or persons to execute
the Borrower Accession Agreement on its behalf; and
(c) authorising a specified person or persons, on its
behalf, to sign and/or despatch all other documents
and notices to be signed and/or despatched by it
under or in connection with this Agreement.
4. A certificate of a director of the Target confirming that
utilisation of Facility C in full would not cause any
borrowing limit binding on it to be exceeded.
5. A specimen of the signature of each person authorised by
the resolution referred to in paragraph (3) above.
6. The latest audited consolidated accounts of the Target.
7. If not already received by the Agent, copies of:
(a) the Licence; and
(b) the Pooling and Settlement Agreement.
8. A certificate of an authorised signatory of the Target
certifying that each copy document specified in Part II
of this Schedule 2 is correct, complete and in full force
and effect as at a date no earlier than the date of the
Borrower Accession Agreement.
9. A legal opinion of Allen & Overy, legal advisers to the
Agent, addressed to the Finance Parties, substantially in
the form of Part II of Schedule 8.
<PAGE>
SCHEDULE 3
CALCULATION OF THE MLA COST
(a) The MLA Cost for a Loan for its Interest Period(s) is
calculated in accordance with the following formula:-
BY + L(Y-X) + S(Y-Z)
-------------------- % per annum = MLA Cost
100-(B+S)
where on the day of application of the formula:-
B is the percentage of the Agent's eligible
liabilities which the Bank of England requires the
Agent to hold on a non-interest-bearing deposit
account in accordance with its cash ratio
requirements;
Y is the rate at which Sterling deposits are offered
by the Agent to leading banks in the London
interbank market at or about 11.00 a.m. on that day
for the relevant period;
L is the percentage of eligible liabilities which the
Bank of England requires the Agent to maintain as
secured money with members of the London Discount
Market Association and/or as secured call money with
certain money brokers and gilt-edged primary market
makers;
X is the rate at which secured Sterling deposits in
the relevant amount may be placed by the Agent with
members of the London Discount Market Association
and/or as secured call money with certain money
brokers and gilt-edged primary market makers at or
about 11.00 a.m. on that day for the relevant
period;
S is the percentage of the Agent's eligible
liabilities which the Bank of England requires the
Agent to place as a special deposit; and
Z is the interest rate per annum allowed by the Bank
of England on special deposits.
(b) For the purposes of this Schedule 3:-
(i) "eligible liabilities" and "special deposits" have
the meanings given to them at the time of
application of the formula by the Bank of England;
(ii) "relevant period" in relation to a Loan, means:-
(A) if the relevant Interest Period is 3 months or
less, that Interest Period; or
(B) if the relevant Interest Period is more than 3
months, 3 months.
(c) In the application of the formula, B, Y, L, X, S and Z
are included in the formula as figures and not as
percentages, e.g. if B = 0.5% and Y = 15%, BY is
calculated as 0.5 x 15.
(d) (i) The formula is applied on the first day of the
relevant Interest Period.
(ii) Each rate calculated in accordance with the formula
is, if necessary, rounded upward to the nearest four
decimal places.
(e) If the Agent determines that a change in circumstances
has rendered, or will render, the formula inappropriate,
the Agent (after consultation with the Banks) shall
notify the Company of the manner in which the MLA Cost
will subsequently be calculated. The manner of
calculation so notified by the Agent shall, in the
absence of manifest error, be binding on all the Parties.
<PAGE>
SCHEDULE 4
FORM OF REQUEST
To: ABN AMRO BANK N.V. as Agent
From: [ENTERGY POWER UK PLC/LONDON ELECTRICITY plc]
Date: [ ]
ENTERGY POWER UK PLC - 1,250,000,000 Pounds Revolving Credit
Agreement
dated 17th December, 1996
1. [We wish to borrow a Facility A/Facility B/Facility C*
Loan as follows:-
(a) Drawdown Date:
[ ]
(b) Purpose: [ ]
(c) Amount: [ ]
(d) [First]** Interest Period:
[ ]
(e) Payment instructions:
[ ].]*
[We wish the Issuing Bank to issue the Guarantee as
follows:-
(a) Amount: [ ]
(b) Issue Date:
[ ]
(c) Expiry Date:
[ ]
(d) Delivery instructions:
[ ]]*
2. We confirm that each condition specified in [Clause 4.2
(Further conditions precedent)/Clause 4.3 (Conditions
precedent during the Certain Funds Period]* is satisfied
on the date of this Request.
By:
[ENTERGY POWER UK PLC/LONDON ELECTRICITY plc]
Authorised Signatory
SCHEDULE 5
FORMS OF ACCESSION DOCUMENTS
PART I
NOVATION CERTIFICATE
To: ABN AMRO BANK N.V. as Agent
From: [THE EXISTING
BANK] and [THE NEW BANK] Date:
[ ]
ENTERGY POWER UK PLC - 1,250,000,000 pounds Revolving Credit
Agreement
dated 17th December, 1996
We refer to Clause 28.3 (Procedure for novations).
1. We [ ] (the
"Existing Bank") and
[ ] (the "New Bank")
agree to the Existing Bank and the New Bank novating all
the Existing Bank's Commitment(s) and/or rights and
obligations referred to in the Schedule in accordance
with Clause 28.3 (Procedure for novations).
2. The specified date for the purposes of Clause 28.3(c) is
[date of novation].
3. The Facility Office and address for notices of the New
Bank for the purposes of Clause 34.2 (Addresses for
notices) are set out in the Schedule.
4. This Novation Certificate is governed by English law.
THE SCHEDULE
Commitments/Rights and obligations to be novated
[Details of the Commitments/rights and obligations of the
Existing Bank to be novated].
[New Bank]
[Facility Office Address for notices]
[Existing Bank] [New Bank] ABN AMRO BANK
N.V.
By: By: By:
Date: Date: Date:
<PAGE>
PART II
BORROWER ACCESSION AGREEMENT
To: ABN AMRO BANK N.V. as Agent
From: LONDON ELECTRICITY plc and ENTERGY POWER UK PLC
[ ], 199[ ]
ENTERGY POWER UK PLC - 1,250,000,000 pounds Revolving Credit
Agreement
dated 17th December, 1996 (the "Credit Agreement")
We refer to Clause 28.4 (Target as Borrower).
London Electricity plc of Templar House, 81-87 High Holborn,
London WC1V 6NU (Registered no. 2366852) (the "Proposed
Borrower") agrees to become a Borrower and to be bound by the
terms of the Credit Agreement as a Borrower in accordance with
Clause 28.4 (Target as Borrower).
The address for notices of the Proposed Borrower for the
purposes of Clause 34.2 (Addresses for notices) is:-
[
]
This Agreement is governed by English law.
By:
LONDON ELECTRICITY plc
Authorised Signatory
By:
ENTERGY POWER UK PLC
Authorised Signatory
<PAGE>
PART III
FORM OF SYNDICATION AGREEMENT
SUPPLEMENTAL AGREEMENT
DATED [ ]
relating to a 1,250,000,000 pounds Credit
Agreement dated 17th December, 1996
for
ENTERGY POWER UK PLC
arranged by
ABN AMRO BANK N.V.
BANK OF AMERICA INTERNATIONAL LIMITED
UNION BANK OF SWITZERLAND
with
ABN AMRO BANK N.V.
as Agent
ALLEN & OVERY
London
<PAGE>
THIS AGREEMENT is dated
[ ] between:
(1) ENTERGY POWER UK PLC (Registered No. 3261188) (the
"Company");
(2) LONDON ELECTRICITY plc (Registered No. 2366852) (the
"Target")* ;
(3) ABN AMRO BANK N.V., BANK OF AMERICA INTERNATIONAL LIMITED
and UNION BANK OF SWITZERLAND as arrangers (in this
capacity the "Arrangers");
(4) ABN AMRO BANK N.V., BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION and UNION BANK OF SWITZERLAND as the
banks party to the Credit Agreement (as defined below) as
at today's date (the "Existing Banks");
(5) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as the
banks who wish to accede to the Credit Agreement as Banks
(the "New Banks"); and
(6) ABN AMRO BANK N.V. as agent (in this capacity the
"Agent").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement, unless the contrary intention appears
or the context otherwise requires:
"Credit Agreement"
means the Original Credit Agreement as amended pursuant
to Clause 4 (Nature of this Agreement) of this Agreement.
"Effective Date"
means
[
].
"Original Credit Agreement"
means the Credit Agreement dated 17th December, 1996
between the Company, the Arrangers, the Existing Banks
and the Agent.
1.2 Incorporation of Original Credit Agreement
interpretations
(a) Terms defined in the Original Credit Agreement shall,
unless the contrary intention appears or the context
otherwise requires, have the same meaning in this
Agreement.
(b) Clauses 1.2 (Construction), 32 (Severability) and 33
(Counterparts) of the Original Credit Agreement shall
apply to this Agreement, as though they were set out in
full in this Agreement but as if references to the
Original Credit Agreement are to be construed as
references to this Agreement.
2. CONSENT AND CONFIRMATION
[(a)]1 The Company, [the Target]2 the Arrangers, the
Existing Banks and the Agent each consent to the New
Banks becoming Banks and confirm that, except as
expressly provided by the terms of this Agreement, each
of the Finance Documents shall continue in full force and
effect.
[(b) It is acknowledged that the Guarantee will not be
issued.]1.
3. NOVATION
3.1 Novation of Commitments and related rights and
obligations
On the Effective Date (regardless of whether a Default is
then continuing):
(a) each New Bank will become a Bank under the Credit
Agreement with a Facility A Commitment, Facility B
Commitment and Facility C Commitment as set out
opposite its name in Schedule 2;
(b) each Existing Bank's Facility A Commitment,
Facility B Commitment and Facility C Commitment
shall be and be deemed to be reduced down to, the
respective amounts set out opposite its name in
Schedule 2; and
(c) each New Bank will automatically obtain and assume,
and undertakes to perform, all of the rights and
obligations of a Bank under and in respect of each
of the Finance Documents in respect of the rights
and obligations transferred to it under
paragraphs (a) and (b) above[, including, without
limitation, its corresponding proportion of the
rights and obligations of the Existing Banks in
respect of:]
[List outstanding term loans and Guarantee, if
issued.]
3.2 Amounts due on or before the Effective Date
(a) All amounts (if any) payable to an Existing Bank by the
Borrowers on or before the Effective Date (including,
without limitation, all interest and fees payable on the
Effective Date) in respect of any period ending prior to
the Effective Date shall be for the account of the
Existing Banks, and none of the New Banks shall have any
interest in, or any rights in respect of, any such
amounts.
(b) If any Facility A Loan or Facility C Loan falls to be
made on the Effective Date:
(i) the Agent will promptly notify each of the New Banks
of that fact (and the amount of its participation in
that Facility A Loan or Facility C Loan in
accordance with sub-paragraph (ii) below); and
(ii) each Existing Bank and each New Bank shall
participate in that Facility A Loan or Facility C
Loan (subject to the terms of the Credit Agreement)
as if the novation of the Facility A Commitments and
the Facility C Commitments under Clauses 3.1(a) and
(b) (Novation of Commitments and related rights and
obligations) of this Agreement had taken effect
prior to opening of business on the Business Day
before the Effective Date,
and the Company acknowledges that no Existing Bank will
be obliged to participate in any such Loan to any greater
extent.
3.3 Administrative details
Each New Bank has delivered to the Agent its initial
details for the purposes of Clause 34 (Notices) of the
Credit Agreement.
4. NATURE OF THIS AGREEMENT
The novation of Commitments and rights and obligations
contemplated by this Agreement shall take effect (in
accordance with its terms) as a novation so that:
(a) Schedule 1 to this Agreement is substituted for
Schedule 1 to the Credit Agreement on the Effective
Date; and
(b) Clause 28.3 (Procedure for novations) of the Credit
Agreement shall apply to the Commitments, rights and
obligations transferred, assumed and released under
Clause 3.1 (Novation of Commitments and related
rights and obligations) of this Agreement and to the
associated rights and obligations under the Finance
Documents, as if this Agreement were a Novation
Certificate.
5. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the
beginning of this Agreement.
<PAGE>
SCHEDULE 1
BANKS AND COMMITMENTS
Banks Facility A Facility B Facility C
Commitment Commitment Commitment
Pounds Pounds Pounds
[
<PAGE>
SIGNATORIES
(to the Syndication Agreement)
Company
ENTERGY POWER UK PLC
By:
Target
LONDON ELECTRICITY plc
By:
Arrangers and Existing Banks
ABN AMRO BANK N.V.
By:
BANK OF AMERICA INTERNATIONAL LIMITED
By:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
UNION BANK OF SWITZERLAND
By:
New Banks
[ ]
Agent
ABN AMRO BANK N.V.
By:
<PAGE>
SCHEDULE 6
FORM OF GUARANTEE
THIS DEED is dated [ ] 199[ ] and made
by ABN AMRO BANK N.V. (the "Guarantor" which expression
includes its successors and assigns).
BACKGROUND
(A) ENTERGY POWER UK PLC (Registered No: 3261188) (the
"Company") has issued loan notes of an aggregate
principal amount of pounds[ ] (the
"Loan Notes") in connection with the offer for the shares
in London Electricity plc.
(B) The Guarantor has agreed to guarantee payments due from
the Company to holders of the Loan Notes (the
"Noteholders") subject to the terms of this Deed.
IT IS AGREED as follows:
1. (a) Subject to the other terms of this Deed, the
Guarantor irrevocably and unconditionally guarantees
to each Noteholder for the time being and within
five business days of a written demand by that
Noteholder, the payment of the principal amount of
each Loan Note held by it and the payment of any
interest in respect of that principal amount;
(b) the aggregate liability of the Guarantor under this
Deed in respect of the principal amount of the Loan
Notes is limited to
pounds[ ]; and
(c) the aggregate liability of the Guarantor under this
Deed in respect of interest on the Loan Notes is
limited to pounds[ ].
In this Guarantee a "business day" is a day on which
banks are open for business (other than a Saturday or a
Sunday) in London.
2. To be valid, any demand by a Noteholder under Clause 1
above must:
(a) be in writing signed by the Noteholder with such
signature being confirmed by the Noteholder's
bankers or solicitors;
(b) state that the Company has defaulted in payment of
sums due in respect of the Loan Notes specifying the
date of the default, the applicable period of grace
(if any), the amount claimed from the Guarantor and
the amount of principal and interest in respect of
which the default by the Company has been made; and
(c) be delivered to the Guarantor at its address at
[
] within 30 days of the due date of the
relevant payment.
3. This guarantee is to be a continuing guarantee and
(subject to Clause 5 below) shall remain in force until
the date on which all moneys expressed to be payable by
the Company under the terms of the Loan Notes shall have
been paid.
4. (a) The obligations of the Guarantor under this
guarantee shall not be affected by any concession or
arrangement granted or made to or with the Company
or by the liquidation of the Company;
(b) the liability of the Guarantor is not to be
increased or extended in any way by any compromise
or arrangement but if the effect of any such
compromise or arrangement is to extend the time of
payment by the Company of any principal or interest
secured by the Loan Notes and which the Guarantor is
for the time being or may become liable to pay in
respect thereof, and, without prejudice to Clause 5
below, the Guarantor shall have the benefit of that
extension of time; and
(c) the Guarantor will not be bound by any
variation of the rights of the Noteholders unless
that variation shall have been made with the prior
written consent of the Guarantor.
5. Unless otherwise agreed by the Guarantor, the liability
of the Guarantor under this guarantee shall terminate on
the date falling
[ ] or (if
earlier) on the date on which all moneys expressed to be
payable by the Company under the terms of the Loan Notes
shall have been paid, except that the Guarantor shall
remain liable in respect of any claims or demands validly
made prior to that date to the extent not satisfied or
withdrawn by that date.
6. This Deed is governed by English Law.
The Guarantor has executed this Deed on the day and year first
above written.
[Executed as a Deed by ABN AMRO BANK N.V. )
acting by: )
[ ] )
and [ ]] )
<PAGE>
SCHEDULE 7
FORM OF DEBENTURE
DEBENTURE
DATED 17th December, 1996
BETWEEN
ENTERGY POWER UK PLC
- and -
ABN AMRO BANK N.V.
London
<PAGE>
TABLE OF CONTENTS
Clause Page
1. Interpretation 111
2. Fixed Security 113
3. Floating charge 113
4. Representations and warranties 114
5. Undertakings 114
7. When security becomes enforceable 116
8. Enforcement of security 116
9. Receiver 117
10. Powers of Receiver 118
12. Application of proceeds 120
13. Expenses and indemnity 120
14. Delegation 121
15. Further assurances 121
16. Power of attorney 121
17. Miscellaneous 121
18. Release 122
19. Governing law 122
Schedules
1. Form of notice of the Account Bank 123
2. Form of acknowledgement of the bank operating the
Security Accounts 124
Signatories 125
<PAGE>
THIS DEED is dated 17th December, 1996 between:
(1) ENTERGY POWER UK PLC (Registered number 3261188) (the
"Chargor"); and
(2) ABN AMRO BANK N.V. (the "Agent") as agent and trustee for
the Finance Parties (as defined in the Credit Agreement
defined below).
BACKGROUND:
(A) The Chargor enters into this Deed in connection with the
Credit Agreement (as defined below).
(B) It is intended that this document takes effect as a deed
notwithstanding the fact that a party may only execute
this document under hand.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Deed:
"Account Bank"
means a person with whom a Security Account is maintained
under Clause 6 (Security Accounts).
"Credit Agreement"
means the 1,250,000,000 pounds credit agreement dated 17th
December, 1996 between (among others) the parties to this
Deed.
"Group Shares"
means any shares in any member of the Group from time to
time held by the Chargor or a nominee on its behalf,
including the shares of the Chargor in the Target.
"Receiver"
means a receiver and manager or (if the Agent so
specifies in the relevant appointment) a receiver, in
either case, appointed under this Deed.
"Related Rights"
means:
(a) any dividend or interest paid or payable in relation
to any Shares;
(b) any stocks, shares, securities, rights, moneys or
property accruing or offered at any time in relation
to any Shares by way of redemption, substitution,
exchange, bonus or preference, under option rights
or otherwise; and
(c) all dividends, interest or other income in respect
of any such asset as is referred to in paragraph (b)
above.
"Secured Liabilities"
means all present and future obligations and liabilities
(whether actual or contingent and whether owed jointly or
severally or in any other capacity whatsoever) of the
Borrowers to any Finance Party under the Finance
Documents except for any obligation which, if it were so
included, would result in this Deed contravening Section
151 of the Companies Act 1985. The term "Finance
Document" includes all amendments and supplements.
"Security Account"
means an account of the Chargor established under
Clause 6 (Security accounts).
"Security Assets"
means all assets of the Chargor the subject of any
security created by this Deed.
"Security Period"
means the period beginning on the date of this Deed and
ending on the date on which the Agent is satisfied that
all the Secured Liabilities have been unconditionally and
irrevocably paid and discharged in full.
"Shares"
means the Group Shares, and any other stocks, shares,
debentures, bonds or other securities and investments
held by the Chargor.
1.2 Construction
(a) Capitalised terms defined in the Credit Agreement have,
unless expressly defined in this Deed, the same meaning
in this Deed.
(b) The provisions of Clause 1.2 of the Credit Agreement
apply to this Deed as though they were set out in full in
this Deed except that references to the Credit Agreement
are to be construed as references to this Deed.
(c) If the Agent (acting reasonably) considers that an amount
paid by any Borrower to a Finance Party under a Finance
Document is capable of being avoided or otherwise set
aside on the liquidation or administration of that
Borrower or otherwise, then that amount shall not be
considered to have been irrevocably paid for the purposes
of this Deed.
(d) A reference in this Deed to any assets includes, unless
the context otherwise requires, present and future
assets.
2. FIXED SECURITY
The Chargor, as beneficial owner and as security for the
payment of all the Secured Liabilities, charges in favour
of the Agent:-
(a) by way of a first equitable mortgage all Shares held
by it and/or any nominee on its behalf and all
Related Rights accruing to the Shares; and
(b) by way of first fixed charge:-
(i) (to the extent not effectively mortgaged under
paragraph (a) above) its interest in all the
Shares and their Related Rights;
(ii) to the fullest extent permitted by law, all
moneys standing to the credit of any account
(including the Security Accounts) with any
person and the debts represented by them;
(iii) all of the Chargor's book and other debts,
the proceeds of the same and all other moneys
due and owing to the Chargor and the benefit of
all rights, securities and guarantees of any
nature enjoyed or held by it in relation to any
of the foregoing; and
(iv) to the extent that they are able to be the
subject of any Security Interest, the benefit
of all licences, consents and authorisations
(statutory or otherwise) held in connection
with its business or the use of any Security
Asset specified in any other sub-paragraph in
this Clause and the right to recover and
receive all compensation which may be payable
to it in respect of them.
The Agent may convert the equitable mortgage created in
paragraph (a) above into a legal mortgage if a Default is
outstanding. The mortgages and charges created by this
Clause 2 are made with full title guarantee.
3. FLOATING CHARGE
3.1 Creation of floating charge
The Chargor, as beneficial owner and as security for the
payment of all of the Secured Liabilities, charges in
favour of the Agent by way of a first floating charge all
its assets not otherwise effectively mortgaged or charged
by way of fixed mortgage or charge by Clause 2 (Fixed
Security).
3.2 Conversion
The Agent may by notice to the Chargor convert the
floating charge created by this Deed into a fixed charge
as regards all or any of the Chargor's assets specified
in the notice if:
(a) an Event of Default is outstanding; or
(b) the Agent considers those assets to be in danger of
being seized or sold under any form of distress,
attachment, execution or other legal process or to
be otherwise in jeopardy.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and warranties
The Chargor makes the representations and warranties set
out in this Clause 4 to each Finance Party.
4.2 Security
This Deed creates those Security Interests it purports to
create and is not liable to be avoided or otherwise set
aside on the liquidation or administration of the Chargor
or otherwise.
4.3 Shares
The Shares are fully paid and the Chargor is the sole
beneficial owner of them, free from any Security Interest
or option.
4.4 Times for making representations and warranties
The representations and warranties set out in this
Clause 4 are made on the date of this Deed and are deemed
to be repeated by the Chargor on each date during the
Security Period with reference to the facts and
circumstances then existing.
5. UNDERTAKINGS
5.1 Duration
The undertakings in this Clause 5 remain in force
throughout the Security Period.
5.2 Restrictions on dealing
The Chargor shall not (except as permitted under the
Credit Agreement):-
(a) create or permit to subsist any Security Interest on
any Security Asset other than any Security Interest
created by this Deed; or
(b) sell, transfer, grant, or lease or otherwise dispose
of any Security Asset, except for the disposal in
the ordinary course of trade of any Security Asset
subject to the floating charge created under
Clause 3.1 (Creation of floating charge).
5.3 Book debts and receipts
The Chargor shall:-
(a) get in and realise the Chargor's:
(i) securities to the extent held by way of
temporary investment; and
(ii) book and other debts and other moneys,
in the ordinary course of its business and hold the
proceeds of the getting in and realisation (until
payment into a Security Account if required in
accordance with paragraph (b) below) upon trust for
the Agent; and
(b) save to the extent that the Agent otherwise agrees,
pay the proceeds of the getting in and realisation
into a Security Account.
5.4 Notice to bank operating an account
The Chargor will give notice to any bank (other than the
Agent) operating an account of the Chargor on the date of
this Deed or (if later) the date the account is opened,
substantially in the form of Schedule 1, and shall use
its reasonable endeavours to procure that the relevant
bank acknowledges the notice substantially in the form of
Schedule 2.
5.5 Deposit of Shares
The Chargor shall:-
(a) deposit with the Agent, or as the Agent may direct,
all certificates, bearer instruments, and other
documents of title or evidence of ownership in
relation to the Shares and their Related Rights; and
(b) execute and deliver to the Agent all share transfers
and other documents which may be requested by the
Agent in order to enable the Agent or its nominees
to be registered as the owner or otherwise obtain a
legal title to the Shares and their Related Rights.
6. SECURITY ACCOUNTS
6.1 Accounts
All Security Accounts must be maintained at a branch of
the Account Bank approved by the Agent. The initial
Account Bank is the Agent.
6.2 Change of Account Bank
(a) The Account Bank may be changed to another bank or
financial institution if the Agent so requires.
(b) A change only becomes effective upon the proposed new
Account Bank agreeing with the Agent and the Chargor, in
a manner satisfactory to the Agent, to fulfil the role of
the Account Bank under this Deed.
(c) In the event of a change of Account Bank, the amount (if
any) standing to the credit of the Security Accounts
maintained with the old Account Bank shall be transferred
to the corresponding Security Accounts maintained with
the new Account Bank forthwith upon the appointment
taking effect. The Chargor shall take any action which
the Agent may require to facilitate a change of Account
Bank and any transfer of credit balances (including the
execution of bank mandate forms).
6.3 Interest
Amounts standing to the credit of each Security Account
shall bear interest at a rate considered by the Account
Bank to be a fair market rate.
6.4 Withdrawals
(a) Except with the prior consent of the Agent, the Chargor
shall not withdraw any moneys standing to the credit of a
Security Account except for a purpose not prohibited by
the Credit Agreement at a time when the security
constituted by this Deed is not enforceable or has not
been enforced.
(b) The Agent (or a Receiver) may (subject to the payment of
any claims having priority to this security) withdraw
amounts standing to the credit of a Security Account to
meet an amount due and payable under the Finance
Documents when it is due and payable.
7. WHEN SECURITY BECOMES ENFORCEABLE
The security constituted by this Deed shall become
immediately enforceable upon the occurrence of an Event
of Default and the power of sale, shall be immediately
exerciseable upon and at any time after the occurrence of
any Event of Default. After the security constituted by
this Deed has become enforceable, the Agent may in its
absolute discretion enforce all or any part of the
security in any manner it sees fit or as the Majority
Banks direct.
8. ENFORCEMENT OF SECURITY
8.1 General
For the purposes of all powers implied by statute, the
Secured Liabilities are deemed to have become due and
payable on the date of this Deed and section 103 and
section 93 of the Law of Property Act 1925 shall not
apply to the security constituted by this Deed.
8.2 Shares
After the security constituted by this Deed has become
enforceable, the Agent may exercise (in the name of the
Chargor and without any further consent or authority on
the part of the Chargor) any voting rights and any powers
or rights which may be exercised by the person or persons
in whose name any Share and its Related Rights are
registered or who is the holder of any of them or
otherwise (including all the powers given to trustees by
Section 10(3) and (4) of the Trustee Act, 1925 as amended
by Section 9 of the Trustee Investment Act, 1961 in
respect of securities or property subject to a trust).
Until that time, the voting rights, powers and other
rights in respect of the Shares shall (if exercisable by
the Agent) be exercised in any manner which the Chargor
may direct in writing.
8.3 Contingencies
If the Agent enforces the security constituted by this
Deed at a time when no amounts are due under the Finance
Documents but at a time when amounts may or will become
so due, the Agent (or the Receiver) may pay the proceeds
of any recoveries effected by it into a Security Account.
8.4 No liability as mortgagee in possession
Neither the Agent nor any Receiver will be liable, by
reason of entering into possession of a Security Asset,
to account as mortgagee in possession or for any loss on
realisation or for any default or omission for which a
mortgagee in possession might be liable.
8.5 Agent of the Chargor
Each Receiver is deemed to be the agent of the Chargor
for all purposes and accordingly is deemed to be in the
same position as a Receiver duly appointed by a mortgagee
under the Law of Property Act 1925. The Chargor alone
shall be responsible for his contracts, engagements,
acts, omissions, defaults and losses and for liabilities
incurred by him and no Finance Party shall incur any
liability (either to the Chargor or to any other person)
by reason of the Agent making his appointment as a
Receiver or for any other reason.
8.6 Protection of third parties
No person (including a purchaser) dealing with the Agent
or a Receiver or its or his agents will be concerned to
enquire:-
(a) whether the Secured Liabilities have become payable;
or
(b) whether any power which the Agent or the Receiver is
purporting to exercise has become execrable; or
(c) whether any money remains due under the Finance
Documents; or
(d) how any money paid to the Agent or to the Receiver
is to be applied.
8.7 Redemption of prior mortgages
At any time after the security constituted by this Deed
has become enforceable, the Agent may:-
(a) redeem any prior Security Interest against any
Security Asset; and/or
(b) procure the transfer of that Security Interest to
itself; and/or
(c) settle and pass the accounts of the prior mortgagee,
chargee or encumbrancer; any accounts so settled and
passed shall be conclusive and binding on the
Chargor.
All principal moneys, interest, costs, charges and
expenses of and incidental to any such redemption and/or
transfer shall be paid by the Chargor to the Agent on
demand.
9. RECEIVER
9.1 Appointment of Receiver
At any time after the security constituted by this Deed
becomes enforceable or, if the Chargor so requests the
Agent in writing, at any time, the Agent may without
further notice appoint under seal or in writing under its
hand any one or more persons to be a Receiver of all or
any part of the Security Assets in like manner in every
respect as if the Agent had become entitled under the Law
of Property Act 1925 to exercise the power of sale
conferred under the Law of Property Act 1925.
9.2 Removal
The Agent may by writing under its hand (subject to any
requirement for an order of the court in the case of an
administrative receiver) remove any Receiver appointed by
it and may, whenever it deems it expedient, appoint a new
Receiver in the place of any Receiver whose appointment
may for any reason have terminated.
9.3 Remuneration
The Agent may fix the remuneration of any Receiver
appointed by it.
9.4 Relationship with Agent
To the fullest extent permitted by law, any right, power
or discretion conferred by this Deed (either expressly or
impliedly) upon a Receiver of the Security Assets may
after the security created by this Deed becomes
enforceable be exercised by the Agent in relation to any
Security Asset without first appointing a Receiver or
notwithstanding the appointment of a Receiver.
10. POWERS OF RECEIVER
10.1 General
(a) Each Receiver has, and is entitled to exercise, all of
the rights, powers and discretions set out below in this
Clause 10 in addition to those conferred by the Law of
Property Act 1925 on any receiver appointed under the Law
of Property Act 1925.
(b) If there is more than one Receiver holding office at the
same time, each Receiver may (unless the document
appointing him states otherwise) exercise all of the
powers conferred on a Receiver under this Deed
individually and to the exclusion of any other Receivers.
(c) A Receiver who is an administrative receiver of the
Chargor has all the rights, powers and discretions of an
administrative receiver under the Insolvency Act 1986.
10.2 Possession
A Receiver may take immediate possession of, get in and
collect any Security Assets.
10.3 Carry on business
A Receiver may carry on the business of the Chargor as he
thinks fit.
10.4 Protection of assets
A Receiver may do all acts as he may think fit which the
Chargor might do in the ordinary conduct of its business
as well for the protection as for the improvement of the
Security Assets.
10.5 Employees
A Receiver may appoint and discharge managers, officers,
agents, accountants, servants, workmen and others for the
purposes of this Deed upon such terms as to remuneration
or otherwise as he may think proper and discharge any
such persons appointed by the Chargor.
10.6 Borrow money
A Receiver may raise and borrow money either unsecured or
on the security of any Security Asset either in priority
to the security constituted by this Deed or otherwise and
generally on any terms and for whatever purpose which he
thinks fit. No person lending that money is concerned to
enquire as to the propriety or purpose of the exercise of
that power or to check the application of any money so
raised or borrowed.
10.7 Sale of assets
A Receiver may sell, exchange, convert into money and
realise any Security Asset by public auction or private
contract and generally in any manner and on any terms
which he thinks proper. The consideration for any such
transaction may consist of cash, debentures or other
obligations, shares, stock or other valuable
consideration and any such consideration may be payable
in a lump sum or by instalments spread over such period
as he thinks fit.
10.8 Compromise
A Receiver may settle, adjust, refer to arbitration,
compromise and arrange any claims, accounts, disputes,
questions and demands with or by any person who is or
claims to be a creditor of the Chargor or relating in any
way to any Security Asset.
10.9 Legal Actions
A Receiver may bring, prosecute, enforce, defend and
abandon all actions, suits and proceedings in relation to
any Security Asset which may seem to him to be expedient.
10.10 Receipts
A Receiver may give valid receipts for all moneys and
execute all assurances and things which may be proper or
desirable for realising any Security Asset.
10.11 Subsidiaries
A Receiver may form a Subsidiary of the Chargor and
transfer to that Subsidiary any Security Asset.
10.12 Delegation
A Receiver may delegate his powers in accordance with
Clause 14 (Delegation).
10.13 Other powers
A Receiver may:-
(a) do all other acts and things which he may consider
desirable or necessary for realising any Security
Asset or incidental or conducive to any of the
rights, powers or discretions conferred on a
Receiver under or by virtue of this Deed; and
(b) exercise in relation to any Security Asset all the
powers, authorities and things which he would be
capable of exercising if he were the absolute
beneficial owner of the same,
and may use the name of the Chargor for any of the above
purposes.
11. SET OFF
The Agent may, at any time after this Deed has become
enforceable, without notice to or making demand on the
Chargor and whether or not all or any of the Secured
Liabilities have matured:
(a) set off any of the Secured Liabilities against any
liability (whether or not matured) owed by the Agent
to the Chargor in respect of any moneys in the
Security Accounts regardless of the place or
payment, booking branch or currency of either
obligation; and/or
(b) debit any account of the Chargor (whether sole or
joint) with the Agent at any of its offices anywhere
(including an account opened specially for that
purpose) with all or any part of the Secured
Liabilities; and/or
(c) apply any moneys in a Security Account in or towards
the payment or discharge of the Secured Liabilities.
12. APPLICATION OF PROCEEDS
Any moneys received by the Agent or any Receiver after
this Deed has become enforceable shall be applied in the
following order of priority (but without prejudice to the
right of any Finance Party to recover any shortfall from
the Chargor):
(a) in satisfaction of or provision for all costs and
expenses incurred by the Agent or any Receiver and
of all remuneration due to the Receiver under this
Deed;
(b) in or towards payment of the Secured Liabilities or
such part of them as is then due and payable; and
(c) in payment of the surplus (if any) to the Chargor or
other person entitled to it.
13. EXPENSES AND INDEMNITY
The Chargor shall forthwith on demand pay all costs and
expenses (including legal fees) incurred in connection
with this Deed by any Finance Party, Receiver, attorney,
manager, agent or other person appointed by the Agent
under this Deed, and keep each of them indemnified
against any failure or delay in paying the same.
14. DELEGATION
The Agent and any Receiver may delegate by power of
attorney or in any other manner to any person any right,
power or discretion exercisable by them under this Deed.
Any such delegation may be made upon the terms (including
power to sub-delegate) and subject to any regulations
which the Agent or that Receiver (as the case may be) may
think fit. Neither the Agent nor any Receiver will be in
any way liable or responsible to the Chargor for any loss
or liability arising from any act, default, omission or
misconduct on the part of any such delegate or sub-
delegate.
15. FURTHER ASSURANCES
The Chargor shall, at its own expense, take whatever
action the Agent or a Receiver may reasonably require
for:-
(a) perfecting or protecting the security intended to be
created by this Deed over any Security Asset;
(b) facilitating the realisation of any Security Asset,
or the exercise of any right, power or discretion
exercisable, by the Agent or any Receiver or any of
its or their delegates or sub-delegates in respect
of any Security Asset,
including the execution of any transfer, conveyance,
assignment or assurance of any property whether to the
Agent or to its nominees, and the giving of any notice,
order or direction and the making of any registration,
which, in any such case, the Agent may think expedient.
16. POWER OF ATTORNEY
The Chargor, by way of security, irrevocably and
severally appoints the Agent, each Receiver and any of
their delegates or sub-delegates to be its attorney to
take any action which the Chargor is obliged to take
under this Deed, including under Clause 15 (Further
Assurances). The Chargor ratifies and confirms whatever
any attorney does or purports to do pursuant to its
appointment under this Clause.
17. MISCELLANEOUS
17.1 Covenant to pay
The Chargor shall pay or discharge the Secured
Liabilities in the manner provided for in the Finance
Documents.
17.2 Continuing security
The security constituted by this Deed is continuing and
will extend to the ultimate balance of all the Secured
Liabilities, regardless of any intermediate payment or
discharge in whole or in part.
17.3 Additional security
The security constituted by this Deed is in addition to
and is not in any way prejudiced by any other security
now or subsequently held by any Finance Party for any
Secured Liability.
17.4 Tacking
Each Bank shall perform its obligations under the Credit
Agreement (including any obligation to make available
further advances).
17.5 New Accounts
If a Finance Party receives, or is deemed to be affected
by, notice, whether actual or constructive, of any
subsequent charge or other interest affecting any
Security Asset and/or the proceeds of sale of any
Security Asset, the Finance Party may open a new account
with the Chargor. If the Finance Party does not open a
new account, it shall nevertheless be treated as if it
had done so at the time when it received or was deemed to
have received notice. As from that time all payments made
to the Finance Party will be credited or be treated as
having been credited to the new account and will not
operate to reduce any amount for which this Deed is
security.
17.6 Time deposits
Without prejudice to any right of set-off any Finance
Party may have under any other Finance Document or
otherwise, if any time deposit matures on any account the
Chargor has with any Finance Party at a time within the
Security Period when:
(a) this security has become enforceable; and
(b) no amount of the Secured Liabilities is due and
payable,
that time deposit shall automatically be renewed for any
further maturity which that Finance Party considers
appropriate.
18. RELEASE
Upon the expiry of the Security Period (but not
otherwise), the Finance Parties shall, at the request and
cost of the Chargor, take whatever action is necessary to
release the Security Assets from the security constituted
by this Deed.
19. GOVERNING LAW
This Deed is governed by English law.
This Deed has been entered into as a deed on the date stated
at the beginning of this Deed.
<PAGE>
SCHEDULE 1
Form of notice of the Account Bank
To: [ ]
[ ], 199[ ]
Dear Sirs,
We give you notice that, by a Debenture dated 17th December,
1996, Entergy Power UK PLC charged (by way of a first fixed
and floating charge) to ABN AMRO Bank N.V. (as agent and
trustee) (the "Agent") all moneys (including interest) from
time to time standing to the credit of certain bank accounts
(the "Accounts") and the debt or debts represented thereby.
We irrevocably instruct and authorise you to disclose to the
Agent without any reference to or further authority from us
and without any inquiry by you as to the justification for the
disclosure, any information relating to any of the Accounts
maintained with you from time to time as the Agent may, at any
time and from time to time, request you to disclose to it.
This letter is governed by English law.
Would you please confirm your agreement to the above by
sending the enclosed acknowledgement to the Agent with a copy
to ourselves.
Yours faithfully,
................................
(Authorised signatory)
Entergy Power UK PLC
<PAGE>
SCHEDULE 2
Form of acknowledgement of the Account Bank
To: ABN AMRO Bank N.V.
For the attention of: [ ]
[relevant address applying under
Clause 34 (Notices) of the Credit Agreement]
[ ], 199[ ]
Dear Sirs,
We confirm receipt from Entergy Power UK PLC (the "Company")
of a notice dated [ ] of a
charge upon the terms of a Debenture dated 17th December, 1996
of all moneys (including interest) from time to time standing
to the credit of certain bank accounts of the Company (the
"Accounts") and the debt or debts represented thereby.
We confirm that we have not received notice of the interest of
any third party in any of the Accounts maintained with us.
We confirm that until you give us notice in writing that the
assets assigned to you under the Debenture have been released
and reassigned to the Company, we do not have and will not
make or exercise, any claims or demands, any rights of
counterclaim, rights of set-off or any other equities against
the Company in respect of the Accounts maintained with us.
This letter is governed by English law.
Yours faithfully,
.................................
[ ]
<PAGE>
SIGNATORIES TO THE DEBENTURE
THE COMMON SEAL of )
ENTERGY POWER UK PLC was )
affixed to this deed in the )
presence of )
Director
Director/Secretary
The Agent
ABN AMRO BANK N.V.
By:
<PAGE>
SCHEDULE 8
FORM OF LEGAL OPINIONS OF ALLEN & OVERY
PART I
TO BE DELIVERED BEFORE THE FIRST LOAN
To: The Finance Parties
(as defined in the
Credit Agreement defined below)
Dear Sirs,
Entergy Power UK PLC(the "Company") - 1,250,000,000 pounds Credit
Agreement
dated 17th December, 1996 (the "Credit Agreement")
We have received instructions from and participated in
discussions with the Arrangers in connection with the Credit
Agreement.
Terms defined in the Credit Agreement have the same meaning in
this opinion. The Credit Agreement and the Debenture is each
called an "Agreement". "Security Assets" has, in relation to
the Debenture, the meaning given to it in the Debenture
For the purposes of this opinion we have examined the
following documents:-
(a) a signed copy of the Credit Agreement;
(b) an executed copy of the Debenture dated
[ ] between the Company
and the Agent;
(c) a certified copy of the memorandum and articles of
association and certificate of incorporation of the
Company; and
(d) a certified copy of the minutes of a meeting of the board
of directors of the Company dated [ ].
On [ ] December, 1996, we carried out a search of the
Company at the Companies Registry. On [ ] December,
1996 we made a telephone search of the Company at the winding-
up petitions at the Companies court.
The above are the only documents or records we have examined,
and the only searches and enquiries we have carried out, for
the purposes of this opinion.
We assume that:-
(i) the Company is not unable to pay its debts within the
meaning of section 123 of the Insolvency Act, 1986 at the
time it enters into an Agreement and will not as a
consequence of either Agreement be unable to pay its
debts within the meaning of that section;
(ii) no step has been taken to wind up the Company or appoint
a receiver in respect of it or any of its assets,
although the searches referred to above give no
indication that any winding-up order or appointment of a
receiver has been made;
(iii)all signatures and documents are genuine;
(iv) all documents are and remain up-to-date;
(v) the correct procedure was carried out at the board
meeting referred to in paragraph (d) above; for example,
there was a valid quorum, all relevant interests of
directors were declared and the resolutions were duly
passed at the meeting; and
(vi) each Agreement is a legally binding, valid and
enforceable obligation of each party to it other than the
Company.
Subject to the qualifications set out below and to any matters
not disclosed to us, it is our opinion that, so far as the
present laws of England are concerned:-
(1) Status: The Company is a company incorporated with
limited liability under the laws of England and is not in
liquidation.
(2) Powers and authority: The Company has the corporate power
to enter into and perform the Agreements and has taken
all necessary corporate action to authorise the
execution, delivery and performance of the Agreements.
(3) Legal validity: Each Agreement constitutes the Company's
legally binding, valid and enforceable obligation.
(4) Non-conflict: The execution, delivery and performance by
the Company of each Agreement will not violate any
provision of (i) any existing English law applicable to
companies generally, or (ii) the memorandum or articles
of association of the Company.
(5) Consents: No authorizations of governmental, judicial or
public bodies or authorities in England are required by
the Company in connection with the performance, validity
or enforceability of either Agreement.
(6) Taxes: All payments due from the Company under the Credit
Agreement may be made without deduction of any United
Kingdom taxes, if, in the case of any interest, the
person which made the part of the Loan to which the
interest relates was, at the time of the making of the
Loan, a "bank" as defined in section 840A of the Income
and Corporation Taxes Act 1988 and the recipient of the
interest is within the charge to United Kingdom
corporation tax as regards that interest.
(7) Registration requirements: Except for registration of the
Debenture at Companies House under section 395 of the
Companies Act 1985, it is not necessary or advisable to
file, register or record either Agreement in any public
place or elsewhere in England.
(8) Stamp duties: No stamp, registration or similar tax or
charge is payable in England in respect of either
Agreement.
(9) Security: Subject to due registration where required, the
Debenture creates security interests in the Security
Assets concerned.
This opinion is subject to the following qualifications:-
(i) This opinion is subject to all insolvency and other laws
affecting the rights of creditors or secured creditors
generally.
(ii) No opinion is expressed on matters of fact.
(iii)We assume that no foreign law affects the
conclusions stated above.
(iv) No opinion is expressed as to:
(a) the title of the Company to any Security Asset; or
(b) the priority of any security created or to be
created by the Debenture; or
(c) the nature of the security created by the Debenture
(whether fixed or floating); or
(d) the marketability of, or rights of enforcement over,
the Security Assets.
These matters are too lengthy to cover in this letter.
(v) It may not be possible to create a valid security
interest over a bank account in favour of the bank with
which the account is maintained.
(vi) The term "enforceable" means that a document is of a type
and form enforced by the English courts. It does not
mean that each obligation will be enforced in accordance
with its terms. Certain rights and obligations may be
qualified by the non-conclusivity of certificates,
doctrines of good faith and fair conduct, the
availability of equitable remedies and other matters, but
in our view these qualifications would not defeat your
legitimate expectations in any material respect.
This opinion is given for the sole benefit of the Finance
Parties as at the date of this opinion (and their professional
advisers) and may not be relied upon by or disclosed to any
other person.
Yours faithfully
<PAGE>
PART II
TO BE DELIVERED IN RESPECT OF THE TARGET
To: The Finance Parties
(as defined in the
Credit Agreement defined below)
Dear Sirs,
Entergy Power UK PLC (the "Company")/London Electricity plc
(the "Target") - 1,250,000,000 pounds Credit Agreement dated 17th
December, 1996 (the "Credit Agreement")
We have received instructions from and participated in
discussions with the Agent in connection with the Credit
Agreement.
Terms defined in the Credit Agreement have the same meaning in
this opinion.
For the purposes of this opinion we have examined the
following documents:-
(a) a signed copy of the Credit Agreement;
(b) a copy of the Borrower Accession Agreement dated
[ ] and executed by the
Target;
(c) a certified copy of the memorandum and articles of
association and certificate of incorporation of the
Target; and
(d) a certified copy of the minutes of a meeting of the board
of directors of the Target dated [ ].
On [ ], 199[ ], we carried out a
search of the Target at the Companies Registry. On
[ ], 199[ ] we made a telephone
search of the Target at the winding-up petitions at the
Companies court.
The above are the only documents or records we have examined,
and the only searches and enquiries we have carried out, for
the purposes of this opinion.
We assume that:-
(i) no step has been taken to wind up the Target or appoint a
receiver in respect of it or any of its assets, although
the searches referred to above give no indication that
any winding-up order or appointment of a receiver has
been made;
(ii) all signatures and documents are genuine;
(iii)all documents are and remain up-to-date;
(iv) the correct procedure was carried out at the board
meeting referred to in paragraph (d) above: for example,
there was a valid quorum, all relevant interests of
directors were declared and the resolutions were duly
passed at the meeting; and
(v) the Credit Agreement is a legally binding, valid and
enforceable obligation of each party to it.
Subject to the qualifications set out below and to any matters
not disclosed to us, it is our opinion that, so far as the
present laws of England are concerned:-
(1) Status: The Target is a company incorporated with limited
liability under the laws of England and is not in
liquidation.
(2) Powers and authority: The Target has the corporate power
to enter into and perform the Agreements and has taken
all necessary corporate action to authorise the
execution, delivery and performance of the Credit
Agreement.
(3) Legal validity: The Credit Agreement constitutes the
Target's legally binding, valid and enforceable
obligation.
(4) Non-conflict: The execution, delivery and performance by
the Target of the Borrower Accession Agreement and the
Credit Agreement will not violate any provision of
(i) any existing English law applicable to companies
generally, or (ii) the memorandum or articles of
association of the Target.
(5) Consents: No authorizations of governmental, judicial or
public bodies or authorities in England are required by
the Target in connection with the performance, validity
or enforceability of the Borrower Accession Agreement or
the Credit Agreement.
(6) Taxes: All payments due from the Target under the Credit
Agreement may be made without deduction of any United
Kingdom taxes, if, in the case of any interest, the
person which made the part of the Loan to which the
interest relates was, at the time of the making of the
Loan, a "bank" as defined in section 840A of the Income
and Corporation Taxes Act 1988 and the recipient of the
interest is within the charge to United Kingdom
corporation tax as regards that interest.
(7) Registration requirements: It is not necessary or
advisable to file, register or record the Borrower
Accession Agreement in any public place or elsewhere in
England.
(8) Stamp duties: No stamp, registration or similar tax or
charge is payable in England in respect of the Borrower
Accession Agreement.
This opinion is subject to the following qualifications:-
(i) This opinion is subject to all insolvency and other laws
affecting the rights of creditors generally.
(ii) No opinion is expressed on matters of fact.
(iii)We assume that no foreign law affects the conclusions
stated above.
(iv) The term "enforceable" means that a document is of a type
and form enforced by the English courts. It does not
mean that each obligation will be enforced in accordance
with its terms. Certain rights and obligations may be
qualified by the non-conclusivity of certificates,
doctrines of good faith and fair conduct, the
availability of equitable remedies and other matters, but
in our view these qualifications would not defeat your
legitimate expectations in any material respect.
This opinion is given for the sole benefit of the Finance
Parties as at the date of this opinion (and their professional
advisers) and may not be relied upon by or disclosed to any
other person.
Yours faithfully
<PAGE>
SCHEDULE 9
FORM OF SUBORDINATION AGREEMENT
DATED [ ] , 199[ ]
BETWEEN
ENTERGY POWER UK PLC
-and-
THE JUNIOR CREDITOR
(as defined in this Deed)
-and-
ABN AMRO BANK N.V.
as Security Agent
_________________________________
SUBORDINATION AGREEMENT
relating to a 1,250,000,000 pounds
credit agreement dated 17th December, 1996
between ENTERGY POWER UK PLC and others
__________________________________
London
<PAGE>
TABLE OF CONTENTS
Clause
Page
1. Interpretation 134
2. The Company's undertakings 136
3. Junior Creditor's undertakings 136
4. Turnover of non-permitted recoveries 137
5. Subordination on insolvency 137
6. Consents 138
7. Representations and warranties 138
8. Subrogation by the Junior Creditor 138
9. Protection of subordination 139
10. Preservation of Junior Debt 140
11. Changes to the parties 140
12. Miscellaneous 140
13. Indemnity 141
14. Waivers; remedies cumulative 141
15. Severability 141
16. Governing law 136
Signatories 142
<PAGE>
THIS SUBORDINATION AGREEMENT is dated [ ],
1996 between:
(1) [ ] (the
"Junior Creditor");
(2) ENTERGY POWER UK PLC (Registered No. 3261188)(the
"Company"); and
(3) ABN AMRO BANK N.V. (the "Agent") as agent and trustee for
the Finance Parties.
BACKGROUND:
(A) By the Credit Agreement the Banks have agreed to make
available a credit facility of up to 1,250,000,000 pounds
to the Borrowers.
(B) The Junior Creditor has agreed to subordinate all amounts
payable under the Junior Finance Documents on the terms
of this Deed.
(C) It is intended that this document takes effect as a deed
notwithstanding the fact that a party may only execute
this document under hand.
1. INTERPRETATION
1.1 Definitions
In this Deed:
"Credit Agreement"
means the agreement dated 17th December, 1996 between
(among others) the Borrowers and the Agent for a credit
facility of up to 1,250,000,000 pounds.
"Junior Debt"
means all present and future liabilities (actual or
contingent) payable or owing to the Junior Creditor by
the Company under or in connection with the Junior
Finance Documents relating thereto together with:
(a) any permitted novation, deferral or extension of any
of those liabilities;
(b) any further advances which may be made by the Junior
Creditor to the Company under any agreement
expressed to be supplemental to any Junior Finance
Document plus all interest, fees and costs in
connection therewith;
(c) any claim for damages or restitution in the event of
rescission of any of those liabilities or otherwise
in connection with the Junior Finance Documents;
(d) any claim against the Company flowing from any
recovery by the Company of a payment or discharge in
respect of those liabilities on grounds of
preference or otherwise; and
(e) any amounts (such as post-insolvency interest) which
would be included in any of the above for any
discharge, non-provability, unenforceability or non-
allowability of the same in any insolvency or other
proceedings.
"Junior Finance Documents"
means [specify debt document] and all variations,
replacements, novations of and supplements thereto.
"Majority Banks"
has the meaning given to it in the Credit Agreement.
"Senior Debt"
means all present and future liabilities (actual or
contingent) payable or owing by any Borrower to the
Finance Parties under or in connection with the Finance
Documents together with:
(a) any refinancing, novation, refunding, deferral or
extension of any of those liabilities;
(b) any further advances which may be made by the
Finance Parties to any Borrower under any agreement
expressed to be supplemental to any Finance Document
plus all interest, fees and costs in connection
therewith;
(c) any claim for damages or restitution in the event of
rescission of any of those liabilities or otherwise
in connection with the Finance Documents;
(d) any claim against any Borrower flowing from any
recovery by such Borrower of a payment or discharge
in respect of those liabilities on grounds of
preference or otherwise; and
(e) any amounts (such as post-insolvency interest) which
would be included in any of the above for any
discharge, non-provability, unenforceability or
non-allowability of the same in any insolvency or
other proceedings.
"Senior Liabilities"
means all present and future obligations and liabilities
(whether actual or contingent and whether owned jointly
or severally or in any capacity whatsoever) of each
Borrower to any Finance Party under each Finance Document
to which such Borrower is a party.
1.2 Construction
(a) Capitalised terms defined in the Credit Agreement have,
unless expressly defined in this Deed, the same meaning
in this Deed.
(b) The provisions of Clause 1.2 of the Credit Agreement
apply to this Deed as though they were set out in full in
this Deed except that references to the Credit Agreement
are to be construed as references to this Deed.
(c) Any document, instrument or agreement shall be construed
as to include such document, instrument or agreement as
varied, amended, supplemented or novated from time to
time.
2. THE COMPANY'S UNDERTAKINGS
So long as any Senior Debt is outstanding and until the
Senior Liabilities have been irrevocably paid in full,
the Company will not except as permitted under the
Finance Documents (including, without limitation, Clause
19.15 (Distributions)) or except as the Agent, acting on
the instructions of the Majority Banks, has previously
consented:
(a) subject to Clause 5 (Subordination on Insolvency),
pay or repay or purchase or acquire, any of the
Junior Debt; or
(b) discharge any of the Junior Debt by set-off; or
(c) create or permit to subsist security over any of its
assets for any of the Junior Debt; or
(d) amend, vary, waive or release any term of the Junior
Finance Documents (other than any procedural or
administrative change or any other change which can
reasonably be expected not to prejudice any Senior
Debt or any Finance Party); or
(e) take or omit to take any action whereby the
subordination achieved by this Deed will be
impaired.
3. JUNIOR CREDITOR'S UNDERTAKINGS
So long as any Senior Debt is outstanding and until the
Senior Liabilities have been irrevocably paid in full,
except, as permitted under the Finance Documents or
except as the Agent (acting on the instructions of the
Majority Banks) has previously consented, the Junior
Creditor will:
(a) subject to Clause 5 (Subordination on insolvency),
not demand or receive payment of any of the Junior
Debt from the Company or any other source or apply
any money or assets in discharge of any Junior Debt;
(b) not discharge any of the Junior Debt by set-off;
(c) not permit to subsist or receive any security for
any of the Junior Debt;
(d) not permit to subsist or receive any guarantee or
other assurance against loss in respect of any of
the Junior Debt;
(e) not amend, vary, waive or release any term of the
Junior Finance Documents (other than any procedural
or administrative change or any other change which
can reasonably be expected not to prejudice any
Senior Debt or any Finance Party);
(f) promptly notify the Agent of any default or event of
default in respect of the Junior Debt;
(g) unless Clause 5 (Subordination on insolvency)
applies, not:
(i) declare any of the Junior Debt prematurely due
and payable;
(ii) enforce the Junior Debt by execution or
otherwise; or
(iii)initiate or take any steps with a view to any
insolvency, reorganisation or dissolution
proceedings in respect of the Company; and
(h) not take or omit to take any action whereby the
subordination achieved by this Deed may be impaired.
4. TURNOVER OF NON-PERMITTED RECOVERIES
4.1 Non-permitted payment
If, other than as permitted under the Finance Documents:
(a) the Junior Creditor receives a payment or
distribution in respect of any of the Junior Debt
from the Company or any other source; or
(b) the Junior Creditor receives the proceeds of any
enforcement of any security or any guarantee for any
Junior Debt; or
(c) the Company makes any payment or distribution to the
Junior Creditor on account of the purchase or other
acquisition of any of the Junior Debt,
the Junior Creditor will hold the same in trust for the
Finance Parties and pay and distribute it to the Agent
for application towards the Senior Debt until the Senior
Debt is irrevocably paid in full.
4.2 Non-permitted set-offs
If, other than as permitted under the Finance Documents,
for any reason, any of the Junior Debt is discharged by
set-off, the Junior Creditor will promptly pay an amount
equal to the discharge to the Agent for application
towards the Senior Debt until the Senior Debt is
irrevocably paid in full.
4.3 Failure of trust
If, for any reason, a trust in favour of, or a holding of
property for, the Finance Parties under this Deed is
invalid or unenforceable, the Junior Creditor will pay
and deliver to the Agent an amount equal to the payment,
receipt or recovery which the Junior Creditor would
otherwise have been bound to hold on trust for or as
property of the Finance Parties.
5. SUBORDINATION ON INSOLVENCY
If any of the events set out in Clauses 20.6 (Insolvency)
to 20.10 (Analogous proceedings) (inclusive) of the
Credit Agreement occurs THEN
(a) the Junior Debt will be subordinate in right of
payment to the Senior Debt;
(b) the Agent may, and is irrevocably authorised on
behalf of the Junior Creditor to, (i) claim, enforce
and prove for the Junior Debt, (ii) file claims and
proofs, give receipts and take all such proceedings
and do all such things as the Agent reasonably sees
fit to recover the Junior Debt and (iii) receive all
distributions on the Junior Debt for application
towards the Senior Debt;
(c) if and to the extent that the Agent is not entitled
to do any of the foregoing, the Junior Creditor will
do so in good time as reasonably directed by the
Agent;
(d) the Junior Creditor will hold all distributions in
cash or in kind received or receivable by it in
respect of the Junior Debt from the Company or from
any other source in trust for the Finance Parties
and will (at the Junior Creditor's expense) pay and
transfer the same to the Agent for application
towards the Senior Debt until the Senior Debt is
irrevocably paid in full; and
(e) the trustee in bankruptcy, liquidator, assignee or
other person distributing the assets of the Company
or their proceeds is directed to pay distributions
on the Junior Debt direct to the Agent for
application towards the Senior Debt until the Senior
Debt is irrevocably paid in full. The Junior
Creditor will give all such notices and do all such
things as the Agent may reasonably direct to give
effect to this provision.
6. CONSENTS
The Junior Creditor will not have any remedy against the
Company or other Borrower, the Agent or the Finance
Parties by reason of any transaction entered into between
the Agent and/or the Finance Parties and the Company
which violates any Junior Finance Document and the Junior
Creditor may not object to any such transaction by reason
of any provisions of the Junior Finance Documents.
7. REPRESENTATIONS AND WARRANTIES
The Junior Creditor represents and warrants to the Agent
and each Finance Party that this Deed:
(a) is within its powers and has been duly authorised by
it;
(b) constitutes its legal, valid and binding
obligations; and
(c) does not conflict in any material respect with any
law or regulation or its constitutional documents or
any document binding on it and that it has obtained
all necessary consents for its performance of this
Deed.
8. SUBROGATION BY THE JUNIOR CREDITOR
If any of the Senior Debt is wholly or partially paid out
of any proceeds received in respect of or on account of
the Junior Debt, the Junior Creditor will to that extent
be subrogated to the Senior Debt so paid but not before
all the Senior Debt is paid in full.
9. PROTECTION OF SUBORDINATION
9.1 Continuing subordination
The subordination provisions in this Deed constitute a
continuing subordination and benefit the ultimate balance
of the Senior Debt regardless of any intermediate payment
or discharge of the Senior Debt in whole or in part.
9.2 Waiver of defences
The subordination in this Deed and the obligations of the
Junior Creditor under this Deed will not be affected by
any act, omission, matter or thing which, but for this
provision, would reduce, release or prejudice the
subordination or any of those obligations in whole or in
part, including without limitation:
(a) any waiver granted to, or composition with, any
Borrower or other person;
(b) the taking, variation, compromise, exchange, renewal
or release of, or refusal or neglect to perfect,
take up or enforce, any rights against, or security
over assets of, any Borrower or other person in
respect of the Senior Debt or otherwise or any
failure to realise the full value of any security;
(c) any unenforceability, illegality or invalidity of
any obligation of any Borrower or security in
respect of the Senior Debt or any other document or
security.
9.3 Immediate recourse
The Junior Creditor waives any right it may have of first
requiring any Finance Party (or the Agent or any trustee
or other agent on its behalf) to proceed against or
enforce any other rights or security or claim payment
from any person before claiming the benefit of this Deed.
The Agent may refrain from applying or enforcing any
money, rights or security unless and until instructed by
the Majority Banks. The Majority Banks may give or
refrain from giving instructions to the Agent to enforce
or refrain from enforcing any security as long as they
see fit.
9.4 Appropriations
Until the Senior Liabilities have been irrevocably paid
in full, the Agent may:
(a) apply any moneys or property received under this
Deed or from any Borrower or from any other person
against the Senior Debt in accordance with the terms
of the Credit Agreement;
(b) hold in an interest-bearing suspense account any
moneys or distributions received from the Junior
Creditors under Clause 4 (Turnover of non-permitted
recoveries) or Clause 5 (Subordination on
insolvency) or on account of the liability of the
Junior Creditor under this Deed.
9.5 Non-competition
Until the Senior Liabilities have been irrevocably paid
in full, the Junior Creditor will not by virtue of any
payment or performance by them under this Deed or by
virtue of the operation of Clauses 4 (Turnover of non-
permitted recoveries) or 5 (Subordination on insolvency):-
(a) be subrogated to any rights, security or moneys
held, received or receivable by any Finance Party
(or the Agent or any trustee or other agent on its
behalf) or be entitled to any right of contribution
or indemnity in respect of any payment made or
moneys received on account of the Junior Creditor's
liability under this Deed; or
(b) claim, rank, prove or vote as a creditor of any
Borrower or other person or their respective estates
in competition with any Finance Party (or the Agent
or any trustee or other agent on its behalf); or
(c) receive, claim or have the benefit of any payment,
distribution or security from or on account of any
Borrower or other person.
10. PRESERVATION OF JUNIOR DEBT
Notwithstanding any term of this Deed postponing,
subordinating or preventing the payment of any of the
Junior Debt, the Junior Debt concerned shall, solely as
between the Company and the Junior Creditor, remain owing
or due and payable in accordance with the terms of the
Junior Finance Documents, and interest and default
interest will accrue on missed payments accordingly.
11. CHANGES TO THE PARTIES
11.1 Successors and assigns
This Deed is binding on the successors and assigns of the
parties hereto.
11.2 The Company and the Junior Creditor
Neither the Company nor the Junior Creditor may assign or
transfer any of their rights or obligations under this
Deed without the consent of the Majority Banks.
11.3 The Agent and the Finance Parties
The Agent and the Finance Parties may assign or otherwise
dispose of all or any of their rights under this Deed in
accordance with the Senior Finance Documents to which
they are respectively a party.
12. MISCELLANEOUS
12.1 Perpetuity
The perpetuity period for the trusts in this Deed is 80
years.
12.2 Power of attorney
By way of security for the obligations of the Junior
Creditor under this Deed, the Junior Creditor irrevocably
appoints the Agent as its attorney to do anything which
the Junior Creditor is required to do by this Deed but
has failed to do, having been given 10 Business Day's
notice to rectify such non-compliance. The Agent may
delegate this power subject to the approval of the
Majority Banks.
13. INDEMNITY
(a) The Company will indemnify the Agent and every attorney
appointed by it in respect of all liabilities and
expenses reasonably incurred by it or him in good faith
in connection with the enforcement or preservation of any
rights in accordance with this Deed.
(b) The Agent shall not be liable for any losses arising in
connection with the exercise or purported exercise of any
of its rights, powers and discretions in good faith under
this Deed, unless that liability arises as a result of
the Agent's negligence or wilful default and in
particular (but without limitation) the Agent in
possession shall not be liable to account as mortgagee in
possession or for anything except actual receipts.
14. WAIVERS; REMEDIES CUMULATIVE
The rights of the Agent and the Finance Parties under
this Deed:
(a) may be exercised as often as necessary;
(b) are cumulative and are not exclusive of their rights
under the general law; and
(c) may be waived only in writing and specifically and
may be on such terms as the Agent or the Finance
Parties see fit.
15. SEVERABILITY
(a) If a provision of this Deed is or becomes illegal,
invalid or unenforceable in any jurisdiction, that shall
not affect:
(i) the validity or enforceability in that jurisdiction
of any other provision of this Deed; or
(ii) the validity or enforceability in other
jurisdictions of that or any other provision of this
Deed.
(b) This Deed may be executed in any number of counterparts,
all of which, taken together, shall constitute one and
the same instrument and any party may enter into this
Deed by executing a counterpart.
16. GOVERNING LAW
This Deed is governed by and shall be construed in
accordance with English law.
This Deed has been entered into on the date stated at the
beginning of this Deed.
<PAGE>
SIGNATORIES TO THE SUBORDINATION AGREEMENT
Senior Creditor
[ ]
By:
Company
ENTERGY POWER UK PLC
By:
Agent
ABN AMRO BANK N.V.
By:
<PAGE>
SIGNATORIES
Company
ENTERGY POWER UK PLC
By: LAWRENCE S. FOLKS
Arrangers and Banks
ABN AMRO BANK N.V.
By: C.M. MACDONALD J.P. CLIFFE
BANK OF AMERICA INTERNATIONAL LIMITED
By: WILLIAM M.F. BISHOP
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By: SANJAY GUPTA
UNION BANK OF SWITZERLAND
By: FIONA H. KAPLAN SEAN MALONE
Agent
ABN AMRO BANK N.V.
By: C.M. MACDONALD J.P. CLIFFE
<PAGE>
CONFORMED COPY
SUPPLEMENTAL AGREEMENT
DATED 6th February, 1997
relating to a 1,250,000,000 pounds Credit
Agreement dated 17th December, 1996
for
ENTERGY POWER UK PLC
arranged by
ABN AMRO BANK N.V.
BANK OF AMERICA INTERNATIONAL LIMITED
UNION BANK OF SWITZERLAND
with
ABN AMRO BANK N.V.
as Agent
ALLEN & OVERY
London
<PAGE>
THIS AGREEMENT is dated 6th February, 1997 between:
(1) ENTERGY POWER UK PLC (Registered No. 3261188) (the
"Company");
(2) ABN AMRO BANK N.V., BANK OF AMERICA INTERNATIONAL LIMITED
and UNION BANK OF SWITZERLAND as arrangers (in this
capacity the "Arrangers");
(3) ABN AMRO BANK N.V., BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION and UNION BANK OF SWITZERLAND as the
banks party to the Credit Agreement (as defined below) as
at today's date (the "Existing Banks");
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as the
banks who wish to accede to the Credit Agreement as Banks
(the "New Banks"); and
(5) ABN AMRO BANK N.V. as agent (in this capacity the
"Agent").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement, unless the contrary intention appears
or the context otherwise requires:
"Credit Agreement"
means the Original Credit Agreement as amended pursuant
to Clause 4 (Nature of this Agreement) of this Agreement.
"Effective Date"
means 6th February, 1997.
"Original Credit Agreement"
means the Credit Agreement dated 17th December, 1996
between the Company, the Arrangers, the Existing Banks
and the Agent.
1.2 Incorporation of Original Credit Agreement
interpretations
(a) Terms defined in the Original Credit Agreement shall,
unless the contrary intention appears or the context
otherwise requires, have the same meaning in this
Agreement.
(b) Clauses 1.2 (Construction), 32 (Severability) and 33
(Counterparts) of the Original Credit Agreement shall
apply to this Agreement, as though they were set out in
full in this Agreement but as if references to the
Original Credit Agreement are to be construed as
references to this Agreement.
2. CONSENT AND CONFIRMATION
(a) The Company, the Arrangers, the Existing Banks and the
Agent each consent to the New Banks becoming Banks and
confirm that, except as expressly provided by the terms
of this Agreement, each of the Finance Documents shall
continue in full force and effect.
(b) It is acknowledged that the Guarantee will not be issued.
3. NOVATION
3.1 Novation of Commitments and related rights and
obligations
On the Effective Date (regardless of whether a Default is
then continuing):
(a) each New Bank will become a Bank under the Credit
Agreement with a Facility A Commitment, Facility B
Commitment and Facility C Commitment as set out
opposite its name in Schedule 2;
(b) each Existing Bank's Facility A Commitment,
Facility B Commitment and Facility C Commitment
shall be and be deemed to be reduced down to, the
respective amounts set out opposite its name in
Schedule 2; and
(c) each New Bank will automatically obtain and assume,
and undertakes to perform, all of the rights and
obligations of a Bank under and in respect of each
of the Finance Documents in respect of the rights
and obligations transferred to it under
paragraphs (a) and (b) above.
3.2 Amounts due on or before the Effective Date
(a) All amounts (if any) payable to an Existing Bank by the
Borrowers on or before the Effective Date (including,
without limitation, all interest and fees payable on the
Effective Date) in respect of any period ending prior to
the Effective Date shall be for the account of the
Existing Banks, and none of the New Banks shall have any
interest in, or any rights in respect of, any such
amounts.
(b) If any Facility A Loan or Facility C Loan falls to be
made on the Effective Date:
(i) the Agent will promptly notify each of the New Banks
of that fact (and the amount of its participation in
that Facility A Loan or Facility C Loan in
accordance with sub-paragraph (ii) below); and
(ii) each Existing Bank and each New Bank shall
participate in that Facility A Loan or Facility C
Loan (subject to the terms of the Credit Agreement)
as if the novation of the Facility A Commitments and
the Facility C Commitments under Clauses 3.1(a) and
(b) (Novation of Commitments and related rights and
obligations) of this Agreement had taken effect
prior to opening of business on the Business Day
before the Effective Date,
and the Company acknowledges that no Existing Bank will
be obliged to participate in any such Loan to any greater
extent.
3.3 Administrative details
Each New Bank has delivered to the Agent its initial
details for the purposes of Clause 34 (Notices) of the
Credit Agreement.
4. NATURE OF THIS AGREEMENT
The novation of Commitments and rights and obligations
contemplated by this Agreement shall take effect (in
accordance with its terms) as a novation so that:
(a) Schedule 2 to this Agreement is substituted for
Schedule 1 to the Credit Agreement on the Effective
Date; and
(b) Clause 28.3 (Procedure for novations) of the Credit
Agreement shall apply to the Commitments, rights and
obligations transferred, assumed and released under
Clause 3.1 (Novation of Commitments and related
rights and obligations) of this Agreement and to the
associated rights and obligations under the Finance
Documents, as if this Agreement were a Novation
Certificate.
5. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the
beginning of this Agreement.
<PAGE>
SCHEDULE 1
NEW BANKS
The Bank of New York
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi, Ltd
Bayerische Landesbank Girozentrale, London Branch
CIBC Wood Gundy plc
Credit Lyonnais
The Dai-Ichi Kangyo Bank, Limited
Den Danske Bank Aktieselskab
The Fuji Bank, Limited
The Industrial Bank of Japan, Limited
Midland Bank PLC
Rabobank, London Branch
The Royal Bank of Scotland plc
The Sanwa Bank, Limited
Societe Generale
The Toronto-Dominion Bank
Union Bank of California, N.A.
Westdeutche Landesbank Girozentrale London Branch
<PAGE>
SCHEDULE 2
BANKS AND COMMITMENTS
Banks Facility A Facility B Facility C
Commitment Commitment Commitment
POUNDS POUNDS POUNDS
ABN AMRO Bank N.V. 40,500,000 12,000,000 10,000,000
Bank of America National Trust and 40,500,000 12,000,000 10,000,000
Savings Association
The Bank of New York 40,500,000 12,000,000 10,000,000
The Bank of Nova Scotia 40,500,000 12,000,000 10,000,000
The Bank of Tokyo-Mitsubishi, Ltd 40,500,000 12,000,000 10,000,000
and Union Bank of California, N.A.
Bayerische Landesbank Girozentrale, 40,500,000 12,000,000 10,000,000
London Branch
CIBC Wood Gundy plc 40,500,000 12,000,000 10,000,000
Credit Lyonnais 40,500,000 12,000,000 10,000,000
The Dai-Ichi Kangyo Bank, Limited 40,500,000 12,000,000 10,000,000
Den Danske Bank Aktieselskab 40,500,000 12,000,000 10,000,000
The Fuji Bank, Limited 40,500,000 12,000,000 10,000,000
The Industrial Bank of Japan, Limited 40,500,000 12,000,000 10,000,000
Midland Bank PLC 40,500,000 12,000,000 10,000,000
Rabobank, London Branch 40,500,000 12,000,000 10,000,000
The Royal Bank of Scotland plc 40,500,000 12,000,000 10,000,000
The Sanwa Bank, Limited 40,500,000 12,000,000 10,000,000
Societe Generale 40,500,000 12,000,000 10,000,000
The Toronto-Dominion Bank 40,500,000 12,000,000 10,000,000
Union Bank of Switzerland 40,500,000 12,000,000 10,000,000
Westdeutche Landesbank Girozentrale 40,500,000 12,000,000 10,000,000
London Branch
__________ __________ __________
810,000,000 240,000,000 200,000,000
__________ __________ __________
<PAGE>
SIGNATORIES
Company
ENTERGY POWER UK PLC
By: ROBERT J. CUSHMAN
Arrangers and Existing Banks
ABN AMRO BANK N.V.
By: JUSTIN P. CLIFFE
BANK OF AMERICA INTERNATIONAL LIMITED
By: WILLIAM M.F. BISHOP
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: SANJAY GUPTA
UNION BANK OF SWITZERLAND
By: FIONA KAPLAN SEAN MALONE
New Banks
THE BANK OF NEW YORK
By: MICHAEL MCMORROW
THE BANK OF NOVA SCOTIA
By: RUSSEL C. HAMER
THE BANK OF TOKYO-MITSUBISHI, LTD
By: DAVID J. DALLISON
BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH
By: SONKE PETERSEN
CIBC WOOD GUNDY plc
By: SHANNON L. ERNST
CREDIT LYONNAIS
By: MARGARET STEWART
THE DAI-ICHI KANGYO BANK, LIMITED
By: COLIN VITTERY
DEN DANSKE BANK AKTIESELSKAB
By: D. RIMMER
Power of Attorney
THE FUJI BANK, LIMITED
By: RICHARD W. ALLEN
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: DENIS RAYEL
MIDLAND BANK PLC
By: ANDREW P. SMITH
RABOBANK, LONDON BRANCH
(COOPERATIEVE CENTRALE RAIFFEISEN BOERENLEENBANK BA)
By: PAMELA R. GREEN
THE ROYAL BANK OF SCOTLAND plc
By: C.L. SALTER
THE SANWA BANK, LIMITED
By: P.B. LUCAS
SOCIETE GENERALE
By: MARC BERNARD
THE TORONTO-DOMINION BANK
By: GRAEME FRANCIS
UNION BANK OF CALIFORNIA, N.A.
By: DAVID J. DALLISON
Power of Attorney
WESTDEUTCHE LANDESBANK GIROZENTRALE LONDON BRANCH
By: POLLY ADAMS
Agent
ABN AMRO BANK N.V.
By: D. RIMMER
<PAGE>
CONFORMED COPY
SECOND SUPPLEMENTAL AGREEMENT
DATED 18th March, 1997
relating to a 1,250,000,000 Pounds Credit
Agreement dated 17th December, 1996
(as amended by a Supplemental Agreement dated 6th February,
1997)
for
ENTERGY POWER UK PLC
arranged by
ABN AMRO BANK N.V.
BANK OF AMERICA INTERNATIONAL LIMITED
UNION BANK OF SWITZERLAND
with
ABN AMRO BANK N.V.
as Agent
ALLEN & OVERY
London
<PAGE>
THIS AGREEMENT is dated 18th March, 1997 between:
(1) ENTERGY POWER UK PLC (Registered No. 3261188) (the
"Company");
(2) ABN AMRO BANK N.V., BANK OF AMERICA INTERNATIONAL LIMITED
and UNION BANK OF SWITZERLAND as arrangers (in this
capacity the "Arrangers");
(3) THE BANKS listed in Schedule 1 as the banks party to the
Credit Agreement (as defined below) as at today's date
(the "Existing Banks");
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 2 as the
banks who wish to accede to the Credit Agreement as Banks
(the "New Banks"); and
(5) ABN AMRO BANK N.V. as agent (in this capacity the
"Agent").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement, unless the contrary intention appears
or the context otherwise requires:
"Credit Agreement"
means the Original Credit Agreement as amended pursuant
to Clause 4 (Nature of this Agreement) of this Agreement.
"Effective Date"
means 21st March, 1997.
"Original Credit Agreement"
means the Credit Agreement dated 17th December, 1996
between the Company, the Arrangers, the Existing Banks
and the Agent, as amended by the Supplemental Agreement
dated 6th February, 1997.
1.2 Incorporation of Original Credit Agreement
interpretations
(a) Terms defined in the Original Credit Agreement shall,
unless the contrary intention appears or the context
otherwise requires, have the same meaning in this
Agreement.
(b) Clauses 1.2 (Construction), 32 (Severability) and 33
(Counterparts) of the Original Credit Agreement shall
apply to this Agreement, as though they were set out in
full in this Agreement but as if references to the
Original Credit Agreement are to be construed as
references to this Agreement.
2. CONSENT AND CONFIRMATION
(a) The Company, the Arrangers, the Existing Banks and the
Agent each consent to the New Banks becoming Banks and
confirm that, except as expressly provided by the terms
of this Agreement, each of the Finance Documents shall
continue in full force and effect.
(b) This Agreement is the Syndication Agreement.
3. NOVATION
3.1 Novation of Commitments and related rights and
obligations
On the Effective Date (regardless of whether a Default is
then continuing):
(a) each New Bank will become a Bank under the Credit
Agreement with a Facility A Commitment, Facility B
Commitment and Facility C Commitment as set out
opposite its name in Schedule 3;
(b) each Existing Bank's Facility A Commitment,
Facility B Commitment and Facility C Commitment
shall be and be deemed to be reduced down to, the
respective amounts set out opposite its name in
Schedule 3; and
(c) each New Bank will automatically obtain and assume,
and undertakes to perform, all of the rights and
obligations of a Bank under and in respect of each
of the Finance Documents in respect of the rights
and obligations transferred to it under
paragraphs (a) and (b) above, including, without
limitation, its corresponding proportion of the
rights and obligations of the Existing Banks in
respect of the current Facility B Loan.
3.2 Amounts due on or before the Effective Date
(a) All amounts (if any) payable to an Existing Bank by the
Borrowers on or before the Effective Date (including,
without limitation, all interest and fees payable on the
Effective Date) in respect of any period ending prior to
the Effective Date shall be for the account of the
Existing Banks, and none of the New Banks shall have any
interest in, or any rights in respect of, any such
amounts.
(b) If any Facility A Loan or Facility C Loan falls to be
made on the Effective Date:
(i) the Agent will promptly notify each of the New Banks
of that fact (and the amount of its participation in
that Facility A Loan or Facility C Loan in
accordance with sub-paragraph (ii) below); and
(ii) each Existing Bank and each New Bank shall
participate in that Facility A Loan or Facility C
Loan (subject to the terms of the Credit Agreement)
as if the novation of the Facility A Commitments and
the Facility C Commitments under Clauses 3.1(a) and
(b) (Novation of Commitments and related rights and
obligations) of this Agreement had taken effect
prior to opening of business on the Business Day
before the Effective Date,
and the Company acknowledges that no Existing Bank will
be obliged to participate in any such Loan to any greater
extent.
(c) On the Effective Date each New Bank shall pay to the
Agent for the Existing Banks pro rata an amount
equal to the principal amount of the Facility B Loan
assumed by it under Clause 3.1(c) (Novation of
Commitments and related rights and obligations) of
this Agreement.
3.3 Administrative details
Each New Bank has delivered to the Agent its initial
details for the purposes of Clause 34 (Notices) of the
Credit Agreement.
4. NATURE OF THIS AGREEMENT
The novation of Commitments and rights and obligations
contemplated by this Agreement shall take effect (in
accordance with its terms) as a novation so that:
(a) Schedule 3 to this Agreement is substituted for
Schedule 1 to the Credit Agreement on the Effective
Date; and
(b) Clause 28.3 (Procedure for novations) of the Credit
Agreement shall apply to the Commitments, rights and
obligations transferred, assumed and released under
Clause 3.1 (Novation of Commitments and related
rights and obligations) of this Agreement and to the
associated rights and obligations under the Finance
Documents, as if this Agreement were a Novation
Certificate.
5. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the
beginning of this Agreement.
<PAGE>
SCHEDULE 1
EXISTING BANKS
ABN AMRO Bank N.V.
Bank of America National Trust and Savings Association
The Bank of New York
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi, Ltd
Bayerische Landesbank Girozentrale, London Branch
CIBC Wood Gundy plc
Credit Lyonnais
The Dai-Ichi Kangyo Bank, Limited
Den Danske Bank Aktieselskab
The Fuji Bank, Limited
The Industrial Bank of Japan, Limited
Midland Bank PLC
Rabobank, London Branch
The Royal Bank of Scotland plc
The Sanwa Bank, Limited
Societe Generale
The Toronto-Dominion Bank
Union Bank of California, N.A.
Union Bank of Switzerland
Westdeutsche Landesbank Girozentrale London Branch
<PAGE>
SCHEDULE 2
NEW BANKS
Bayerische Hypotheken- und Wechsel-Bank AG, London Branch
Barclays Bank PLC
Commonwealth Bank of Australia
Deutsche Bank AG London
Dresdner Bank AG London Branch
Kredietbank NV (London Branch)
National Westminster Bank Plc
The Nikko Bank (UK) plc
The Sakura Bank, Limited
The Sumitomo Bank, Limited
SCHEDULE 3
BANKS AND COMMITMENTS
Banks Facility A Facility B Facility C
Commitment Commitment Commitment
POUNDS POUNDS POUNDS
ABN AMRO Bank N.V. 32,400,000 9,600,000 8,000,000
Bank of America National Trust and
Savings Association 32,400,000 9,600,000 8,000,000
The Bank of New York 32,400,000 9,600,000 8,000,000
The Bank of Tokyo-Mitsubishi, Ltd and
Union Bank of California, N.A. 32,400,000 9,600,000 8,000,000
Bayerische Landesbank Girozentrale,
London Branch 32,400,000 9,600,000 8,000,000
CIBC Wood Gundy plc 32,400,000 9,600,000 8,000,000
The Dai-Ichi Kangyo Bank, Limited 32,400,000 9,600,000 8,000,000
Den Danske Bank Aktieselskab 32,400,000 9,600,000 8,000,000
The Industrial Bank of Japan, Limited 32,400,000 9,600,000 8,000,000
Midland Bank PLC 32,400,000 9,600,000 8,000,000
Rabobank, London Branch 32,400,000 9,600,000 8,000,000
The Royal Bank of Scotland plc 32,400,000 9,600,000 8,000,000
The Sanwa Bank, Limited 32,400,000 9,600,000 8,000,000
Union Bank of Switzerland 32,400,000 9,600,000 8,000,000
Westdeutsche Landesbank Girozentrale
London Branch 32,400,000 9,600,000 8,000,000
The Toronto-Dominion Bank 29,160,000 8,640,000 7,200,000
The Bank of Nova Scotia 25,920,000 7,680,000 6,400,000
Credit Lyonnais 25,920,000 7,680,000 6,400,000
Societe Generale 25,920,000 7,680,000 6,400,000
The Fuji Bank, Limited 22,680,000 6,720,000 5,600,000
Bayerische Hypotheken- und Wechsel-
Bank AG, London Branch 19,440,000 5,760,000 4,800,000
Barclays Bank PLC 19,440,000 5,760,000 4,800,000
Commonwealth Bank of Australia 19,440,000 5,760,000 4,800,000
Deutsche Bank AG London 19,440,000 5,760,000 4,800,000
Dresdner Bank AG London Branch 19,440,000 5,760,000 4,800,000
Kredietbank NV (London Branch) 19,440,000 5,760,000 4,800,000
National Westminster Bank Plc 19,440,000 5,760,000 4,800,000
The Nikko Bank (UK) plc 19,440,000 5,760,000 4,800,000
The Sakura Bank, Limited 19,440,000 5,760,000 4,800,000
The Sumitomo Bank, Limited 19,440,000 5,760,000 4,800,000
__________ __________ __________
810,000,000 240,000,000 200,000,000
__________ __________ __________
<PAGE>
SIGNATORIES
Company
ENTERGY POWER UK PLC
By: WILLIAM J. REGAN, JR.
Arrangers and Existing Banks
ABN AMRO BANK N.V.
By: J.P. CLIFFE
BANK OF AMERICA INTERNATIONAL LIMITED
By: WILLIAM M.F. BISHOP
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: WILLIAM M.F. BISHOP
UNION BANK OF SWITZERLAND
By: N. BURNHAM
Existing Banks
THE BANK OF NEW YORK
By: MICHAEL McMORROW
THE BANK OF NOVA SCOTIA
By: RUSSEL C. HAMER
THE BANK OF TOKYO-MITSUBISHI, LTD
By: DAVID J. DALLISON
Existing Banks (Cont.)
BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH
By: MIRIAM SCUKA
CIBC WOOD GUNDY plc
By: D. RIMMER (Power of Attorney)
CREDIT LYONNAIS
By: M. STEWART
THE DAI-ICHI KANGYO BANK, LIMITED
By: D. RIMMER (Power of Attorney)
DEN DANSKE BANK AKTIESELSKAB
By: D. RIMMER (Power of Attorney)
THE FUJI BANK, LIMITED
By: P. RICHEY
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: ROGER CONCIN
MIDLAND BANK PLC
By: A.P. SMITH
RABOBANK, LONDON BRANCH
(COOPERATIEVE CENTRALE RAIFFEISEN BOERENLEENBANK BA)
By: D. RAWSON PAMELA R. GREEN
Existing Banks (Cont.)
THE ROYAL BANK OF SCOTLAND plc
By: D. RIMMER (Power of Attorney)
THE SANWA BANK, LIMITED
By: M.J. CURRAN
SOCIETE GENERALE
By: P. FOWLER
THE TORONTO-DOMINION BANK
By: D. RIMMER (Power of Attorney)
UNION BANK OF CALIFORNIA, N.A.
By: DAVID J. DALLISON
WESTDEUTSCHE LANDESBANK GIROZENTRALE LONDON BRANCH
By: RHODERICK HENDERSON
New Banks
BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK AG,
LONDON BRANCH
By: JONATHAN BULLOCK TREVOR PRITCHARD
BARCLAYS BANK PLC
By: DAVID ALLEN
COMMONWEALTH BANK OF AUSTRALIA
By: B. PARKER
DEUTSCHE BANK AG LONDON
By: G. RUTTER D. BUGGE
DRESDNER BANK AG LONDON BRANCH
By: H. WOOLDRIDGE D. BARNES
KREDIETBANK NV (LONDON BRANCH)
By: N. VAN DOREN
NATIONAL WESTMINSTER BANK Plc
By: J.P. KASPEREK
THE NIKKO BANK (UK) plc
By: J.B. SMITH M. MOSELING
THE SAKURA BANK, LIMITED
By: K. ONOE M. GILLARD
THE SUMITOMO BANK, LIMITED
By: D. RIMMER (Power of Attorney)
Agent
ABN AMRO BANK N.V.
By: D. RIMMER
<PAGE>
CONFORMED COPY
THIRD SUPPLEMENTAL AGREEMENT
DATED 30th June, 1997
relating to a 1,250,000,000 Pounds Credit Agreement dated 17th
December, 1996
(as amended by a Supplemental Agreement dated 6th February, 1997
and a Second Supplemental Agreement dated 18th March, 1997)
for
ENTERGY POWER UK PLC
arranged by
ABN AMRO BANK N.V.
BANK OF AMERICA INTERNATIONAL LIMITED
UNION BANK OF SWITZERLAND
with
ABN AMRO BANK N.V.
as Agent
ALLEN & OVERY
London
<PAGE>
THIS AGREEMENT is dated 30th June, 1997 between:
(1) ENTERGY POWER UK PLC (Registered No. 3261188) (the
"Company");
(2) ABN AMRO BANK N.V., BANK OF AMERICA INTERNATIONAL LIMITED
and UNION BANK OF SWITZERLAND as arrangers (in this capacity
the "Arrangers"); and
(3) ABN AMRO BANK N.V. as agent for the Banks party to the
Original Credit Agreement (in this capacity the "Agent").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement, unless the contrary intention appears or
the context otherwise requires:
"Credit Agreement"
means the Original Credit Agreement as amended pursuant to
Clause 2 (Amendments to the Original Credit Agreement) of
this Agreement.
"Original Credit Agreement"
means the Credit Agreement dated 17th December, 1996 between
the Company, the Arrangers, the Existing Banks and the
Agent, as amended by the Supplemental Agreement dated 6th
February, 1997 and a Second Supplemental Agreement dated
18th March, 1997.
1.2 Incorporation of Original Credit Agreement interpretations
(a) Terms defined in the Original Credit Agreement shall, unless
the contrary intention appears or the context otherwise
requires, have the same meaning in this Agreement.
(b) Clauses 1.2 (Construction), 27 (Amendments and waivers), 32
(Severability) and 33 (Counterparts) of the Original Credit
Agreement shall apply to this Agreement, as though they were
set out in full in this Agreement but as if references to
the Original Credit Agreement are to be construed as
references to this Agreement.
2. AMENDMENTS TO THE ORIGINAL CREDIT AGREEMENT
The Company has requested that the Finance Parties agree to
the following amendments which differ from the arrangments
contemplated by the Original Credit Agreement as follows:-
(a) Clause 18.16 (Times for making representations and
warranties): the words "(with the exception of Clause
18.11 (Information memorandum)" shall be added after
the words "in the case of the Target," in sub-paragraph
(ii) of paragraph (a) of Clause 18.16 (Times for making
representations and warranties);
(b) Clause 19.16 (Lending and borrowing):
(i) sub-paragraph (iv) of paragraph (b) of Clause
19.16 (Lending and borrowing) shall be renumbered
sub-paragraph "(v)" and a new paragraph (iv) shall
be added into as follows:-
"(iv) cash deposits made by a member of the
Group at a bank or other financial
institution; or"; and
(ii) the reference to "(iii)" in the new sub-paragraph
(v) shall be deleted and replaced by "(iv)"; and
(c) Clause 19.28 (Financial covenants): a new paragraph
(vi) and a new paragraph (vii) shall be added into the
definition of "Adjusted Capital and Reserves" in Clause
19.28 (Financial covenants) as follows:-
"(vi) plus any amount deducted from reserves or the
profit and loss account in respect of goodwill
arising upon and in respect of the acquisition of
the Shares;
(vii) plus any amount deducted from reserves or the
profit and loss account as a provision for the
future payment of any exceptional, special or
windfall tax or levy applicable to, inter alia,
privatised regional electricity companies as a
whole;;".
3. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Finance Party
that the representations and warranties to be repeated by
the Company in accordance with Clause 18.16 (b) (Times for
making representations and warranties) of the Original
Credit Agreement are true as if made on the date of this
Agreement and as if references to the Original Credit
Agreement were references to this Agreement.
4. AGREEMENT TO AMENDMENTS TO THE ORIGINAL CREDIT AGREEMENT
Subject to Clauses 3 (Representations and warranties) above,
each of the parties and the Agent on behalf of the Banks, by
its execution of this Agreement, consents to the
arrangements set out in Clause 2 (Amendments to the Original
Credit Agreement) above and agrees that the Original Credit
Agreement shall be amended, with effect from the date of
this Agreement, in order to enable such arrangements to be
effected, to the intent that any carrying out of any such
arrangements shall not constitute a breach of or Default
under the Original Credit Agreement or any other Finance
Document.
5. INCORPORATION
(a) This Agreement is a Finance Document.
(b) This Agreement shall be deemed to be incorporated as part of
the Original Credit Agreement.
(c) Except as otherwise provided in this Agreement, the Finance
Documents remain in full force and effect.
6. GOVERNING LAW
This Agreement is governed by English law.
This Agreement has been entered into on the date stated at the
beginning of this Agreement.
<PAGE>
SIGNATORIES
Company
ENTERGY POWER UK PLC
By: MICHAEL BEMIS
Arrangers
ABN AMRO BANK N.V.
By: DUNCAN BAILEY KARL PAGE
BANK OF AMERICA INTERNATIONAL LIMITED
By: JOHN LAVERY
UNION BANK OF SWITZERLAND
By: SEAN MALONE NICK BURNHAM
Agent
ABN AMRO BANK N.V.
By: DUNCAN BAILEY KARL PAGE
Exhibit 23(a)
CONSENT
We consent to the reference to our firm under the
heading "Experts" in the Quarterly Report on Form 10-Q being
filed on or about the date hereof by Entergy Corporation,
Entergy Arkansas, Inc., Entergy Gulf States, Inc. ("Entergy
Gulf States"), Entergy Louisiana, Inc., Entergy Mississippi,
Inc., Entergy New Orleans, Inc., and System Energy
Resources, Inc. We further consent to the incorporation by
reference of such reference to our firm into Entergy Gulf
States' Registration Statements on Form S-3 (File Numbers 33-
49739 and 33-51181), Form S-8 (File Numbers 2-76551 and 2-
98011) and on Form S-2 (File Number 333-17911) of such
reference and Statements.
/s/ L. S. Sandlin
SANDLIN ASSOCIATES
Management Consultants
Pasco, Washington
August 8, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Corporation and Subsidiaries financial statements for the quarter ended June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000065984
<NAME> ENTERGY CORPORATION
<SUBSIDIARY>
<NUMBER> 023
<NAME> ENTERGY CORPORATION AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 18,231,592
<OTHER-PROPERTY-AND-INVEST> 971,738
<TOTAL-CURRENT-ASSETS> 3,072,099
<TOTAL-DEFERRED-CHARGES> 4,707,568
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 26,982,997
<COMMON> 2,407
<CAPITAL-SURPLUS-PAID-IN> 4,477,900
<RETAINED-EARNINGS> 2,384,923
<TOTAL-COMMON-STOCKHOLDERS-EQ> 7,186,250
196,237
345,954
<LONG-TERM-DEBT-NET> 9,524,296
<SHORT-TERM-NOTES> 400,468
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 387,630
0
<CAPITAL-LEASE-OBLIGATIONS> 260,922
<LEASES-CURRENT> 152,206
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,850,054
<TOT-CAPITALIZATION-AND-LIAB> 26,982,997
<GROSS-OPERATING-REVENUE> 4,223,843
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 3,417,738
<TOTAL-OPERATING-EXPENSES> 3,417,738
<OPERATING-INCOME-LOSS> 806,105
<OTHER-INCOME-NET> 52,685
<INCOME-BEFORE-INTEREST-EXPEN> 858,790
<TOTAL-INTEREST-EXPENSE> 417,858
<NET-INCOME> 285,064
29,026
<EARNINGS-AVAILABLE-FOR-COMM> 256,038
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 840,214
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Arkansas' financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000007323
<NAME> ENTERGY ARKANSAS
<SUBSIDIARY>
<NUMBER> 001
<NAME> ENTERGY ARKANSAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,821,272
<OTHER-PROPERTY-AND-INVEST> 236,472
<TOTAL-CURRENT-ASSETS> 570,307
<TOTAL-DEFERRED-CHARGES> 462,449
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,090,500
<COMMON> 470
<CAPITAL-SURPLUS-PAID-IN> 590,169
<RETAINED-EARNINGS> 502,218
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,209,207
36,027
116,350
<LONG-TERM-DEBT-NET> 1,241,548
<SHORT-TERM-NOTES> 667
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17,465
0
<CAPITAL-LEASE-OBLIGATIONS> 98,567
<LEASES-CURRENT> 53,086
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,433,933
<TOT-CAPITALIZATION-AND-LIAB> 4,090,500
<GROSS-OPERATING-REVENUE> 798,350
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 686,586
<TOTAL-OPERATING-EXPENSES> 686,586
<OPERATING-INCOME-LOSS> 111,764
<OTHER-INCOME-NET> 13,302
<INCOME-BEFORE-INTEREST-EXPEN> 125,066
<TOTAL-INTEREST-EXPENSE> 50,940
<NET-INCOME> 47,933
5,630
<EARNINGS-AVAILABLE-FOR-COMM> 42,303
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 177,663
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy Gulf
States' financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000044570
<NAME> ENTERGY GULF STATES
<SUBSIDIARY>
<NUMBER> 006
<NAME> ENTERGY GULF STATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,576,262
<OTHER-PROPERTY-AND-INVEST> 85,771
<TOTAL-CURRENT-ASSETS> 824,734
<TOTAL-DEFERRED-CHARGES> 988,570
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,475,337
<COMMON> 114,055
<CAPITAL-SURPLUS-PAID-IN> 1,152,575
<RETAINED-EARNINGS> 371,772
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,689,846
75,210
51,444
<LONG-TERM-DEBT-NET> 1,878,048
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 150,865
0
<CAPITAL-LEASE-OBLIGATIONS> 69,225
<LEASES-CURRENT> 39,639
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,572,504
<TOT-CAPITALIZATION-AND-LIAB> 6,475,337
<GROSS-OPERATING-REVENUE> 957,749
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 789,092
<TOTAL-OPERATING-EXPENSES> 789,092
<OPERATING-INCOME-LOSS> 168,657
<OTHER-INCOME-NET> 10,040
<INCOME-BEFORE-INTEREST-EXPEN> 178,697
<TOTAL-INTEREST-EXPENSE> 89,400
<NET-INCOME> 59,563
13,938
<EARNINGS-AVAILABLE-FOR-COMM> 45,625
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 213,513
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Louisiana's financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000060527
<NAME> ENTERGY LOUISIANA
<SUBSIDIARY>
<NUMBER> 012
<NAME> ENTERGY LOUISIANA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,435,097
<OTHER-PROPERTY-AND-INVEST> 95,610
<TOTAL-CURRENT-ASSETS> 364,300
<TOTAL-DEFERRED-CHARGES> 373,995
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,269,002
<COMMON> 1,088,900
<CAPITAL-SURPLUS-PAID-IN> (2,321)
<RETAINED-EARNINGS> 64,197
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,251,276
85,000
100,500
<LONG-TERM-DEBT-NET> 1,338,276
<SHORT-TERM-NOTES> 44,115
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 53,300
0
<CAPITAL-LEASE-OBLIGATIONS> 44,415
<LEASES-CURRENT> 28,000
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,424,620
<TOT-CAPITALIZATION-AND-LIAB> 4,269,002
<GROSS-OPERATING-REVENUE> 846,246
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 680,455
<TOTAL-OPERATING-EXPENSES> 680,455
<OPERATING-INCOME-LOSS> 165,791
<OTHER-INCOME-NET> (480)
<INCOME-BEFORE-INTEREST-EXPEN> 165,311
<TOTAL-INTEREST-EXPENSE> 65,695
<NET-INCOME> 58,779
6,846
<EARNINGS-AVAILABLE-FOR-COMM> 51,933
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 115,244
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy
Mississippi's financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000066901
<NAME> ENTERGY MISSISSIPPI
<SUBSIDIARY>
<NUMBER> 016
<NAME> ENTERGY MISSISSIPPI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,050,442
<OTHER-PROPERTY-AND-INVEST> 13,381
<TOTAL-CURRENT-ASSETS> 326,228
<TOTAL-DEFERRED-CHARGES> 152,222
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,542,273
<COMMON> 199,326
<CAPITAL-SURPLUS-PAID-IN> (42)
<RETAINED-EARNINGS> 231,786
<TOTAL-COMMON-STOCKHOLDERS-EQ> 488,951
0
57,881
<LONG-TERM-DEBT-NET> 464,075
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 96,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 493,247
<TOT-CAPITALIZATION-AND-LIAB> 1,542,273
<GROSS-OPERATING-REVENUE> 413,220
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 350,131
<TOTAL-OPERATING-EXPENSES> 350,131
<OPERATING-INCOME-LOSS> 63,089
<OTHER-INCOME-NET> 823
<INCOME-BEFORE-INTEREST-EXPEN> 63,912
<TOTAL-INTEREST-EXPENSE> 23,274
<NET-INCOME> 27,751
2,129
<EARNINGS-AVAILABLE-FOR-COMM> 25,622
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 87,623
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Entergy New
Orleans' financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000071508
<NAME> ENTERGY NEW ORLEANS
<SUBSIDIARY>
<NUMBER> 017
<NAME> ENTERGY NEW ORLEANS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 290,841
<OTHER-PROPERTY-AND-INVEST> 3,259
<TOTAL-CURRENT-ASSETS> 126,541
<TOTAL-DEFERRED-CHARGES> 107,482
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 528,123
<COMMON> 33,744
<CAPITAL-SURPLUS-PAID-IN> 36,294
<RETAINED-EARNINGS> 63,747
<TOTAL-COMMON-STOCKHOLDERS-EQ> 153,565
0
19,780
<LONG-TERM-DEBT-NET> 168,920
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 205,638
<TOT-CAPITALIZATION-AND-LIAB> 528,123
<GROSS-OPERATING-REVENUE> 234,759
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 216,604
<TOTAL-OPERATING-EXPENSES> 216,604
<OPERATING-INCOME-LOSS> 18,155
<OTHER-INCOME-NET> 180
<INCOME-BEFORE-INTEREST-EXPEN> 18,335
<TOTAL-INTEREST-EXPENSE> 7,512
<NET-INCOME> 5,856
482
<EARNINGS-AVAILABLE-FOR-COMM> 5,374
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 29,159
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from System
Energy's financial statements for the quarter ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000202584
<NAME> SYSTEM ENERGY RESOURCES
<SUBSIDIARY>
<NUMBER> 018
<NAME> SYSTEM ENERGY RESOURCES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,525,121
<OTHER-PROPERTY-AND-INVEST> 72,372
<TOTAL-CURRENT-ASSETS> 326,883
<TOTAL-DEFERRED-CHARGES> 521,687
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,446,063
<COMMON> 789,350
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 61,826
<TOTAL-COMMON-STOCKHOLDERS-EQ> 851,176
0
0
<LONG-TERM-DEBT-NET> 1,359,068
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 70,000
0
<CAPITAL-LEASE-OBLIGATIONS> 37,501
<LEASES-CURRENT> 28,000
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,100,318
<TOT-CAPITALIZATION-AND-LIAB> 3,446,063
<GROSS-OPERATING-REVENUE> 316,682
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 168,798
<TOTAL-OPERATING-EXPENSES> 168,798
<OPERATING-INCOME-LOSS> 147,884
<OTHER-INCOME-NET> 3,802
<INCOME-BEFORE-INTEREST-EXPEN> 151,686
<TOTAL-INTEREST-EXPENSE> 64,915
<NET-INCOME> 48,438
0
<EARNINGS-AVAILABLE-FOR-COMM> 48,438
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 131,585
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99(a)
<TABLE>
<CAPTION>
Entergy Arkansas, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest Charges 124,101 119,591 110,814 115,337 106,716 107,339
Interest applicable to rentals 17,657 16,860 19,140 18,158 19,121 16,176
-----------------------------------------------------------
Total fixed charges, as defined 141,758 136,451 129,954 133,495 125,837 123,515
Preferred dividends, as defined (a) 32,195 30,334 23,234 27,636 24,731 19,846
-----------------------------------------------------------
Combined fixed charges and preferred dividends, $173,953 $166,785 $153,188 $161,131 $150,568 $143,361
as defined ===========================================================
Earnings as defined:
Net Income $130,529 $205,297 $142,263 $136,666 $157,798 130,751
Add:
Provision for income taxes:
Total 50,590 82,337 29,220 72,081 84,445 70,900
Fixed charges as above 141,758 136,451 129,954 133,495 125,837 123,515
-----------------------------------------------------------
Total earnings, as defined $322,877 $424,085 $301,437 $342,242 $368,080 $325,166
===========================================================
Ratio of earnings to fixed charges, as defined 2.28 3.11 2.32 2.56 2.93 2.63
===========================================================
Ratio of earnings to combined fixed charges and
preferred dividends, as defined 1.86 2.54 1.97 2.12 2.44 2.27
===========================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed
by dividing the preferred dividend requirement by one hundred percent
(100%) minus the income tax rate.
</TABLE>
Exhibit 99(b)
<TABLE>
<CAPTION>
Entergy Gulf States, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest charges 248,416 210,599 204,134 200,224 192,465 188,231
Interest applicable to rentals 23,759 23,455 21,539 16,648 14,887 15,459
----------------------------------------------------------
Total fixed charges, as defined 272,175 234,054 225,673 216,872 207,352 203,690
Preferred dividends, as defined (a) 69,617 65,299 52,210 44,651 48,690 43,270
----------------------------------------------------------
Combined fixed charges and preferred dividends, $341,792 $299,353 $277,883 $261,523 $256,042 $246,960
as defined ==========================================================
Earnings as defined:
Income (loss) from continuing operations before extraordinary items and
the cumulative effect of accounting changes $139,413 $69,462 ($82,755) $122,919 ($3,887) 160,793
Add:
Income Taxes 55,860 58,016 (62,086) 63,244 102,091 107,683
Fixed charges as above 272,175 234,054 225,673 216,872 207,352 203,690
----------------------------------------------------------
Total earnings, as defined (b) $467,448 $361,532 $80,832 $403,035 $305,556 $472,166
==========================================================
Ratio of earnings to fixed charges, as defined 1.72 1.54 0.36 1.86 1.47 2.32
==========================================================
Ratio of earnings to combined fixed charges and
preferred dividends, as defined 1.37 1.21 0.29 1.54 1.19 1.91
==========================================================
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by
dividing the preferred dividend requirement by one hundred percent (100%)
minus the income tax rate.
(b) Earnings for the year ended December 31, 1994, for GSU were not adequate
to cover fixed charges combined fixed charges and preferred dividends by
$144.8 million and $197.1 million, respectively.
</TABLE>
Exhibit 99(c)
<TABLE>
<CAPTION>
Entergy Louisiana, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 141,513 136,957 136,444 136,901 132,412 132,585
Interest applicable to rentals 9,363 8,519 8,332 9,332 10,601 8,925
------------------------------------------------------------
Total fixed charges, as defined 150,876 145,476 144,776 146,233 143,013 141,510
Preferred dividends, as defined (a) 42,026 40,779 29,171 32,847 28,234 23,285
------------------------------------------------------------
Combined fixed charges and preferred dividends, $192,902 $186,255 $173,947 $179,080 $171,247 $164,795
as defined ============================================================
Earnings as defined:
Net Income $182,989 $188,808 $213,839 $201,537 $190,762 $153,626
Add:
Provision for income taxes:
Total Taxes 87,037 110,813 63,288 117,114 118,559 104,602
Fixed charges as above 150,876 145,476 144,776 146,233 143,013 141,510
------------------------------------------------------------
Total earnings, as defined $420,902 $445,097 $421,903 $464,884 $452,334 $399,738
============================================================
Ratio of earnings to fixed charges, as defined 2.79 3.06 2.91 3.18 3.16 2.82
============================================================
Ratio of earnings to combined fixed charges and
preferred dividends, as defined 2.18 2.39 2.43 2.60 2.64 2.43
============================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by
dividing the preferred dividend requirement by one hundred percent (100%)
minus the income tax rate.
</TABLE>
Exhibit 99(d)
<TABLE>
<CAPTION>
Entergy Mississippi, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 64,066 55,359 52,764 51,635 48,007 47,313
Interest applicable to rentals 521 1,264 1,716 2,173 2,165 2,227
--------------------------------------------------------------
Total fixed charges, as defined 64,587 56,623 54,480 53,808 50,172 49,540
Preferred dividends, as defined (a) 12,823 12,990 9,447 9,004 7,720 6,976
--------------------------------------------------------------
Combined fixed charges and preferred dividends, $77,410 $69,613 $63,927 $62,812 $57,892 $56,516
as defined ==============================================================
Earnings as defined:
Net Income $65,036 $101,743 $48,779 $68,667 $79,210 64,218
Add:
Provision for income taxes:
Total income taxes 23,147 55,993 12,476 34,877 41,107 31,481
Fixed charges as above 64,587 56,623 54,480 53,808 50,172 49,540
--------------------------------------------------------------
Total earnings, as defined $152,770 $214,359 $115,735 $157,352 $170,489 $145,239
===============================================================
Ratio of earnings to fixed charges, as defined 2.37 3.79 2.12 2.92 3.40 2.93
===============================================================
Ratio of earnings to combined fixed charges and
preferred dividends, as defined 1.97 3.08 1.81 2.51 2.94 2.57
===============================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by
dividing the preferred dividend requirement by one hundred percent (100%)
minus the income tax rate.
</TABLE>
Exhibit 99(e)
<TABLE>
<CAPTION>
Entergy New Orleans, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 24,648 20,494 17,562 17,183 16,304 15,328
Interest applicable to rentals 444 544 1,245 916 831 931
--------------------------------------------------------------
Total fixed charges, as defined 25,092 21,038 18,807 18,099 17,135 16,259
Preferred dividends, as defined (a) 3,214 2,952 2,071 1,964 1,549 1,682
--------------------------------------------------------------
Combined fixed charges and preferred dividends, $28,306 $23,990 $20,878 $20,063 $18,684 $17,941
as defined ==============================================================
Earnings as defined:
Net Income $26,424 $47,709 $13,211 $34,386 $26,776 $15,746
Add:
Provision for income taxes:
Total 16,065 31,938 4,600 20,467 16,216 12,437
Fixed charges as above 25,092 21,038 18,807 18,099 17,135 16,259
--------------------------------------------------------------
Total earnings, as defined $67,581 $100,685 $36,618 $72,952 $60,127 $44,442
==============================================================
Ratio of earnings to fixed charges, as defined 2.69 4.79 1.95 4.03 3.51 2.73
==============================================================
Ratio of earnings to combined fixed charges and
preferred dividends, as defined 2.39 4.20 1.75 3.64 3.22 2.48
==============================================================
- ------------------------
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by
dividing the preferred dividend requirement by one hundred percent (100%)
minus the income tax rate.
(b) Earnings for the twelve months ended December 31, 1991 include the $90
million effect of the 1991 NOPSI Settlement.
</TABLE>
Exhibit 99(f)
<TABLE>
<CAPTION>
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Total Interest 204,541 190,938 176,504 151,512 143,720 129,520
Interest applicable to rentals 6,265 6,790 7,546 6,475 6,223 5,754
---------------------------------------------------------------
Total fixed charges, as defined $210,806 $197,728 $184,050 $157,987 $149,943 $135,274
===============================================================
Earnings as defined:
Net Income $130,141 $93,927 $5,407 $93,039 $98,668 $100,194
Add:
Provision for income taxes:
Total 88,853 78,552 36,838 75,493 82,121 78,456
Fixed charges as above 210,806 197,728 184,050 157,987 149,943 135,274
---------------------------------------------------------------
Total earnings, as defined $429,800 $370,207 $226,295 $326,519 $330,732 $313,924
===============================================================
Ratio of earnings to fixed charges, as defined 2.04 1.87 1.23 2.07 2.21 2.32
===============================================================
</TABLE>
