File No. 70-9305
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
____________________________
AMENDMENT NO. 1
To
DECLARATION
Under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________
Entergy Power, Inc. Entergy Corporation
Parkwood Two Building 639 Loyola Avenue
10055 Grogan's Mill Road, Suite 500 New Orleans, LA 70113
The Woodlands, TX 77380
(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)
____________________________
Shahid J. Malik John Wilder
President Chief Financial Officer
Entergy Power, Inc. Entergy Corporation
Parkwood Two Building 639 Loyola Avenue
10055 Grogan's Mill Road New Orleans, LA 70113
Suite 500
The Woodlands, TX 77380
(Names and addresses of agents for service)
____________________________
The Commission is also requested to send copies
of any communications in connection with this matter to:
Laurence M. Hamric, Esq. Christopher J. Bernard, Esq.
Associate General Counsel General Counsel
Entergy Services, Inc. Entergy Power, Inc.
639 Loyola Avenue Parkwood Two Building
New Orleans, LA 70113 10055 Grogan's Mill Road
Suite 500
The Woodlands, TX 77380
Thomas C. Havens, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019-5820
<PAGE>
Item 1. Description of Proposed Transactions.
A. The second paragraph of Part D of Item 1 of the
Declaration on Form U-1 in this File is hereby amended and
restated to read in its entirety as follows:
"EPI and ETEC have entered into an Ownership Interest
Purchase Agreement, dated February 26, 1998 (the "Purchase
Agreement"), pursuant to which, subject to certain conditions,<FN1>
ETEC will acquire from EPI (1) a 7.13% undivided ownership
interest in ISES 2 (which is equivalent to approximately 60 MW of
capacity from ISES 2), (2) a 3.56% undivided ownership interest
in the Certificate, (3) a 3.56% undivided ownership interest in
the land and common facilities at the Independence Station, (4) a
3.56% undivided ownership interest in certain assets comprising
the Wyoming Property, and (5) a 5.49% undivided ownership
interest in certain other assets comprising the Wyoming Property
(such ownership interests, collectively, the "ISES 2 Interest").
ETEC will acquire the ISES 2 Interest for a total purchase price
of approximately $30 million. Upon consummation of the sale, EPI
and ETEC would terminate the existing 36 MW unit power sales
agreement that runs through 2017.<FN2> In addition, EPI shall
assign to ETEC, and ETEC shall assume from EPI, proportionate
rights and obligations under the ISES 2 Ownership Agreement and
the ISES 2 Operating Agreement. ETEC also will secure any
necessary transmission service for the delivery of electric
energy associated with the purchased capacity.<FN3>"
B. Part D of Item 1 of the Declaration on Form U-1 in this
File is hereby amended and restated to read in its entirety as
follows:
"D. Compliance With Rules 53 and 54.
The Declarants hereby represent that, pursuant to Rule 54
under the Act, (1) for the reasons discussed below, the condition
set forth in Rule 53(a)(1) that Entergy's "aggregate investment"
in "exempt wholesale generators" ("EWGs") and "foreign utility
companies" ("FUCOs") not exceed 50% of Entergy's "consolidated
retained earnings" is not currently satisfied, and (2) all of the
other criteria of Rule 53(a) and (b) currently are satisfied.<FN4>
Entergy's "aggregate investment" in EWGs and FUCOs as of
June 30, 1998 is equal to approximately 55% of Entergy's
"consolidated retained earnings" as of June 30, 1998. Entergy's
"aggregate investment" currently exceeds the 50% limitation in
Rule 53(a)(1) as a result of certain write-offs against Entergy's
consolidated retained earnings, including a net decrease of
approximately $140 million in Entergy's consolidated retained
earnings from the quarter ended June 30, 1997 to the quarter
ended September 30, 1997. This $140 million net decrease was
attributable primarily to the recording in July 1997 of a one-
time "windfall profits tax" imposed by the British government on
London Electricity plc ("London Electricity"), an indirect
subsidiary of Entergy and a FUCO, and other privatized companies
in the United Kingdom. This tax, which was approximately US$234
million for London Electricity, was made payable in two
installments, the first of which was paid on December 1, 1997,
and the second of which will be due on December 1, 1998. The
first installment was paid by London Electricity, without need
for additional investment by Entergy, and it is not anticipated
that there will be a need for any additional investment by
Entergy to fund London Electricity's payment of the second
installment. Entergy states that, but for the windfall profits
tax, aggregate earnings from EWGs and FUCOs would have made a
positive contribution to Entergy's consolidated retained earnings
for the year ended December 31, 1997.
Following the July 2, 1997 announcement by the Labor
Government of the proposed windfall profits tax, a Standard &
Poor's Ratings Group ("S&P") report listed 13 British utilities,
including London Electricity, on "CreditWatch with negative
implications". However, as of June 30, 1998, London
Electricity's senior debt ratings have not changed due to the
enactment of the windfall profits tax. Moreover, after Entergy
announced its intent to acquire London Electricity, S&P affirmed
its outstanding ratings on the Entergy domestic operating
companies' senior secured debt.
Entergy currently is not rated by S&P. However, all of
Entergy's operating companies have debt ratings of at least
investment grade, except that Entergy Gulf States, Inc.'s ("Gulf
States") debt ratings for all debt other than senior secured debt
is below investment grade. As of August 31, 1998, Gulf States
had $833.1 million of long-term debt below investment grade,
consisting of preferred stock, quarterly income preferred
securities, debentures, and tax exempt bonds.
On March 20, 1995, S&P lowered the ratings of Gulf States as
follows:
Senior secured debt to BBB- (from BBB)
Senior unsecured debt and preferred stock to BB+ (from BBB-)
Preference stock to BB (from BB+)
S&P's stated reasons for the downgrade were as follows:
"The downgrade results from decision by the Public Utilities
Commission of Texas (PUCT) to reduce [Gulf States'] rates by
$52.9 million. The reduction is less than the $93 million
originally proposed by the hearing examiner. The rate
change includes reductions associated with calculating rates
based on "actual taxes paid methodology", the premium paid
for the power purchased from the Nelson Plant, a small
disallowance of certain River Bend operation and maintenance
costs, and certain amounts associated with allocation of
costs.
The rate reduction coupled with financial pressures
resulting from the Cajun Electric bankruptcy filing will
delay the recovery of the utility from financial stress
resulting from large debt burden incurred from the
construction of the [River Bend] nuclear station. Funds
from operations interest coverage is projected to be weak
for the rating in the near term. The utility is expected to
aggressively control costs during the recovery period and
reduce dividends to Entergy Corp. to mitigate the effects of
the rate reduction.
On March 31, 1995, Moody's Investors Service ("Moody's")
downgraded Gulf States' first mortgage bonds to Baa3 from Baa2,
debentures and senior unsecured pollution control bonds to Ba1
from Baa3, and preferred stock to ba1 from baa3. Moody's stated
reasons for the downgrade were as follows:
On Monday, March 20, the PUCT ordered an annual rate
reduction of $52.9 [sic] million in [Gulf States'] Texas
service territory. Moody's believes that this rollback,
when combined with the prior rate rollbacks of $20 million
in 1993 and $20 million in 1994, hinders substantially the
financial flexibility of [Gulf States] going forward. In
addition, Moody's notes that [Gulf States] is facing a
myriad of other uncertainties, including the ultimate
resolution of the Cajun lawsuit, ramifications of the Cajun
bankruptcy on River Bend operations, potential River Bend
asset write-downs, merger related write-offs and regulatory
proceedings with negative implications in its Louisiana
service territory. Final arguments in the Cajun lawsuit
were heard on March 17, 1995, and it is unclear as to how
long the judge, who is also the bankruptcy judge in the
Cajun Chapter 11 filing, will take to issue a decision.
Moody's believes that even a dismissal of the lawsuit will
result in at least a write-off of the operating and
maintenance expenses owed to [Gulf States] for River Bend.
Entergy states that as of June 30, 1998, Entergy's
consolidated capitalization consisted of approximately 41.7%
equity (including mandatorily redeemable preferred securities)
and approximately 58.3 % debt (including long-term debt,
preferred stock of subsidiaries with sinking fund, and preference
stock of subsidiaries). On a pro forma basis, taking into
consideration the transactions contemplated by this filing, the
equity and debt ratios would be approximately 41.7% and
approximately 58.3%, respectively. Entergy states that its
capitalization ratios will not be materially affected by these
transactions. Entergy further states that as of September 30,
1992, before the initial investment by Entergy in EWGs or FUCOs,
Entergy's consolidated debt to total capital ratio was 54.6% and
its equity capitalization ratio was 45.4%."
Item 2. Fees, Commissions and Expenses.
The fees, commission and expenses expected to be paid or
incurred, directly or indirectly, in connection with the proposed
transactions are estimated to be approximately $12,000, including
the filing fee of the Commission of $2,000, and fees and expenses
of counsel of approximately $10,000.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
F - Opinion of Christopher J. Bernard, Esq.
I - Letter from ETEC in support of Declaration.
J - Entergy Corporation and Subsidiaries Capitalization
Ratios at June 30, 1998 (unaudited).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this amendment to be signed on their behalf by the undersigned
thereunto duly authorized.
ENTERGY POWER, INC.
By: /s/ Christopher J. Bernard
Christopher J. Bernard
Assistant Secretary
ENTERGY CORPORATION
By: /s/ Michael G. Thompson
Michael G. Thompson
Senior Vice President,
General Counsel and Secretary
Dated: September 30, 1998
_______________________________
<FN1> Pursuant to Section 5.2.8 of the Original Sale Agreement, in
the event EPI proposes to sell an interest in its Ownership
Share in ISES 2, Entergy Arkansas has the right to
repurchase such interest on the same basis as it was
originally transferred to EPI (i.e., at the then depreciated
book value of such assets). Entergy Arkansas has notified
EPI that it does not wish to exercise its right of first
refusal under the Original Sale Agreement with respect to
any part of the ISES 2 Interest proposed to be sold to ETEC.
<FN2> In addition, EPI and ETEC will enter into a Reserve Power
Purchase Agreement pursuant to which EPI will continue to
provide ETEC with 6 MW of reserve capacity and related
energy from Ritchie 2 under terms substantially similar to
those under the unit power sales agreement that is being
terminated in conjunction with the sale of the ISES 2
Interest.
<FN3> In connection with the transactions contemplated by the
Purchase Agreement, in a separate transaction, ETEC would
sell to Entergy Power Marketing Corp. approximately 29 MW of
capacity and associated energy from the ISES 2 Interest for
a period commencing with the closing date of ETEC's
acquisition of the ISES 2 Interest and ending on December
31, 2000.
<FN4> The terms "aggregate investment" and "consolidated retained
earnings" are used herein as defined in Rule 53.
EXHIBIT F
September 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: File No. 70-9305
Entergy Power, Inc.; Entergy Corporation - Declaration
with Respect to Sale of Utility Assets and Payment
of Dividends from Unearned Surplus
Ladies and Gentlemen:
I am General Counsel for Entergy Power, Inc. ("EPI") and am
familiar with the transactions described and proposed (the
"Proposed Transactions") in the Declaration on Form U-1, as
amended (the "Declaration"), filed with the Securities and
Exchange Commission (the "Commission") under the Public Utility
Holding Company Act of 1935, as amended (the "Act"), in the above-
referenced File. I have examined, among other things, the
Declaration and such other documents, certificates and corporate
records, and such matters of law, as I have deemed necessary to
form the basis of this opinion.
Based upon the foregoing, it is my opinion that:
1. All actions necessary to make valid the Proposed
Transactions will have been taken when: (i) the Declaration shall
have been permitted to become effective in accordance with the
applicable provisions of the Act; and (ii) all appropriate final
action authorizing the Proposed Transactions shall have been
taken by the Board of Directors of EPI or by a duly authorized
committee thereof.
2. When the foregoing steps have been taken, and assuming the
Proposed Transactions are consummated in accordance with the
Declaration and the related order or orders of the Commission:
(i) all state laws applicable to EPI's participation in the
Proposed Transactions will have been complied with; (ii) EPI may
lawfully (x) effect the sale of utility assets, and (y) make the
distributions to Entergy Corporation out of the unused proceeds
of such sale, in each case as described in the Declaration; and
(iii) the consummation of the Proposed Transactions will not
violate the legal rights of the holders of any securities issued
by EPI or any associate company thereof.
I am a member of the Oklahoma bar and do not hold myself out
as an expert on the laws of any other state.
I hereby consent to the use of this opinion as an exhibit to
the Declaration.
Very truly yours,
/s/ Christopher J. Bernard
Christopher J. Bernard
EXHIBIT I
[Letterhead of ETEC]
August 14, 1998
Office of Public Utility Regulation
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Entergy Power, Inc. (70-9305)
Dear Sir or Madam:
We are writing to express our support for the transaction
proposed by Entergy Power, Inc. ("EPI") in the Declaration on
Form U-1 being filed with you on or about July 31, 1998, whereby
EPI will sell to East Texas Electric Cooperative, Inc. ("ETEC")
an ownership interest in Unit No. 2 of the Independence Steam
Electric Station ("ISES-2").
ETEC intends to acquire an ownership interest in ISES-2 in order
to meet, on a more cost-effective basis, the existing and
projected electric demand of its member cooperatives. Therefore,
we respectfully request that you take all action necessary to
expedite your approval of the subject filing.
We appreciate your prompt consideration of this matter.
Very truly yours,
John H. Butts
Manager
<TABLE>
<CAPTION>
Exhibit J
ENTERGY CORPORATION AND SUBSIDIARIES
CAPITALIZATION RATIOS
JUNE 30, 1998
(Unaudited)
Consolidated Pro Forma
Per 10-Q Amounts Equity Debt
(In Thousands)
<S> <C> <C> <C> <C>
Long-term debt 8,977,087 8,977,087
Currently maturing long-term debt 305,027 305,027
Notes payable 622,609 622,609
Obligations under capital leases 213,396 213,396
Obligations under capital leases - current 163,189 163,189
Subsidiaries' preferred stock with sinking fund 182,755 182,755
Subsidiary's preference stock 150,000 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
Company-obligated redeemable preferred
securities of subsidiary partnership holding solely
junior subordinated deferrable debentures 300,000 300,000
Subsidiaries' preferred stock without sinking fund 334,455 334,455
Common stock 2,467 2,467
Additional paid-in capital 4,627,648 4,627,648
Retained earnings 2,188,165 2,412 (A) 2,190,577
Cumulative foreign currency translation adjustment (73,665) (73,665)
Less - treasury stock 4,066 4,066
---------- ----- --------- ----------
Total 18,204,067 2,412 7,592,416 10,614,063
========== ===== ========= ==========
Actual amounts in millions of dollars 18,204 7,590 10,614
Actual capitalization ratios 100.0% 41.7% 58.3%
Pro forma amounts in millions of dollars 18,206 7,592 10,614
Pro forma capitalization ratios 100.0% 41.7% 58.3%
NOTES
(A) To give effect to the proposed sale, by Entergy Power, Inc., of an
undivided 7.13% ownership interest in ISES 2, at a price of $30,000,000,
to East Texas Electric Cooperative.
</TABLE>
