File No. 70-8055
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
______________________________________
POST-EFFECTIVE AMENDMENT NO. 3
TO
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
______________________________________
Entergy Corporation Arkansas Power & Light Company
225 Baronne Street 425 West Capitol Avenue
New Orleans, Louisiana 70112 Little Rock, Arkansas 72201
Entergy Services, Inc. Louisiana Power & Light Company
225 Baronne Street 639 Loyola Avenue
New Orleans, Louisiana 70112 New Orleans, Louisiana 70113
System Fuels, Inc. Mississippi Power & Light Company
639 Loyola Avenue 308 East Pearl Street
New Orleans, Louisiana 70113 Jackson, Mississippi 39201
System Energy Resources, Inc. New Orleans Public Service Inc.
1340 Echelon Parkway 639 Loyola Avenue
Jackson, Mississippi 39213 New Orleans, Louisiana 70113
Entergy Operations, Inc. Gulf States Utilities Company
1340 Echelon Parkway 350 Pine Street
Jackson, Mississippi 39213 Beaumont, Texas 77701
(Names of companies filing this statement and
addresses of principal executive offices)
______________________________________
Entergy Corporation
(Name of top registered holding company parent
of each applicant or declarant)
______________________________________
<PAGE>
Gerald D. McInvale Jerry L. Maulden
Senior Vice President Vice Chairman and
and Chief Financial Officer Chief Operating Officer
Entergy Corporation Arkansas Power & Light Company
639 Loyola Avenue 425 West Capitol Avenue
New Orleans, Louisiana 70113 Little Rock, Arkansas 72201
Glenn E. Harder Jerry L. Maulden
Vice President - Vice Chairman and
Financial Strategies Chief Operating Officer
and Treasurer Louisiana Power & Light Company
Entergy Services, Inc. 317 Baronne Street
639 Loyola Avenue New Orleans, Louisiana 70112
New Orleans, Louisiana 70113
Glenn E. Harder Jerry L. Maulden
Treasurer Vice Chairman and
System Fuels, Inc. Chief Operating Officer
639 Loyola Avenue Mississippi Power & Light Company
New Orleans, Louisiana 70113 P.O. Box 1640
Jackson, Mississippi 39215
Donald C. Hintz Jerry L. Maulden
President and Vice Chairman and
Chief Executive Officer Chief Operating Officer
System Energy Resources, Inc. New Orleans Public Service Inc.
Entergy Operations, Inc. 317 Baronne Street
1340 Echelon Parkway New Orleans, Louisiana 70112
Jackson, Mississippi 39213
Don M. Clements, Jr.
Senior Vice President -
External Affairs
Gulf States Utilities Company
350 Pine Street
Beaumont, Texas 77701
(Names and addresses of agents for service)
_____________________________________________
<PAGE>
The Commission is also requested to send copies of any
communications in connection with this matter to:
Susan P. Engle Robert B. McGehee, Esq.
Assistant Treasurer Wise Carter Child & Caraway,
Entergy Services, Inc. Professional Association
639 Loyola Avenue P.O. Box 651
New Orleans, Louisiana 70113 Jackson, Mississippi 39205
Laurence M. Hamric, Esq. Benny H. Hughes, Jr., Esq.
General Attorney - Orgain, Bell & Tucker, L.L.P.
Corporate and Securities 470 Orleans Street
Entergy Services, Inc. Beaumont, Texas 77701
225 Baronne Street
New Orleans, Louisiana 70112
Paul B. Benham, III, Esq. Melvin I. Schwartzman, Esq.
Friday, Eldredge & Clark McChord Carrico, Esq.
2000 First Commercial Building Monroe & Lemann
400 West Capitol Avenue (A Professional Corporation)
Little Rock, Arkansas 72201-3493 201 St. Charles Avenue
New Orleans, Louisiana 70170
Thomas J. Igoe, Jr., Esq.
Reid & Priest
40 West 57th Street
New York, New York 10019
<PAGE>
Item 1. Description of Proposed Transactions.
Item 1 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
I. General
The Entergy System Money Pool ("Money Pool") is an
intra-System financing and investment vehicle whereby the
available funds from the treasuries of the participants are
temporarily invested in a portfolio of securities or loaned, on a
short-term unsecured basis, to any one or more of the other
participants in order to meet the participants' respective
interim needs for cash. The participants in the Money Pool are
Arkansas Power & Light Company, Louisiana Power & Light Company,
Mississippi Power & Light Company, New Orleans Public Service
Inc. (collectively, the "Operating Companies"), System Energy
Resources, Inc. ("System Energy"), Entergy Services, Inc.
("Services"), Systems Fuels, Inc. ("System Fuels") and Entergy
Operations, Inc. ("Entergy Operations") (collectively, the
"Participants", and individually, a "Participant"). Entergy
Corporation ("Entergy") is a Participant in the Money Pool
insofar as it has funds available for investing and/or lending to
other Participants, but it is not permitted to borrow funds
through the Money Pool.
The Participants are authorized, through November 30,
1994, to participate in the Money Pool as and to the extent
provided in this File (No. 70-8055) and the order of the
Securities and Exchange Commission ("Commission") with respect
thereto, dated November 18, 1992 (H.C.A.R. 35-25680). In
addition to borrowings through the Money Pool, the Operating
Companies and System Energy are authorized, through November 30,
1994, to issue and sell unsecured short-term promissory notes
(including commercial paper) to various commercial banks and/or
dealers in commercial paper in order to meet their interim
financing requirements, all as more fully described in the
Commission's November 18, 1992 order.
On December 31, 1993 and pursuant to the order of the
Commission, Entergy and Gulf States Utilities Company ("Gulf
States") consummated various transactions whereupon Gulf States
became a wholly-owned operating subsidiary of Entergy (see File
No. 70-8059 and the Commission's memorandum opinion and order
with respect thereto, dated December 17, 1993 (H.C.A.R. 35-
25952)).
As more fully described below, the parties hereto are
seeking authorization for Gulf States to finance its interim
capital needs through Money Pool borrowings and through the
issuance and sale of short-term promissory notes (including
commercial paper) under terms and conditions identical to those
which have been previously authorized for the Operating
Companies. The parties hereto seek authorization for Gulf States
to effect such short-term borrowings and Money Pool transactions
from time to time through November 30, 1994.
II. Borrowing Limitations
Subject to the reservation of jurisdiction described
below, Gulf States proposes to effect short-term borrowings
through the Money Pool and to issue and sell unsecured short-term
promissory notes (including commercial paper) to various
commercial banks and/or dealers in commercial paper in the
maximum amount of $455 million. However, Gulf States requests
that the Commission's order authorize Gulf States to effect short-
term borrowings, including borrowings through the Money Pool and
the issuance and sale of short-term notes to banks and commercial
paper as described below, in the maximum amount of $125 million,
it being understood, as set forth in Item 5 below, that the
Commission will reserve jurisdiction in its order over the
additional amount so proposed to be borrowed.
III. Participation in the Money Pool
Gulf States proposes to join as a participant in the
Money Pool, which will continue to be administered in the manner
described in this File (No. 70-8055) and subject to the terms and
conditions of the Commission's November 18, 1992 order.
The determination of whether Gulf States has at any
time funds to make available to the Money Pool will be made by,
or under the direction of, its treasurer or other designee. Gulf
States will not effect external borrowings for the purpose of
making loans to other Participants in the money pool.
The operation of the Money Pool is designed to match,
on a daily basis, the available cash and borrowing requirements
of the Participants, thereby minimizing the need for borrowings
to be made by the Participants from external sources. To this
end, it is generally anticipated that the short-term borrowing
requirements of Gulf States will be met, in the first instance,
with the proceeds of borrowings through the Money Pool, and
thereafter, to the extent necessary, with the proceeds of
external borrowings as hereinafter set forth; provided, however,
that it may be desirable for Gulf States occasionally to make
short-term bank borrowings and to issue commercial paper,
notwithstanding the existence of available funds in the Money
Pool. Gulf States, together with the Operating Companies and
System Energy, will have priority as borrowers from the Money
Pool. Services, System Fuels and Entergy Operations will be
permitted to effect borrowings through the Money Pool only if, on
any given day, there are available funds in the Money Pool after
the needs of Gulf States, the Operating Companies and System
Energy have been satisfied.
Reference is made to Exhibit B-1(a) hereto with respect
to the form of promissory note to be executed and delivered by
Gulf States effecting borrowings through the Money Pool.
Gulf States believes that, generally, the cost of the
proposed borrowings through the Money Pool will be more favorable
than the comparable cost of external borrowings through bank
loans and the sale of commercial paper, and that the yield to
Gulf States on funds invested through the Money Pool will be
higher than yields available individually to Gulf States.
In the event that, on any given day, the available
funds in the Money Pool are insufficient to satisfy the short-
term borrowing requirements of Gulf States, Gulf States will
effect short-term borrowings through bank loans and/or the sale
of commercial paper in the manner hereinafter set forth.
IV. External Borrowing Arrangements
A. Bank Lines of Credit
Gulf States proposes to establish lines of credit with
various commercial banks which are located in its general
operating area (such banks being referred to hereinafter as
"Territorial Banks"), up to the maximum aggregate principal
amounts shown in Exhibit B-2(f) hereto. In addition, Gulf States
may establish lines of credit with various commercial banks
located outside its general operating area (such banks being
hereinafter referred to as "Non-territorial Banks"). Gulf States
may arrange these lines of credit on an individual basis, or on a
consolidated "either/or" basis with the Operating Companies and
System Energy in such manner that a bank would provide a line of
credit available for use by any one or more of such companies. It
is expected that the names of the Non-territorial Banks and the
maximum principal amounts to be borrowed from each of the Non-
territorial Banks and to be outstanding at any one time will be
substantially as reflected in Exhibit B-3 hereto.
Except as indicated by Exhibits B-2(f) and B-3, Gulf
States will not effect borrowings from banks pursuant to this
Application-Declaration until it has filed a further amendment
hereto setting forth the bank or banks from which such other
borrowings are to be effected and the amounts thereof.
The notes proposed to be issued and sold to Territorial
Banks and Non-territorial Banks will be in the form of unsecured
short-term promissory notes customarily used by the lending bank,
will be payable on demand of the lending bank or not more than
one year from the date of issuance, and will bear interest at a
rate per annum no greater than 1.5 percentage points over the
prime commercial bank rate in effect on the date of issuance or
renewal or from time to time, depending upon the arrangements
with the lending bank; provided, that the rate of interest on the
notes may be based upon other market rates or indices such that,
as a result of fluctuations in such rates or indices (which are
beyond the control of the borrower), the rate may exceed, for
certain brief periods, the above-described maximum rate of
interest. However, the effective interest rate for any 30-day
period, on an annualized basis, may not exceed the above-
described maximum rate. The selected rate will be the most
favorable effective borrowing rate to Gulf States, taking into
account compensating balances and/or commitment fees, and the
proposed amount and maturity of each borrowing. The notes to
banks will, at the option of Gulf States, or, under certain
circumstances, with the consent of the lending bank, be
prepayable, in whole or in part, at any time without premium or
penalty.
Gulf States may maintain accounts with its Territorial
Banks, and although balances in these accounts may be deemed to
be compensating balances, these accounts would be working
accounts, and fluctuations in their balances would not reflect or
depend upon fluctuations in the amounts of bank loans
outstanding. Assuming that a 10% balance were maintained and
assuming a 6% per annum prime commercial bank rate, the effective
interest cost for borrowings from Territorial Banks would be
approximately 6.7% per annum.
With respect to borrowings from the Non-territorial
Banks, it is anticipated that the Non-territorial Banks may
require the maintenance of compensating balances or the payment
of equivalent fees with respect to the amount of loan
commitments, but in no case is the total of such compensating
balances expected to exceed 10%. Assuming that a 10%
compensating balance were maintained and assuming a 6% per annum
prime commercial bank rate, the effective interest cost for
borrowings from Non-territorial Banks would be approximately 6.7%
per annum.
B. Commercial Paper Arrangements
The proposed commercial paper will be in the form of
unsecured promissory notes with varying maturities not to exceed
270 days, the actual maturities to be determined by market
conditions and Gulf States' anticipated cash requirements at the
time of issuance. In accordance with the established custom and
practice in the market, the proposed commercial paper will not be
payable prior to maturity.
Gulf States proposes to issue, reissue and sell the
commercial paper directly to a dealer in commercial paper
("Dealer") at a discount which will not be in excess of the
maximum discount rate per annum prevailing at the date of
issuance for commercial paper of comparable quality of that
particular maturity sold by public utility issuers to commercial
paper dealers.
No commission or fee will be payable by Gulf States in
connection with the issuance and sale of the commercial paper.
Each Dealer, as principal, will reoffer and sell the commercial
paper at the customary discount rate for commercial paper in such
a manner as not to constitute a public offering. Each Dealer in
reoffering the commercial paper will limit the reoffer and sale
to a non-public customer list for Gulf States containing not more
than 200 buyers of commercial paper consisting of commercial
banks, insurance companies, corporate pension funds, investment
trusts, foundations, colleges and university funds, municipal and
state funds and other financial and non-financial corporations
which normally invest funds in commercial paper.
It is anticipated that the commercial paper will be
held by the buyers to maturity. However, each Dealer may, if
desired by a buyer, repurchase the commercial paper for resale to
others on the list of customers.
V. Use of Proceeds
Construction expenditures for Gulf States in 1994 are
estimated to be $129.9 million. In addition, Gulf States will
require capital funds during 1994 to meet scheduled long-term
debt maturities and to satisfy sinking fund requirements in the
amount of $6.5 million.
The proceeds to be received by Gulf States from
borrowings through the Money Pool and through the issuance and
sale of promissory notes to banks and commercial paper, together
with other funds available, from time to time, to Gulf States
from its operations, from the issuance of such securities as may
be appropriate at the time and from other financing transactions,
will be used to provide interim financing for construction
expenditures, to meet long-term debt maturities and satisfy
sinking fund requirements, as described above, as well as for the
possible refunding, redemption, purchase or other acquisition of
all or a portion of certain outstanding series of high-cost debt
and preferred stock and preference stock.
For further information with respect to the estimated
capital and refinancing requirements of Gulf States through 1994,
reference is made to the financial statements (including the
notes incorporated herein by reference) of Gulf States filed in
this proceeding and referred to in part (b) of Item 6 hereof.
Item 2. Fees, Commissions and Expenses.
Item 2 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
Expenses to be incurred by the parties hereto in
connection with obtaining the Commission's order authorizing the
transactions proposed herein for Gulf States, are estimated not
to exceed $14,500, including $7,500 estimated for legal fees,
$5,000 estimated for fees of Services and $2,000 for the filing
fee payable to the Commission with respect to this post-effective
amendment.
Item 3. Applicable Statutory Provisions.
Item 3 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
Gulf States believes that the proposed short-term
borrowings through the Money Pool, as described herein, including
the issuance, delivery and acquisition of promissory notes to
evidence the same, are subject to the provisions of Sections
6(a), 7, 9(a), 10 and 12(b) of the Act and Rule 43 thereunder,
and that said transactions are exempt from the provisions of Rule
50 under the Act by virtue of paragraph (a)(3) thereof.
Gulf States believes that the investment, on its
behalf, of funds in the Money Pool which at any time are not
loaned to the Participants will be exempt from Sections 9(a) and
10 of the Act by virtue of Section 9(c) of the Act or the
provisions of Rule 40 under the Act.
Gulf States believes that the issuance and sale of
notes to banks and commercial paper are subject to the provisions
of Sections 6(a) and 7 of the Act, and that the issuance and sale
of notes to banks are exempt from the provisions of Rule 50 under
the Act by virtue of paragraph (a)(2) thereof.
Gulf States believes that Rule 50 under the Act may be
applicable to the issuance and sale of commercial paper, but
submits that application of the requirements of Rule 50 in
connection with such issuance and sale is not necessary or
appropriate in the public interest or for the protection of
investors or consumers for the following reasons:
(a) The commercial paper which Gulf States plans to issue
and sell will have a maturity not in excess of 270
days; and
(b) it is not practical to invite bids for commercial
paper.
Gulf States hereby respectfully requests, pursuant to Rule
50(a)(5) under the Act, that the Commission exempt the issuance
and sale, from time to time, of commercial paper, as proposed
herein, from the requirements of Rule 50 under the Act on the
bases above set forth or on any other basis which the Commission
may deem applicable.
Item 4. Regulatory Approval.
Item 4 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
No state regulatory body or agency and no Federal
commission or agency other than this Commission has jurisdiction
over the transactions proposed in this post-effective amendment.
Item 5. Procedure.
Item 5 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
The parties hereto respectfully request that the
Commission's order be entered on or before February 18, 1994.
Gulf States requests that such order initially authorize Gulf
States to effect short-term borrowings, including borrowings
through the Money Pool and the issuance and sale of short-term
notes to banks and commercial paper as described in Item 1
hereof, in the maximum amount of $125 million. Gulf States
further requests that the Commission reserve jurisdiction in its
order over additional amounts proposed to be borrowed by Gulf
States up to the maximum amount set forth in Item 1 above pending
further completion of the record herein with respect to any such
proposed additional borrowings.
Gulf States further respectfully requests that Services
be granted authority to file, on behalf of Gulf States and on a
quarterly basis, certificates of notification pursuant to Rule 24
under the Act with respect to borrowings by Gulf States through
the Money Pool and with respect to the issuances, sales and
payments, from time to time, by Gulf States of notes to banks and
commercial paper.
The parties hereto hereby waive a recommended decision
by a hearing officer or any other responsible officer of the
Commission, agree that the Staff of the Division of Investment
Management may assist in the preparation of the Commission's
decision, and request that there be no waiting period between the
issuance of the Commission's order and the date it is to become
effective.
Item 6. Exhibits and Financial Statements.
Item 6 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
a. Exhibits:
*A-11 - Restated Articles of Incorporation, as
amended, of Gulf States (Exhibit A-11 in
File No. 70-8059).
*A-11(a) - Statement of Resolution amending
Restated Articles of Incorporation of
Gulf States establishing terms of new
Preference Stock (Exhibit A-11(a) in
File No. 70-8059).
*A-12 - By-Laws of Gulf States (Exhibit A-12 in
File No. 70-8059).
B-2(f) - Territorial Banks - Gulf States
**B-3 - Non-territorial Banks.
**B-8(f) - Commercial paper arrangements - Gulf
States.
F-1(a) - Opinion of Reid & Priest, Counsel for
Entergy Corporation.
F-2(a) - Opinion of Reid & Priest, Counsel for
Entergy Services, Inc.
F-3(a) - Opinion of Wise Carter Child & Caraway,
Counsel for Entergy Operations, Inc.
F-4(a) - Opinion of Reid & Priest, Counsel for
System Fuels, Inc.
F-5(a) - Opinion of Reid & Priest, Counsel for
System Energy Resources, Inc.
F-6(a) - Opinion of Friday, Eldredge & Clark,
General Counsel for Arkansas Power &
Light Company.
F-7(a) - Opinion of Monroe & Lemann, General
Counsel for Louisiana Power & Light
Company and Counsel for New Orleans
Public Service Inc.
F-8(a) - Opinion of Wise Carter Child & Caraway,
General Counsel for Mississippi Power &
Light Company.
F-9 - Opinion of Orgain, Bell & Tucker,
L.L.P., Counsel for Gulf States.
G - Suggested form of notice of proposed
transactions for publication in the
Federal Register.
b. Financial Statements:
- Financial statements of Gulf States as of September
30, 1993.
- Notes to financial statements of Gulf States
included in the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and the Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1993 (filed in File No. 1-2703 and
incorporated herein by reference).
- Pro-forma financial statements of Entergy and
subsidiaries, consolidated, as of September 30, 1993.
Except as reflected in the financial statements
(including the notes thereto) there have been no material
changes, not in the ordinary course of business, with
respect to Gulf States or Entergy which have taken place
since September 30, 1993.
___________________________
* Incorporated herein by reference as indicated.
** To be supplied by amendment.
Item 7. Information as to Environmental Effects.
Item 7 of the Application-Declaration, as previously
amended, is hereby supplemented to include the following:
a. As stated in Item 5, the parties hereto would appreciate
receiving the Commission's order by February 18, 1994. As more
fully described in Item 1, the proposed transactions subject to
the jurisdiction of this Commission relate only to the financing
activities of Gulf States. The proposed transactions subject to
the jurisdiction of this Commission do not involve a major
Federal action having a significant impact on the human
environment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
Entergy Services, Inc.
Arkansas Power & Light Company
Gulf States Utilities, Inc.
Louisiana Power & Light Company
Mississippi Power & Light Company
New Orleans Public Service Inc.
System Energy Resources, Inc.
Entergy Operations, Inc.
By: /s/ Glenn E. Harder
Glenn E. Harder
Vice President - Financial
Strategies and Treasurer
Entergy Corporation
By: /s/ Glenn E. Harder
Glenn E. Harder
Treasurer
System Fuels, Inc.
By: /s/ Glenn E. Harder
Glenn E. Harder
Treasurer and
Assistant Secretary
Dated: January 4, 1994
EXHIBIT B-2(f)
GULF STATES UTILITIES COMPANY
TERRITORIAL BANKS
MAXIMUM AMOUNT
BANK NAME TO BE BORROWED
NONE
TOTAL $
EXHIBIT F-1(a)
[Letterhead of Reid & Priest]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Entergy
Corporation ("Company"), Gulf States Utilities Company
("Gulf States"), Entergy Services, Inc., System Fuels, Inc.,
System Energy Resources, Inc., Entergy Operations, Inc.,
Arkansas Power & Light Company, Mississippi Power & Light
Company, Louisiana Power & Light Company and New Orleans
Public Service Inc. relating, among other things, to the
proposed loan by the Company from time to time of available
funds to Gulf States through the Entergy System Money Pool
("Money Pool") and the proposed acquisition by the Company
from Gulf States of promissory notes ("Gulf States Notes")
in connection therewith, all as described in the Amendment.
We are counsel for the Company and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Delaware.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(c) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of any other state,
although we have made a study of the laws of other states
insofar as they are involved in the conclusions stated
herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Reid & Priest
REID & PRIEST
EXHIBIT F-2(a)
[Letterhead of Reid & Priest]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Entergy
Services, Inc. ("Company"), Gulf States Utilities Company
("Gulf States"), Entergy Corporation, System Fuels, Inc.,
System Energy Resources, Inc., Entergy Operations, Inc.,
Arkansas Power & Light Company, Mississippi Power & Light
Company, Louisiana Power & Light Company and New Orleans
Public Service Inc. relating, among other things, to (i) the
proposed loan by the Company from time to time of available
funds to Gulf States through the Entergy System Money Pool
("Money Pool") and the proposed acquisition by the Company
from Gulf States of promissory notes ("Gulf States Notes")
in connection therewith, and (ii) the proposed borrowings by
the Company from Gulf States from time to time through the
Money Pool and the proposed issuance by the Company to Gulf
States of promissory notes ("Company Notes") in connection
therewith, all as described in the Amendment. We are
counsel for the Company and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Delaware.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of any other state,
although we have made a study of the laws of other states
insofar as they are involved in the conclusions stated
herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Reid & Priest
REID & PRIEST
EXHIBIT F-3(a)
[Letterhead of Wise Carter Child & Caraway]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Entergy
Operations, Inc. ("Company"), Gulf States Utilities Company
("Gulf States"), Entergy Corporation, Entergy Services,
Inc., System Fuels, Inc., System Energy Resources, Inc.,
Mississippi Power & Light Company, Arkansas Power & Light
Company, Louisiana Power & Light Company and New Orleans
Public Service Inc. relating, among other things, to (i) the
proposed loan by the Company from time to time of available
funds to Gulf States through the Entergy System Money Pool
("Money Pool") and the proposed acquisition by the Company
from Gulf States of promissory notes ("Gulf States Notes")
in connection therewith, and (ii) the proposed borrowings by
the Company from Gulf States from time to time through the
Money Pool and the proposed issuance by the Company to Gulf
States of promissory notes ("Company Notes") in connection
therewith, all as described in the Amendment. We are
General Counsel for the Company and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Delaware.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the Mississippi Bar and do not
hold ourselves out as experts on the laws of any other
state, although we have made a study of the laws of other
states insofar as they are involved in the conclusions
stated herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Wise Carter Child & Caraway
WISE CARTER CHILD & CARAWAY
EXHIBIT F-4(a)
[Letterhead of Reid & Priest]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by System
Fuels, Inc. ("Company"), Gulf States Utilities Company
("Gulf States"), Entergy Corporation, Entergy Services,
Inc., System Energy Resources, Inc., Entergy Operations,
Inc., Arkansas Power & Light Company, Mississippi Power &
Light Company, Louisiana Power & Light Company and New
Orleans Public Service Inc. relating, among other things, to
(i) the proposed loan by the Company from time to time of
available funds to Gulf States through the Entergy System
Money Pool ("Money Pool") and the proposed acquisition by
the Company from Gulf States of promissory notes ("Gulf
States Notes") in connection therewith, and (ii) the
proposed borrowings by the Company from Gulf States from
time to time through the Money Pool and the proposed
issuance by the Company to Gulf States of promissory notes
("Company Notes") in connection therewith, all as described
in the Amendment. We are counsel for the Company and are of
the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Louisiana.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of any other state,
although we have made a study of the laws of other states
insofar as they are involved in the conclusions stated
herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Reid & Priest
REID & PRIEST
EXHIBIT F-5(a)
[Letterhead of Reid & Priest]
Janaury 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by System
Energy Resources, Inc. ("Company"), Gulf States Utilities
Company ("Gulf States"), Entergy Corporation, Entergy
Services, Inc., System Fuels, Inc., Entergy Operations,
Inc., Arkansas Power & Light Company, Mississippi Power &
Light Company, Louisiana Power & Light Company and New
Orleans Public Service Inc. relating, among other things, to
(i) the proposed loan by the Company from time to time of
available funds to Gulf States through the Entergy System
Money Pool ("Money Pool") and the proposed acquisition by
the Company from Gulf States of promissory notes ("Gulf
States Notes") in connection therewith, and (ii) the
proposed borrowings by the Company from Gulf States from
time to time through the Money Pool and the proposed
issuance by the Company to Gulf States of promissory notes
("Company Notes") in connection therewith, all as described
in the Amendment. We are counsel for the Company and are of
the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Arkansas.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the New York Bar and do not hold
ourselves out as experts on the laws of any other state,
although we have made a study of the laws of other states
insofar as they are involved in the conclusions stated
herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Reid & Priest
REID & PRIEST
EXHIBIT F-6(a)
[Letterhead of Friday, Eldredge & Clark]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Arkansas
Power & Light Company ("Company"), Gulf States Utilities
Company ("Gulf States"), Entergy Corporation, Entergy
Services, Inc., System Fuels, Inc., System Energy Resources,
Inc., Entergy Operations, Inc., Mississippi Power & Light
Company, Louisiana Power & Light Company and New Orleans
Public Service Inc. relating, among other things, to (i) the
proposed loan by the Company from time to time of available
funds to Gulf States through the Entergy System Money Pool
("Money Pool") and the proposed acquisition by the Company
from Gulf States of promissory notes ("Gulf States Notes")
in connection therewith, and (ii) the proposed borrowings by
the Company from Gulf States from time to time through the
Money Pool and the proposed issuance by the Company to Gulf
States of promissory notes ("Company Notes") in connection
therewith, all as described in the Amendment. We are
General Counsel for the Company and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Arkansas.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the Arkansas Bar and do not hold
ourselves out as experts on the laws of any other state,
although we have made a study of the laws of other states
insofar as they are involved in the conclusions stated
herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Friday, Eldredge & Clark
FRIDAY, ELDREDGE & CLARK
EXHIBIT F-7(a)
[Letterhead of Monroe & Lemann]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Louisiana
Power & Light Company ("LP&L"), New Orleans Public Service
Inc. ("NOPSI"), Gulf States Utilities Company ("Gulf
States"), Entergy Corporation, Entergy Services, Inc.,
System Fuels, Inc., System Energy Resources, Inc., Entergy
Operations, Inc., Arkansas Power & Light Company and
Mississippi Power & Light Company relating, among other
things, to (i) the proposed loans by LP&L and NOPSI from
time to time of available funds to Gulf States through the
Entergy System Money Pool ("Money Pool") and the proposed
acquisition by LP&L and NOPSI from Gulf States of promissory
notes ("Gulf States Notes") in connection therewith, and
(ii) the proposed borrowings by LP&L and NOPSI from Gulf
States from time to time through the Money Pool and the
proposed issuance by LP&L and NOPSI to Gulf States of
promissory notes ("Company Notes") in connection therewith,
all as described in the Amendment. We are General Counsel
for LP&L and Counsel for NOPSI and are of the opinion that:
(1) LP&L and NOPSI are each a corporation duly
organized and validly existing under the laws of the State
of Louisiana.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by LP&L and NOPSI in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by LP&L and NOPSI
will be valid and binding obligations of LP&L and
NOPSI, respectively, in accordance with their
respective terms;
(c) assuming that they will have been duly authorized
and legally issued, LP&L and NOPSI will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from LP&L and NOPSI through
the Money Pool; and
(d) the consummation by LP&L and NOPSI of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by LP&L and NOPSI,
respectively, or any associate company thereof.
We are members of the Louisiana Bar and do not
hold ourselves out as experts on the laws of any other
state.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Monroe & Lemann
MONROE & LEMANN
EXHIBIT F-8(a)
[Letterhead of Wise Carter Child & Caraway]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by
Mississippi Power & Light Company ("Company"), Gulf States
Utilities Company ("Gulf States"), Entergy Corporation,
Entergy Services, Inc., System Fuels, Inc., System Energy
Resources, Inc., Entergy Operations, Inc., Arkansas Power &
Light Company, Louisiana Power & Light Company and New
Orleans Public Service Inc. relating, among other things, to
(i) the proposed loan by the Company from time to time of
available funds to Gulf States through the Entergy System
Money Pool ("Money Pool") and the proposed acquisition by
the Company from Gulf States of promissory notes ("Gulf
States Notes") in connection therewith, and (ii) the
proposed borrowings by the Company from Gulf States from
time to time through the Money Pool and the proposed
issuance by the Company to Gulf States of promissory notes
("Company Notes") in connection therewith, all as described
in the Amendment. We are General Counsel for the Company
and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of
Mississippi.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
applicable thereto will have been complied with;
(b) the Company Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Gulf States Notes to be issued by Gulf States
evidencing its borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company or any
associate company thereof.
We are members of the Mississippi Bar and do not
hold ourselves out as experts on the laws of any other
state, although we have made a study of the laws of other
states insofar as they are involved in the conclusions
stated herein.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
/s/ Wise Carter Child & Caraway
WISE CARTER CHILD & CARAWAY
EXHIBIT F-9
[Letterhead of Orgain, Bell & Tucker, L.L.P.]
January 3, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We have reviewed Post-Effective Amendment No. 3
("Amendment") to the joint Application-Declaration on Form U-
1, as amended, in File No. 70-8055, to be filed by Gulf
States Utilities Company ("Company"), Entergy Corporation
("Entergy"), Entergy Services, Inc. ("ESI"), System Fuels,
Inc. ("SFI"), System Energy Resources, Inc. ("SERI"),
Entergy Operations, Inc. ("EOI"), Arkansas Power & Light
Company ("AP&L"), Louisiana Power & Light Company ("LP&L"),
Mississippi Power & Light Company ("MP&L") and New Orleans
Public Service Inc. ("NOPSI") relating to (i) the proposed
loan by the Company from time to time of available funds to
AP&L, LP&L, MP&L, NOPSI, ESI, SFI, SERI and EOI through the
Entergy System Money Pool ("Money Pool") and the proposed
acquisition by the Company from AP&L, LP&L, MP&L, NOPSI,
ESI, SFI, SERI and EOI of promissory notes ("Money Pool
Notes") in connection therewith, (ii) the proposed
borrowings by the Company from time to time through the
Money Pool and the proposed issuance by the Company to
Entergy, AP&L, LP&L, MP&L, NOPSI, ESI, SFI, SERI and EOI of
promissory notes ("Company Notes") in connection therewith,
and (iii) the proposed issuance and sale by the Company from
time to time of promissory notes ("Bank Notes") to banks and
of commercial paper ("Commercial Paper Notes") to a
commercial paper dealer, all as described in the Amendment.
We have assumed that none of the proposed transactions will
be subject to applicable usury laws. We are counsel for the
Company and are of the opinion that:
(1) The Company is a corporation duly organized
and validly existing under the laws of the State of Texas.
(2) In the event that the proposed transactions
are consummated in accordance with the Amendment, as it may
be amended, and such transactions are duly authorized by the
Securities and Exchange Commission:
(a) insofar as the participation by the Company in
said proposed transactions is concerned, all state laws
of Texas applicable thereto will have been complied
with;
(b) the Company Notes, the Bank Notes and the
Commercial Paper Notes to be issued by the Company will
be valid and binding obligations of the Company in
accordance with their respective terms;
(c) assuming that they will have been duly authorized
and legally issued, the Company will legally acquire
the Money Pool Notes to be issued by AP&L, LP&L, MP&L,
NOPSI, ESI, SFI, SERI and EOI evidencing their
respective borrowings from the Company through the
Money Pool; and
(d) the consummation by the Company of the proposed
transactions will not violate the legal rights of the
holders of any securities issued by the Company.
We are members of the Texas Bar and do not hold
ourselves out as experts on the laws of any other state.
Our consent is hereby given to the filing of this
opinion as an exhibit to the Amendment.
Very truly yours,
ORGAIN, BELL & TUCKER, L.L.P.
EXHIBIT G
[Suggested Form of Notice of Proposed Transactions]
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- ; 70-8055)
Entergy Corporation, et al.
Notice of Proposal For Gulf States Utilities Company to
Participate in Entergy System Money Pool and to Sell Short-Term
Notes to Banks and Commercial Paper Dealers; Request for
Exception From Competitive Bidding
Entergy Corporation ("Entergy"), 225 Baronne Street,
New Orleans, Louisiana 70112, a registered holding company, its
service company subsidiary, Entergy Services, Inc., 225 Baronne
Street, New Orleans, Louisiana 70112, Arkansas Power & Light
Company, 425 West Capitol, 40th Floor, Little Rock, Arkansas
72201, Louisiana Power & Light Company, 639 Loyola Avenue, New
Orleans, Louisiana 70112, Mississippi Power & Light Company, 308
East Pearl Street, Jackson, Mississippi 39201, New Orleans Public
Service Inc., 639 Loyola Avenue, New Orleans, Louisiana 70112 and
Gulf States Utilities Company ("Gulf States"), 350 Pine Street,
Beaumont, Texas 77701, each an operating subsidiary of Entergy,
the fuel supply subsidiary of the Entergy System, System Fuels,
Inc., 639 Loyola Avenue, New Orleans, Louisiana 70113, System
Energy Resources, Inc., 1340 Echelon Parkway, Jackson,
Mississippi 39213, Entergy's generating company subsidiary and
Entergy Operations, Inc., 1340 Echelon Parkway, Jackson,
Mississippi 39213, the nuclear power plant operations subsidiary
of Entergy, have filed a Post-Effective Amendment to their joint
Application-Declaration in File No. 70-8055 with this Commission
under Sections 6(a), 7, 9(a), 10, and 12(b) of the Public Utility
Holding Company Act of 1935 ("Act") and Rules 40, 43 and 50
thereunder.
Gulf States proposes, through November 30, 1994, to
lend money to the Entergy System money pool ("Money Pool"), to
borrow from the Money Pool and to issue unsecured promissory
notes to banks ("Notes") and commercial paper to commercial paper
dealers ("Commercial Paper").
Total borrowings by Gulf States through the Money Pool,
the issuance and sale of the Notes and Commercial Paper will not
exceed $125 million, in any combination thereof.
The Notes will mature in less than one year from the
date of issuance, and, assuming a 6% per annum prime commercial
bank rate, the effective interest rate cost would be
approximately 6.7%. The Commercial Paper will be in the form of
unsecured promissory notes having varying maturities of not in
excess of 270 days. Gulf States has requested an exception from
the competitive bidding requirements of Rule 50 pursuant to
subsection (a)(5) so that it may be authorized to carry out
negotiations for the terms of the placement of the commercial
paper. It may do so.
The proceeds from the proposed borrowings will be used
by Gulf States to provide interim financing for construction
expenditures, to meet long-term debt maturities, to satisfy
sinking fund requirements, as well as for the possible refunding,
redemption, purchase or other acquisition of all or a portion of
certain series of high-cost debt and preferred stock.
The Post-Effective Amendment to the Application-
Declaration and any further amendments thereto are available for
public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a
hearing should submit their views in writing by ,
1994, to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the applicants and
declarants at the address specified above. Proof of service (by
affidavit or, in case of an attorney at law, by certificate)
should be filed with the request. Any request for a hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the Application-
Declaration as so amended, may be granted and/or permitted to
become effective.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
____________________
Secretary
FINANCIAL STATEMENTS
_________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
GULF STATES UTILITIES
___________________________________________
AS OF SEPTEMBER 30, 1993
(Unaudited)
_____________________________________________
Pages 1 through 5
<PAGE>
GULF STATES UTILITIES
JOURNAL ENTRIES
These entries give effect to the borrowing of $125,000,000
from the System Money Pool.
Entry No. 1
Cash and cash equivalents.............. $125,000,000
Notes Payable-Associated Companies............ $125,000,000
To give effect to the borrowing of $125,000,000 from the Money
Pool.
Entry No. 2
Other Interest Expense................ $7,500,000
Cash and cash equivalents..................... $7,500,000
To record the annual interest expense of notes payable of
$125,000,000 under the proposed borrowing based on an interest
rate of 6.0%.
Entry No. 3
Cash and cash equivalents............. $ 3,030,000
Income Taxes................................. $ 3,030,000
To give effect to the reduction in income taxes due to increased
interest expense in connection with this filing:
Increase in expense.......... $7,500,000
Statutory Composite Federal
and State Income Tax Rate
of 40.43%.................. $3,030,000
<PAGE>
<TABLE>
<CAPTION>
GULF STATES UTILITIES
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1993
(Unaudited)
Adjustments to Reflect
Transactions Proposed
--------------------------------------
Before In Present After
ASSETS Transaction Filing Transaction
----------- ---------- -----------
(In thousands)
<S> <C> <C> <C>
UTILITY AND OTHER PLANT, AT ORIGINAL COST:
Plant in service $7,018,182 $0 $7,018,182
Less: Accumulated provision for depreciation 2,287,835 0 2,287,835
---------- -------- ----------
Total 4,730,347 0 4,730,347
Construction work in progress 40,886 0 40,886
Nuclear fuel, net of accumulated amortization 88,735 0 88,735
---------- -------- ----------
Utility plant - net 4,859,968 0 4,859,968
---------- -------- ----------
Other Property and Investments 28,924 0 28,924
---------- -------- ----------
CURRENT ASSETS:
Cash and cash equivalents 222,524 120,530 343,054
Receivables
Customers 158,770 0 158,770
Other 19,373 0 19,373
Accrued unbilled revenues 46,571 0 46,571
Fuel inventories 16,691 0 16,691
Materials and supplies 86,769 0 86,769
Accumulated deferred income taxes 29,397 0 29,397
Prepayments and other 51,093 0 51,093
---------- -------- ----------
Total 631,188 120,530 751,718
---------- -------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes 103,146 0 103,146
SFAS No. 109 regulatory assets 585,466 0 585,466
Deferred River Bend costs 750,305 0 750,305
Other 482,854 0 482,854
---------- -------- ----------
Total 1,921,771 0 1,921,771
---------- -------- ----------
TOTAL $7,441,851 $120,530 $7,562,381
========== ======== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF STATES UTILITIES
PRO FORMA BALANCE SHEET
September 30, 1993
(Unaudited)
Adjustments to Reflect
Transactions Proposed
---------------------------------------
Before In Present After
CAPITALIZATION AND LIABILITIES Transactions Filing Transactions
------------ ---------- ------------
(In thousands)
<S> <C> <C> <C>
CAPITALIZATION:
Common stock, authorized 200,000,000
shares without par value, 114,055,065
shares outstanding $1,200,923 $0 $1,200,923
Premium and expense on capital stock (12,374) 0 (12,374)
Other paid-in capital 77,851 0 77,851
Retained Earnings 720,666 (4,470) 716,196
Preference Stock 150,000 0 $150,000
Preferred Stock
Not subject to mandatory redemption 136,444 0 136,444
Subject to mandatory redemption 97,370 0 97,370
Long-term debt 2,368,597 0 2,368,597
---------- -------- ----------
Total equity 4,739,477 (4,470) 4,735,007
---------- -------- ----------
CURRENT LIABILITIES:
Long-term debt due within one year and
sinking fund requirements 425 0 425
Preferred stock sinking fund requirements 6,162 0 6,162
Accounts payable - trade 99,177 0 99,177
Notes payable - associated companies 0 125,000 125,000
Customer deposits 21,905 0 21,905
Taxes accrued 57,243 0 57,243
Interest accrued 65,891 0 65,891
Capital leases - current 39,030 0 39,030
Other 100,994 0 100,994
---------- -------- ----------
Total 390,827 125,000 515,827
---------- -------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Investment tax credits 95,043 0 95,043
Accumulated deferred income taxes 1,337,551 0 1,337,551
SFAS No. 109 regulatory liabilities 176,301 0 176,301
Capital leases -- non-current 144,076 0 144,076
Deferred River Bend financing costs 112,854 0 112,854
Other 445,722 0 445,722
---------- -------- ----------
Total 2,311,547 0 2,311,547
---------- -------- ----------
COMMITMENTS AND CONTINGENCIES
TOTAL $7,441,851 $120,530 $7,562,381
========== ======== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF STATES UTILITIES
PRO FORMA STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1993
(Unaudited)
Adjustments to Reflect
Transactions Proposed
----------------------------------------
Before In Present After
Transactions Filing Transactions
------------ ---------- ------------
(In thousands)
<S> <C> <C> <C>
OPERATING REVENUES:
Electric 1,778,729 $0 1,778,729
Steam 45,383 0 45,383
Gas 31,727 0 31,727
---------- ------- ----------
Total 1,855,839 0 1,855,839
---------- ------- ----------
OPERATING EXPENSES AND TAXES:
Fuel 523,772 0 523,772
Purchased power 152,390 0 152,390
Gas for resale 20,854 0 20,854
Other operations 277,344 0 277,344
Maintenance 143,824 0 143,824
Depreciation and amortization 188,526 0 188,526
Deferred revenue requirement - River Bend
phase-in plan 1,072 0 1,072
Amortization of deferred River Bend costs 58,491 0 58,491
Taxes
Income
Current 11,574 (3,030) 8,544
Deferred-net 41,060 0 41,060
Investment tax credit-net (943) 0 (943)
Other 96,450 0 96,450
---------- ------- ----------
Total 1,514,414 (3,030) 1,511,384
---------- ------- ----------
OPERATING INCOME 341,425 3,030 344,455
---------- ------- ----------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 435 0 435
Other-net 12,007 0 12,007
---------- ------- ----------
Total 12,442 0 12,442
---------- ------- ----------
INTEREST CHARGES:
Interest on long-term debt 212,518 0 212,518
Short-term debt and other 8,747 7,500 16,247
Allowance for borrowed funds
used during construction (529) 0 (529)
---------- ------- ----------
Total 220,736 7,500 228,236
---------- ------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGES $133,131 ($4,470) $128,661
EXTRAORDINARY ITEMS (NET OF INCOME TAXES) (4,060) 0 (4,060)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
(NET OF INCOME TAXES) 10,660 0 10,660
---------- ------- ----------
NET INCOME $139,731 (4,470) $135,261
========== ======= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GULF STATES UTILITIES
PRO FORMA STATEMENT OF RETAINED EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 1993
(Unaudited)
Adjustments to Reflect
Transactions Proposed
----------------------------------------
Before In Present After
Transactions Filing Transactions
------------ ---------- ------------
(In thousands)
<S> <C> <C> <C>
Retained Earnings - Beginning of period $627,687 $0 $627,687
Add - Net Income 139,731 (4,470) 135,261
-------- ------- --------
Total 767,418 (4,470) 762,948
-------- ------- --------
Deduct:
Dividends on preferred and
preference stock (38,229) 0 (38,229)
Preferred and preference stock
redemption (8,523) 0 (8,523)
Dividends on common stock 0 0 0
-------- ------- --------
Total (46,752) 0 (46,752)
-------- ------- --------
Retained Earnings - End of period $720,666 ($4,470) $716,196
======== ======= ========
</TABLE>
FINANCIAL STATEMENTS
_________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
ENTERGY AND SUBSIDIARIES
___________________________________________
AS OF SEPTEMBER 30, 1993
(Unaudited)
_____________________________________________
Pages 1 through 5
<PAGE>
PRO FORMA FINANCIAL DATA
The following pro forma financial data combine the historical
balance sheets and statements of income of Entergy and Gulf States
after giving effect to the Reorganization. The unaudited pro forma
combined condensed balance sheet at September 30, 1993 gives effect
to the Reorganization as if it had occurred at September 30, 1993.
The unaudited pro forma combined condensed statements of income for
the nine months ended September 30, 1993, and the year ended
December 31, 1992, give effect to the Reorganization as if it had
occurred at January 1, 1992. The pro forma adjustments account for
the Reorganization as a purchase and are based upon the assumptions
set forth in the notes thereto, including an assumed issuance upon
the Reorganization of 56,667,726 shares of Holdings Common Stock at
a price of $35.8417, and the payment of $250,000,000 in cash.
The following pro forma financial data have been prepared
from, and should be read in conjunction with, the historical
financial statements and related notes contained in the Annual
Reports on Form 10-K for the fiscal year ended December 31, 1992
("1992 10-K's") and the Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1993, June 30, 1993 and September 30, 1993
("1993 10-Q's"), of Entergy and Gulf States, all of which have been
incorporated by reference herein. The following information is
based upon preliminary evaluations and is subject to change. The
following information is not necessarily indicative of the
financial position or operating results that would have occurred
had the Reorganization been consummated on the date, or at the
beginning of the periods, for which the Reorganization is being
given effect, and is not necessarily indicative of future operating
results or financial position. As discussed in Note (11) under
"Notes to Pro Forma Combined Balance Sheet and Statements of
Income", no write-offs or liabilities related to certain
contingencies to which Gulf States is subject have been reflected
in the following pro forma financial data.
<PAGE>
<TABLE>
<CAPTION>
HOLDINGS AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
September 30, 1993
(thousands)
(unaudited)
Pro Forma
---------------------------------
ASSETS ENTERGY GULF STATES Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
UTILITY AND OTHER PLANT:
Plant in service $14,839,102 $7,018,182 $21,857,284
Nuclear fuel 214,280 88,735 $149,056 (6) 452,071
Less - Accumulated depreciation and amortization 4,731,457 2,287,835 149,056 (6) 7,168,348
----------- ---------- ---------- -----------
10,321,925 4,819,082 - 15,141,007
Gulf States acquisition adjustment (9)(10) - - 395,455 (1) 395,455
Construction work in progress 326,321 40,886 367,207
----------- ---------- ---------- -----------
Utility plant - net 10,648,246 4,859,968 395,455 15,903,669
----------- ---------- ---------- -----------
OTHER PROPERTY AND INVESTMENTS 279,122 28,924 308,046
----------- ---------- ---------- -----------
CURRENT ASSETS:
Cash and cash equivalents 563,432 222,524 (261,210) (2) 524,746
Accounts receivable and unbilled revenues 597,879 224,714 822,593
Fuel inventories 64,686 16,691 81,377
Materials and supplies 283,690 86,769 370,459
Rate deferrals and deferred River Bend costs 237,361 - 89,361 (6) 326,722
Accumulated deferred income taxes - 29,397 (29,397) (6) -
Prepayments and other current assets 132,515 51,093 183,608
----------- ---------- ---------- -----------
Total current assets 1,879,563 631,188 (201,246) 2,309,505
----------- ---------- ---------- -----------
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes - 103,146 (103,146) (6) -
Deferred River Bend costs - 750,305 (89,361) (6) 660,944
Rate deferrals 1,283,394 - 1,283,394
SFAS 109 regulatory asset 909,969 585,466 (176,301) (6) 1,319,134
Other 462,539 482,854 (1,024) (2,9) 944,369
----------- ---------- ---------- -----------
Total deferred charges and other assets 2,655,902 1,921,771 (369,832) 4,207,841
----------- ---------- ---------- -----------
TOTAL ASSETS $15,462,833 $7,441,851 ($175,623) $22,729,061
=========== ========== ========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock equity $4,561,910 $1,987,066 $40,825 (3) $6,589,801
Preference stock - 150,000 150,000
Cumulative preferred stock
Without sinking fund 408,801 136,444 545,245
With sinking fund 253,928 97,370 6,162 (6) 357,460
Long-term debt 5,170,095 2,368,597 7,538,692
----------- ---------- ---------- -----------
Total capitalization 10,394,734 4,739,477 46,987 15,181,198
----------- ---------- ---------- -----------
CURRENT LIABILITIES:
Currently maturing long-term debt 121,540 425 121,965
Notes payable 667 - 667
Preferred stock sinking fund requirements - 6,162 (6,162) (6) -
Accounts payable 257,279 99,177 356,456
Customer deposits 104,702 21,905 126,607
Taxes accrued 218,257 57,243 275,500
Interest accrued 139,135 65,891 205,026
Obligations under capital leases 144,343 39,030 183,373
Preferred dividends declared 13,941 - 13,941
Accumulated deferred income taxes 84,455 - (29,397) (6) 55,058
Other 109,474 100,994 210,468
----------- ---------- ---------- -----------
Total current liabilities 1,193,793 390,827 (35,559) 1,549,061
----------- ---------- ---------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 2,644,413 1,337,551 (150,939) (6,9,10) 3,831,025
Accumulated deferred investment tax credits 533,708 95,043 628,751
SFAS 109 regulatory liability - 176,301 (176,301) (6) -
Obligations under capital leases 140,156 144,076 284,232
Deferred River Bend financing costs - 112,854 112,854
Other 556,029 445,722 140,189 (9,10) 1,141,940
----------- ---------- ---------- -----------
Total deferred credits and other liabilities 3,874,306 2,311,547 (187,051) 5,998,802
----------- ---------- ---------- -----------
CONTINGENCIES (11)
TOTAL CAPITALIZATION AND LIABILITIES $15,462,833 $7,441,851 ($175,623) $22,729,061
=========== ========== ========== ===========
The accompanying Notes to Pro Forma Combined Balance Sheet and
Statements of Income are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOLDINGS AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1993
(thousands,except share data)
(unaudited)
Pro Forma
-----------------------------------
ENTERGY GULF STATES Adjustments Combined
(7,9) (7,9)
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES (8):
Electric $3,345,757 $1,364,027 ($22,470) (5) $4,687,314
Natural gas 61,708 23,349 85,057
Steam - 33,632 33,632
---------- ---------- -------- ----------
Total operating revenues 3,407,465 1,421,008 (22,470) 4,806,003
4,806,003
---------- ---------- -------- ----------
OPERATING EXPENSES (8):
Operation:
Fuel for electric generation and fuel-related
expenses 628,772 415,786 1,044,558
Purchased power 208,212 101,600 (22,470) (5) 287,342
Gas purchased for resale 36,052 14,666 50,718
Other 556,969 201,172 (2,803) (4) 755,338
Maintenance 221,733 102,311 324,044
Depreciation, decommissioning and amortization 329,898 141,830 471,728
Taxes other than income taxes 145,643 72,869 218,512
Income taxes 252,744 55,656 1,133 (4) 309,533
Rate deferrals:
Rate deferrals (1,651) - (1,651)
Deferred revenue requirement - 697 697
Amortization of deferrals 215,838 44,992 260,830
---------- ---------- -------- ----------
Total operating expenses 2,594,210 1,151,579 (24,140) 3,721,649
---------- ---------- -------- ----------
OPERATING INCOME 813,255 269,429 1,670 1,084,354
OTHER INCOME AND DEDUCTIONS 40,611 6,584 (9,567) (4) 37,628
---------- ---------- -------- ----------
INCOME BEFORE INTEREST CHARGES 853,866 276,013 (7,897) 1,121,982
---------- ---------- -------- ----------
INTEREST AND OTHER CHARGES:
Long-term debt 368,332 153,538 521,870
Other 20,967 6,247 27,214
Preferred and Preference dividend requirements 42,964 - 28,118 (6) 71,082
---------- ---------- -------- ----------
Total charges 432,263 159,785 28,118 620,166
---------- ---------- -------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 421,603 116,228 (36,015) 501,816
PREFERRED AND PREFERENCE DIVIDEND
REQUIREMENTS - 28,118 (28,118) (6) -
---------- ---------- -------- ----------
INCOME APPLICABLE TO COMMON STOCK
BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $421,603 $88,110 ($7,897) $501,816
=========== =========== ======== ===========
AVERAGE COMMON SHARES OUTSTANDING 174,794,391 114,055,065 231,462,117
=========== =========== ===========
EARNINGS PER AVERAGE COMMON SHARE
BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $2.41 $0.77 $2.17
=========== =========== ===========
===========
DIVIDENDS DECLARED PER COMMON SHARE $1.20 - $1.20
=========== =========== ===========
The accompanying Notes to Pro Forma Combined Balance Sheet and
Statements of Income are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOLDINGS AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1992
(thousands,except share data)
Pro Forma
----------------------------------
ENTERGY GULF STATES Adjustments Combined
(7,9) (7,9)
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES (8):
Electric $4,043,555 $1,694,536 ($38,900) (5) $5,699,191
Natural gas 72,944 28,523 101,467
Steam - 50,315 50,315
---------- ---------- -------- ----------
Total operating revenues 4,116,499 1,773,374 (38,900) 5,850,973
---------- ---------- -------- ----------
OPERATING EXPENSES (8):
Operation:
Fuel for electric generation and fuel-related
expenses 759,470 471,873 1,231,343
Purchased power 228,679 136,716 (38,900) (5) 326,495
Gas purchased for resale 43,212 16,563 59,775
Other (6) 806,943 277,385 2,747 (4) 1,087,075
Maintenance 301,836 161,080 462,916
Depreciation, decommissioning and amortization 424,958 188,393 613,351
Taxes other than income taxes 197,895 91,740 289,635
Income taxes 210,081 38,058 (1,111) (4) 247,028
Rate deferrals:
Rate deferrals (24,176) - (24,176)
Deferred revenue requirement - 2,290 2,290
Amortization of deferrals (6) 209,015 50,656 259,671
---------- ---------- -------- ----------
Total operating expenses 3,157,913 1,434,754 (37,264) 4,555,403
---------- ---------- -------- ----------
OPERATING INCOME 958,586 338,620 (1,636) 1,295,570
OTHER INCOME AND DEDUCTIONS 96,448 48,262 (12,757) (4) 131,953
---------- ---------- -------- ----------
INCOME BEFORE INTEREST CHARGES 1,055,034 386,882 (14,393) 1,427,523
---------- ---------- -------- ----------
INTEREST AND OTHER CHARGES:
Long-term debt 529,668 239,341 769,009
Other 24,592 8,128 32,720
Preferred and Preference dividend requirements 63,137 - 49,702 (6) 112,839
---------- ---------- -------- ----------
Total charges 617,397 247,469 49,702 914,568
---------- ---------- -------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 437,637 139,413 (64,095) 512,955
PREFERRED AND PREFERENCE DIVIDEND
REQUIREMENTS - 49,702 (49,702) (6) -
---------- ---------- -------- ----------
INCOME APPLICABLE TO COMMON STOCK
BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $437,637 $89,711 ($14,393) $512,955
=========== =========== ======== ===========
AVERAGE COMMON SHARES OUTSTANDING 176,573,778 114,055,065 233,241,504
=========== =========== ===========
EARNINGS PER AVERAGE COMMON SHARE
BEFORE EXTRAORDINARY ITEMS AND THE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $2.48 $0.79 $2.20
=========== =========== ===========
DIVIDENDS DECLARED PER COMMON SHARE $1.45 - $1.45
=========== =========== ===========
The accompanying Notes to Pro Forma Combined Balance Sheet and
Statements of Income are an integral part of this statement.
</TABLE>
<PAGE>
HOLDINGS AND SUBSIDIARIES
Notes to Pro Forma Combined Balance Sheet
and Statements of Income
(unaudited)
(1) Reflects an acquisition adjustment equal to the excess of
the purchase price over the net assets of Gulf States acquired,
assuming the conversion of 114,055,065 shares of Gulf States Common
Stock at $20 per share, and the payment of $31,000,000 in
transaction costs estimated to be capitalized in connection with
the Reorganization. It has been classified as an acquisition
adjustment in Utility Plant in accordance with generally accepted
accounting principles. See also Notes (9), (10) and (11) below.
(2) Reflects $250,000,000 paid upon conversion of Gulf States
Common Stock in the Reorganization (assuming 12,500,000 of the
114,055,065 shares of Gulf States Common Stock elect the right to
receive cash at $20 per share), and $11,210,000 representing the
balance of transaction costs estimated to be paid in connection
with the Reorganization. As of September 30, 1993, $23,000,000 had
already been paid for transaction costs.
(3) Reflects the elimination of the Gulf States Common Stock
account of $1,987,066,000 net of total adjustments of
$2,027,891,000 to reflect the issuance in the Reorganization of
56,667,726 shares of Holdings Common Stock at a value of $35.8417
per share and to reflect the reduction in capital for $3,210,000 of
estimated transaction costs associated with the registration and
issuance of securities. See also Note (2) above.
(4) Reflects amortization of the acquisition adjustment (as
described in Note 1 above) over a 31-year period, which
approximates the remaining average book life of the plant being
acquired. The annual amortization is calculated at $12,757,000 and
amortization for the nine months ended September 30, 1993,
represents 75% of the annual amortization level, or $9,567,000.
This amortization is assumed to not be deductible for income tax
purposes.
Gulf States' annual costs associated with items described in
Notes (9), (10) and (11), if any ultimately arises, will be
eliminated in consolidation in order not to reflect these costs in
both Gulf States' and Holdings' (through amortization of the
acquisition adjustment) income statements. For the year ended
December 31, 1992, annual cost and income taxes related to
Statement of Financial Accounting Standards ("SFAS") No. 87 net
asset adjustment have been eliminated, or approximately $1,636,000,
net of income taxes. For the nine months ended September 30, 1993,
the cost and income taxes related to SFAS No. 87 net asset and SFAS
No. 106 net obligation adjustments have been eliminated, or
approximately $1,670,000, net of income taxes.
(5) Reflects elimination of $38,900,000 and $22,470,000
related to intercompany purchased power transactions between
Entergy and Gulf States for the year ended December 31, 1992 and
the nine months ended September 30, 1993, respectively.
(6) Certain reclassifications of reported amounts have been
made to conform to current classifications on a combined basis,
including reclassifications for nuclear fuel amortization,
current/non-current rate deferrals, current/non-current accumulated
deferred income taxes, SFAS 109 regulatory liability, current
preferred stock sinking fund payments, and preferred and preference
dividend requirements. In addition, certain reclassifications of
reported amounts in Entergy's Statement of Income for the year
ended December 31, 1992 have been made to conform to the
presentation in the Statement of Income for the nine months ended
September 30, 1993.
(7) Includes the effects of the following non-recurring items,
net of income taxes.
Nine Months Ended Year Ended
September 30, 1993 December 31, 1992
------------------ ------------------
Earnings Impact Earnings Impact
$ Per Share $ Per Share
------------------ ------------------
(thousands, except per share data)
ENTERGY
FERC return on equity
settlement agreement $16,800 $0.10
Sale of retail properties
in Missouri $19,600 $0.11
GULF STATES
Reversal of common stock
guaranty liability to
the Southern Company $24,200 $0.21
Also, prior to December 31, 1992 certain Entergy operating
companies and Gulf States recognized revenue when billed. To
provide a better matching of revenues and expenses, effective
January 1, 1993, these companies adopted a change in accounting
principle to provide for accrual of estimated unbilled revenues.
The increase in income before the cumulative effect of the
accounting change for unbilled revenues and the related earnings
per share impact for the nine months ended September 30, 1993 are
as follows:
Increase in Earnings
Income Before the Per Share
Cumulative Effect Impact
----------------- ---------
(in 000's, except per share data)
Entergy $24,388 $0.14
Gulf States (See Note) $ 7,356 $0.06
Note - In addition to the above, the cumulative effect for the Gulf
States' Louisiana retail jurisdiction of recording unbilled
revenue, approximating $10,068,000, net of related income taxes,
was deferred in accordance with a Louisiana Public Service
Commission ("LPSC") rate order. Changes in unbilled revenues in
the Louisiana retail jurisdiction subsequent to January 1, 1993,
have been recorded in operations.
(8) The LPSC, the Public Utility Commission of Texas ("PUCT")
and the Federal Energy Regulatory Commission ("FERC") approved the
Reorganization and certain rate actions. The regulatory approvals
are described in Entergy's 1993 10-Q's. In addition, Entergy and
certain system operating companies entered into settlement
arrangements with the Arkansas Public Service Commission, the Council
of the City of New Orleans, Louisiana and the Mississippi Public
Service Commission. These settlement arrangements provided that,
among other things, Arkansas Power & Light Company would not seek a
general rate increase for five years; New Orleans Public Service,
Inc. would reduce its annual electric base rates by $4.8 million
effective for bills rendered on or after November 1, 1993; and
for a period of five years beginning November 9, 1993, Mississippi
Power & Light Company's ("MP&L") retail base rates under its
proposed formula rate plan would not be increased above November 1,
1993 levels and MP&L would not request any general retail rate
increase that would increase retail rates above the level of
MP&L's rates in effect as of November 1, 1993. For further
information with respect to the settlements, see Entergy's
September 30, 1993 10-Q. Summarized below are the significant
provisions of the rate actions taken by the LPSC, the PUCT and
the FERC.
The LPSC approved a joint regulatory proposal which included
the following elements: (1) a five-year rate cap or ceiling on Gulf
States' retail electric rates in Louisiana; (2) a fuel cost
protection mechanism by which the LPSC-jurisdictional portion of
all fuel savings created by the merger of the two companies would
flow through the LPSC fuel adjustment to the Gulf States ratepayers
(subject to a fuel cost tracking mechanism to provide certain
protection to certain LPSC jurisdictional ratepayers); and (3) a
non-fuel savings tracking mechanism comparing the non-fuel O&M
expenses to a baseline deemed to represent the level of non-fuel O&M
expenses that would have been incurred absent the merger. In the
event that the baseline numbers exceed the actual non-fuel O&M
expenses (subject to certain adjustments), the difference will be
deemed to be merger-related non-fuel O&M savings, which savings
will be shared 60 percent for Gulf States stockholders and 40
percent for Gulf States ratepayers, with no limit on the amount of
such savings that may be shared during the eight years following
closing.
The PUCT adopted a regulatory plan that includes the following
elements: (1) a provision requiring merger created fuel savings
in Gulf States' Texas service area to be passed through to Texas
customers; (2) a five year rate cap on Gulf States' retail base
rates in Texas; (3) a tracking mechanism which establishes a
baseline against which merger-related non-fuel O&M savings will
measured; (4) a provision permitting Gulf States' stockholders to
retain 50 percent of the merger-related non-fuel O&M savings
measured by the above tracking mechanism for eight years, except
that the stockholders' portion will be reduced by $2.6 million per
year on a total Company basis in years four through eight; (5) a
series of regulatory rate filings to ensure that customers' share
of non-fuel O&M savings be reflected in rates on a timely basis;
and (6) a requirement that Entergy hold Gulf States' Texas retail
customers harmless from the effects of removal by the FERC of a 40
percent cap on the amount of fuel savings Gulf States may be
required to transfer to other Entergy operating companies under the
FERC fuel tracking mechanism (see below).
The FERC approved certain rate schedule changes to integrate
Gulf States into the Entergy System Agreement. Certain commitments
were adopted to provide reasonable assurance that the ratepayers of
the existing Entergy operating companies will not be allocated
higher costs, specifically including, among others, (1) a tracking
mechanism to protect operating companies from certain unexpected
increases in fuel costs, (2) the distribution of profits from power
sales contracts entered into prior to the Reorganization, (3) a
methodology to estimate the cost of capital in future FERC
proceedings and (4) a stipulation that the operating companies will
be insulated from certain direct effects on capacity equalization
payments should Gulf States, due to a finding of imprudent Gulf
States management prior to the merger, be required to purchase
Cajun Electric Power Cooperative, Inc.'s ("Cajun") 30 percent share
in the River Bend Unit 1 ("River Bend").
No pro forma adjustments have been reflected for the projected
effects of the rate actions and cost savings. The intent of pro
forma financial information is to provide information about the
continuing impact of a particular transaction, and not to provide a
financial forecast. Accordingly, these adjustments have been
excluded since cost savings vary over time, and because of the
estimates inherent in projecting the ultimate impact of the rate
actions.
(9) In accordance with the purchase method of accounting for
business combinations, certain adjustments must be recorded through
the process of assigning the purchase price to individual assets
acquired and liabilities assumed. SFAS No. 87, Employers'
Accounting for Pensions, SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, and SFAS No. 109,
Accounting for Income Taxes, include specific business combination
provisions, the impact of which is summarized and discussed below.
Amounts disclosed have been estimated as of September 30, 1993.
Changes in accounting assumptions and/or updated valuations as of
December 31, 1993 will impact the amounts ultimately recorded upon
consummation of the Reorganization. See also Notes (1) and (4)
above.
in 000's
--------
SFAS No. 87 net asset $(21,976)
SFAS No. 106 net obligation 123,199
Income tax effect of above (40,924)
--------
Net increase in acquisition adjustment $ 60,299
========
SFAS No. 87 requires the recording of an asset for the fair
value of plan assets in excess of the projected benefit obligation.
As of September 30, 1993, Gulf States' net SFAS No. 87 asset
approximated $21,976,000.
SFAS No. 106 requires the recording of a liability for the
accumulated postretirement benefit obligation in excess of the fair
value of plan assets. As of September 30, 1993, Gulf States' net
SFAS No. 106 obligation approximated $123,199,000.
Regarding SFAS No. 106, Entergy and Gulf States adopted this
statement effective January 1, 1993. Accordingly, the impact of
SFAS No. 106 is reflected in the pro forma financial statements
except for the Income Statement for the Year Ended December 31,
1992. Because the effects of the change on earlier periods are not
determinable, no pro forma adjustment has been reflected in the
December 31, 1992 income statement. For the first nine months of
1993 the total cost for postretirement benefits under SFAS No. 106
increased by approximately $18,100,000 for Entergy and $9,200,000
for Gulf States. Certain Entergy operating companies recorded
offsetting regulatory assets approximating $8,744,000 based on
approved rate treatment. See Entergy's Note 6, "Postretirement and
Postemployment Benefits," and Gulf States' Note 4, "Rates and
Accounting," to the 1993 10-Q's, incorporated by reference herein,
for additional SFAS No. 106 information.
SFAS No. 109 requires that a deferred tax liability or asset
shall be recognized for differences between the assigned values and
liabilities (except the portion of goodwill for which amortization
is not determinable for tax purposes). The acquisition adjustment
is treated as goodwill under the provisions of SFAS No. 109.
Accordingly, the tax effect of the acquisition adjustment is not
reflected.
Regarding SFAS No. 109, Entergy and Gulf States adopted this
statement effective January 1, 1993. Entergy adopted SFAS No. 109
by recording the cumulative effect of an accounting change in 1993.
Gulf States adopted SFAS No. 109 by restating prior years'
financial statements. Accordingly, the impact of SFAS No. 109 is
reflected in the pro forma financial statements except for the
Income Statement for the Year Ended December 31, 1992 for Entergy.
Because the effects of the change on earlier periods are not
determinable, no pro forma adjustment has been reflected in the
December 31, 1992 income statement for Entergy. A substantial
majority of the adjustments required by SFAS No. 109 for Entergy
were recorded to deferred tax balance sheet accounts with
offsetting adjustments to regulatory assets and liabilities.
(10) In connection with the Reorganization, Gulf States has
offered a voluntary enhanced retirement plan to eligible employees.
This plan will be available for a temporary period and will be
accounted for in accordance with SFAS No. 88, Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits. Since the plan is directly related
to and contingent upon the Reorganization, the resulting liability,
estimated to approximate $ 16,990,000, and related income tax
effect approximating $6,869,000, will be recorded through the
process of assigning the purchase price, with a corresponding
increase in the acquisition adjustment. See also Note (1) above.
(11) Gulf States remains subject to significant contingencies
and risks which could result in material losses and write-offs
during future periods. See Gulf States' Notes 3, "Commitments and
Contingencies," and 4, "Rates and Accounting," to the 1993 10-Q's,
incorporated by reference herein, for information with respect to
the contingencies and risks. Two of the more significant
contingencies pertain to unresolved rate making issues and
litigation. No write-offs or liabilities related to these
contingencies have been reflected in the accompanying pro forma
financial statements. Disclosure related to these matters is
reproduced below. This information is excerpted from, and
qualified in its entirety by reference to, the information set
forth in the Gulf States' 1993 10-Q's and 1992 10-K.
Rate Making Issues
On May 16, 1988, in Docket No. 7195, the PUCT granted Gulf
States a permanent increase in annual revenues of $59,900,000. The
increase was based on including in rate base approximately $1.6
billion of Gulf States' system-wide plant investment in River Bend
and approximately $182,000,000 of related Texas retail jurisdiction
deferred River Bend costs ruled prudent. Additionally, the PUCT
affirmed its preliminary rulings made in February 1988, to disallow
as imprudent $63,468,000 of Gulf States system-wide River Bend
plant costs and placed in abeyance approximately $1.4 billion of
Gulf States' system-wide River Bend plant investment and
approximately $157,000,000 of Texas retail jurisdiction deferred
River Bend operating and carrying costs with no finding of
prudency. The PUCT affirmed that the ultimate rate treatment of
such amounts would be subject to future demonstration by Gulf
States of the prudency of such costs. Gulf States, the Office of
Public Utility Counsel, the Attorney General, and the intervening
municipal groups appealed the PUCT order in Docket No. 7195. Gulf
States also filed a separate rate case (Docket No. 8702) in which
it asked that the abeyed River Bend plant cost be found prudent and
included in rate base. Intervening parties filed suit in district
court to prohibit the proceedings in Docket No. 8702. The district
court's decision in that suit was ultimately appealed to the Texas
Supreme Court, and the Texas Supreme Court ruled that the prudence
of the costs purported to be held in abeyance by the PUCT in its
May 16, 1988 order could not be relitigated in a separate rate
proceeding such as Docket No. 8702. The Texas Supreme Court's
decision stated that all issues relating to the merits of the
original order of the PUCT, including the prudence of all River
Bend related costs, were to be addressed in a then-pending district
court appeal.
On October 1, 1991, the district court handed down its
decision in Gulf States' appeal of the May 1988 order from the
PUCT. The decision stated that, while it was clear the PUCT made
an error in assuming it could set aside $1.4 billion of the total
costs of River Bend and consider them in a later proceeding, the
PUCT, nevertheless, found that Gulf States had not met its burden
of proof related to the amounts placed in abeyance. The court also
ruled that deferred costs associated with River Bend accrued after
the unit was placed in commercial operation, but prior to relevant
rate orders, should not be included in rate base under a 1991
decision regarding El Paso Electric Company's ("El Paso") similar
deferred costs. The court further stated that the PUCT erred in
reducing Gulf States' deferred costs by $1.50 for each $1.00 of
revenue collected under the interim rate increases authorized in
1987 and 1988. The court remanded the case to the PUCT with
instructions as to the proper handling of the deferred cost issues.
Gulf States' motion for rehearing was denied, and on December 18,
1991 Gulf States filed an appeal of the October 1, 1991 district
court order. The PUCT also appealed the October 1, 1991 district
court order, which served to supersede the district court's
judgment rendering it unenforceable under Texas law. On August 26,
1992, the court of appeals in the El Paso case handed down its
second opinion on rehearing modifying its previous opinion on
deferred accounting for El Paso (which had been relied upon by the
district court in the Gulf States case). The court's second
opinion distinguishes between deferred carrying costs and deferred
operating and maintenance costs, concluding that the PUCT may
lawfully defer operating and maintenance costs and subsequently
include them in rate base, but that the Public Utility Regulatory
Act prohibits such rate base treatment for deferred carrying costs.
The court stated, however, its opinion would not preclude the
recovery of deferred carrying costs without rate base treatment.
On September 13, 1993, the Texas Supreme Court heard arguments on
the appeal of the court of appeals decision in the El Paso case.
The decision of the Texas Supreme Court is still pending.
On September 15, 1993, the Third District Court of Appeals
(the Court) decided the appeal of the October 1, 1991 district
court order in Docket No. 7195. The Court remanded the case to the
PUCT "to reexamine the record evidence to whatever extent necessary
to render a final order supported by substantial evidence and not
inconsistent with our opinion." The Court analyzed the PUCT's
treatment of costs resulting from regulatory changes and inflation
during construction and concluded that "the Commission's final
order is not based on substantial evidence." The Court also stated
that its remand included the issues regarding includability of the
post-in-service carrying costs and post-in-service operating and
maintenance costs, noting that the Court had, in the meantime,
ruled in the El Paso case that only post-in-service carrying costs
were precluded from inclusion in rate base. The Court also
confirmed its view that treatment of federal income tax expenses
should be under the "actual taxes paid" doctrine previously
announced by the Court, but noted that the remand would include
reconsideration of the PUCT's original treatment of income taxes as
such might be affected by other changes found to be appropriate in
the remanded proceedings.
While the Court remanded the case to the PUCT "without
instructions or limitations," the majority of the three-judge panel
(over one dissent) cautioned the PUCT to confine its deliberations
to the evidence addressed in the original proceedings in Docket No.
7195. Certain parties to the case have indicated their position
that on remand the PUCT may change its original order only with
respect to matters specifically discussed by the Court which (if
allowed) would increase Gulf States' allowed River Bend investment,
net of accumulated depreciation and related taxes, by approximately
$48,000,000 on a Texas jurisdictional basis as of September 30,
1993. Gulf States believes that under the Court's decision the
PUCT would be free to reconsider any aspect of its order concerning
the $1.4 billion in River Bend investment.
Gulf States has filed a motion for rehearing asking the Court
to modify its order so as to permit the PUCT to take additional
evidence on remand. The PUCT and other parties have also sought a
rehearing on various grounds.
Since the court of appeals ruling is subject to possible
modifications on rehearing and appeal and to remand proceedings at
the PUCT, and the deferred accounting issue has been appealed to
the Texas Supreme Court, Gulf States cannot predict the timing or
outcome of these proceedings or what effect the Court's limitation
of the remand to the existing PUCT record will have. If the
pending merger with Entergy is consummated with the rate plans that
have been approved by the PUCT and the LPSC, the rate caps provided
for therein could result in Gulf States being unable to use a
favorable result from the PUCT upon remand to immediately increase
rates in effect prior to certain rate reductions which took effect
November 1, 1993 pursuant to a settlement of rate inquiries brought
in 1993 by certain cities in the Gulf States Texas service area. A
favorable result could be used to limit or prevent rate decreases
during the period the rate caps are in effect.
As of September 30, 1993, on a Texas retail jurisdictional
basis, the disallowed River Bend plant costs were approximately
$14,000,000, and the River Bend plant costs held in abeyance
totaled approximately $302,000,000, both net of accumulated
depreciation and related taxes.
The River Bend cost deferrals associated with the portion of
the investment held in abeyance amounted to approximately
$171,000,000, net of taxes, as of September 30, 1993. River Bend
cost deferrals which were allowed in rate base in Texas were
approximately $96,000,000, net of taxes and amortization, as of
September 30, 1993. Gulf States estimates it had collected
approximately $132,000,000 of revenues as a result of the
previously ordered rate treatment of these deferred costs as of
September 30, 1993, and currently estimates that it collects
approximately $2,300,000 monthly, or $28,000,000 annually, of
revenues associated with such deferred costs from ratepayers in
Texas.
If the September 15, 1993 court of appeals' opinion with
respect to the accounting order issues is ultimately applied to
Gulf States, and the PUCT permits recovery through amortization of
the deferred carrying costs, the possible write-off of deferred
River Bend costs currently allowed in rates ($96,000,000) would be
eliminated, and possible refunds would be reduced. At September
30, 1993, Gulf States estimates it had collected approximately
$62,000,000 of revenues as a result of the current inclusion of
deferred carrying costs in rate base. Gulf States collects
approximately $1,000,000 per month as a result of such current rate
base treatment. The October 1, 1991 district court order also
found that the PUCT erred in reducing Gulf State's deferred costs
by $1.50 for each $1.00 of revenue collected under the interim rate
increases authorized in 1987 and 1988. Elimination of the
reduction of deferred costs from rate base could reduce the
potential refund of amounts described in the preceding paragraph by
amounts ranging from approximately $18,000,000 to $43,000,000.
No assurance can be given as to the timing or outcome of the
appeals described above. Pending further developments in these
cases, Gulf States has made no write-offs for the River Bend
related costs discussed above. Management believes, based on
advice from Clark, Thomas & Winters, a Professional Corporation,
legal counsel of record in the appeal of Docket No. 7195, it is
reasonably possible that Gulf States will ultimately prevail on
appeal of Docket No. 7195 and the case will be remanded to the
PUCT, and that it is reasonably possible that the PUCT will be
allowed to expressly rule on the prudence of the abeyed River Bend
plant costs. Upon remand of Docket No. 7195, the PUCT has been
instructed to rely on the existing record, including the report of
the three administrative law judges that heard the extensive
testimony filed in the case; or, the PUCT can take some action that
may lead the parties to settle the case without additional
extensive litigation. At this time, management and legal counsel
are unable to predict the amount, if any, of the abeyed and
previously disallowed River Bend plant costs that may be ultimately
disallowed by the PUCT. A net of tax write-off as of September 30,
1993, ranging from $0 to $316,000,000, could be required based on
the PUCT's ultimate ruling.
Management believes that it is reasonably possible that it
will recover, in rate base, or otherwise through means such as a
deregulated asset plan, all, or substantially all, of the abeyed
River Bend plant costs. Management believes that the abeyed River
Bend plant costs were prudently incurred. However, management
recognizes that it is reasonably possible that not all of the
abeyed River Bend plant costs may ultimately be recovered.
In prior proceedings, the PUCT has held that the original cost
of nuclear power plants will be included in rates to the extent
those costs were prudently incurred. Based upon the PUCT's prior
decisions, management believes that its River Bend construction
costs were prudently incurred.
As part of its direct case in Docket No. 8702, Gulf States
filed 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 percent 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.
There have been four other rate proceedings in Texas involving
nuclear power plants. Investment in the plants ultimately
disallowed ranged from 0 percent to 15 percent in these four
proceedings. Each case was unique, and the disallowances in each
were made for different reasons. Appeals of most, if not all, of
these PUCT decisions are currently pending.
The following factors support management's position that a
loss contingency requiring accrual has not occurred, and its belief
that all, or substantially all, of the abeyed plant costs will
ultimately be recovered:
1. The fact that the $1.4 billion of abeyed River Bend plant costs
have never been ruled imprudent and disallowed by the PUCT.
2. Sandlin Associates' analysis which supports the prudence of
substantially all of the abeyed construction costs.
3. Historical inclusion by the PUCT of prudent construction costs
in rate base.
4. The analysis of Gulf States' internal legal staff, which has
considerable experience in Texas rate case litigation.
Additionally, management believes, based on advice from Clark,
Thomas & Winters, a Professional Corporation, legal counsel of
record in the appeal of Docket No. 7195, that it is probable that
the deferred operating and carrying costs discussed above will be
recovered in rates as allowable costs. However, assuming the
August 26, 1992 court of appeals' opinion in the El Paso case
regarding deferred costs, as discussed above, is upheld and applied
to Gulf States, and the deferred River Bend costs currently held in
abeyance, related to the $302,000,000 of abeyed plant costs, are
not allowed to be recovered in rates as allowable costs, a write-
off of up to $171,000,000 could be required. In addition, future
revenues based upon the deferred costs previously allowed in rate
base could also be lost; and no assurance can be given as to
whether or not refunds (up to $62,000,000 as of September 30, 1993)
of revenue received based upon such deferred costs previously
recorded will be required.
Litigation
On June 26, 1989, Cajun, the owner of 30% of River Bend, filed
a civil action against Gulf States. The object of the suit is to
annul, rescind, terminate and/or dissolve the Joint Ownership
Participation and Operating Agreement ("Joint Operating Agreement")
related to River Bend because of fraud and error by Gulf States,
breach of its fiduciary duties owed to Cajun, and/or Gulf States'
repudiation, renunciation, abandonment, or dissolution of its core
obligations under the Joint Operating Agreement, as well as the
lack or failure of cause and/or consideration for Cajun's
performance under the Joint Operating Agreement. Cajun seeks to
recover at least its alleged $1.6 billion investment in River Bend
as damages, plus attorneys' fees, interest, and costs. On March
31, 1992, the district court appointed a mediator to engage in
settlement discussions and to schedule settlement conferences
between the parties. Discussions with the mediator began in July
1992, however, Gulf States cannot predict what effect, if any, such
discussions will have on the timing or outcome of the case. The
presiding judge has set a trial date of April 12, 1994, on the
portion of the suit by Cajun to rescind the River Bend Joint
Operating Agreement and has determined that the matter will be
heard by the court without a jury. Two member cooperatives of
Cajun have brought an independent action to declare the River Bend
Joint Operating Agreement void, based upon failure to get prior
LPSC approval alleged to be necessary.
Gulf States believes the suits are without merit and is
contesting them vigorously. No assurance can be given as to the
outcome of this litigation. Accordingly, no provision for any
liability that may result from its ultimate resolution has been
recorded in the financial statements. If Gulf States were
ultimately unsuccessful in this litigation and were required to
make substantial payments, Gulf States would probably be unable to
make such payments and would probably have to seek relief from its
creditors under the Bankruptcy Code.
Impact of Adverse Events on the Financial Statements
Holdings considers the possibility of an adverse result in the
litigation relating to Cajun and the possibility of a write-off
relating to Texas River Bend rate making issues to be
preacquisition contingencies. There may be other contingencies
associated with Gulf States which could also constitute
preacquisition contingencies but which have not yet been
specifically identified as such by Holdings. During the allocation
period (which will not exceed one year after consummation of the
transaction), Holdings' will complete its analyses with respect to
these contingencies. Upon completion, should Holdings no longer
believe Gulf States has a reasonable possibility of attaining a
favorable ruling in such preacquisition contingencies, any
resulting write-offs and/or losses would cause the reduction of the
affected non-current assets and an increase of a like amount in the
acquisition adjustment in Holdings' financial statements, in
accordance with the purchase method of accounting for business
combinations. Gulf States' financial statements would reflect the
impact as a reduction of the affected non-current assets and the
recognition of a write-off or loss in its income statement. Any
other write-offs and/or losses would be recorded by Holdings and
Gulf States in their respective income statements.
