File No. 70-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Entergy Corporation Entergy Operations, Inc.
639 Loyola Avenue 1340 Echelon Parkway
New Orleans, LA 70113 Jackson, Mississippi 39213
Entergy Gulf States, Inc. Entergy Services, Inc.
350 Pine Street 639 Loyola Avenue
Beaumont, TX 77701 New Orleans, LA 70113
Entergy Enterprises, Inc.
639 Loyola Avenue
New Orleans, Louisiana 70113
(Names of companies filing this statement and
addresses of principal executive offices)
Entergy Corporation
(Name of top registered holding company parent)
Steven C. McNeal
Vice President and Treasurer
Entergy Services, Inc.
639 Loyola Avenue
New Orleans, Louisiana 70113
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
Ann G. Roy, Esq. William T. Baker, Jr., Esq.
Entergy Services, Inc. Thelen Reid & Priest LLP
639 Loyola Avenue 40 West 57th Street
New Orleans, Louisiana 70113 New York, New York 10019
Item 1. Description of Proposed Transaction.
(A) Introduction
Entergy Gulf States, Inc., a Texas corporation (the
"Company"), is a public utility subsidiary of Entergy Corporation
("Entergy Corp."), a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act").
Entergy Corp.'s other public-utility subsidiaries are Entergy
Arkansas, Inc. ("Entergy Arkansas"), Entergy Louisiana, Inc.
("Entergy Louisiana"), Entergy Mississippi, Inc. ("Entergy
Mississippi") and Entergy New Orleans, Inc. ("Entergy New
Orleans") (the Company, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi and Entergy New Orleans are hereinafter
collectively referred to as the "Operating Companies"). The
Company has five subsidiary companies: (a) GSG&T, Inc. ("GSG&T"),
a Texas corporation, formed to hold the Company's interest in the
fossil-fueled Lewis Creek power plant ("Lewis Creek Plant") which
is leased back to the Company ("GSG&T Lease"); (b) Varibus L.L.C.
("Varibus"), a Texas limited liability company which operates
certain intrastate pipelines in Louisiana used primarily to
transport fuel to two of the Company's generating stations; (c)
Prudential Oil and Gas L.L.C. ("Prudential"), a Texas limited
liability company whose only asset is a cash account balance and
is otherwise inactive; (d) Southern Gulf Railway Company ("SGR"),
a Texas corporation, which owns and operates several miles of
rail track in Louisiana to facilitate the transportation of coal
for use as boiler fuel in a Company generating station; and (e)
Gulf States Utilities, Inc. ("GSU"), a Texas corporation, which
has sold all of its assets and is currently inactive
(collectively, GSG&T, Varibus, Prudential, SGR and GSU are
hereinafter referred to as the "Subsidiaries"). Entergy
Services, Inc. ("Entergy Services") provides general executive,
advisory, administrative, accounting, legal, engineering and
other services to the Operating Companies (Entergy Corp., Entergy
Services and the Operating Companies are hereinafter collectively
referred to as "Entergy", and Entergy Corp. and its subsidiary
companies are hereinafter referred to as the "Entergy System").
Entergy Enterprises, Inc. ("EEI"), through itself, affiliates and
subsidiary companies, provides operations, management and
consulting services to non-utility affiliates within the Entergy
System, including those relating to disaggregation and retail
competition in Texas, and to non-affiliates. Entergy Operations,
Inc. ("EOI") provides nuclear management, operation and
maintenance services to certain Operating Companies, including
the Company. The principal executive offices of the applicants
are located at the addresses set forth on the cover page hereof.
(B) Background and Regulatory Environment
(1) Texas Senate Bill 7 ("S.B. 7") and Public Utility Commission
of Texas ("PUCT")
In June 1999, the Texas legislature enacted a law, S.B. 7,
amending the Public Utility Regulatory Act ("PURA") to provide
for competition in the electric utility industry through retail
open access. The law provides for retail open access by most
electric utilities, including the Company. Such retail open
access is currently scheduled to commence on January 1, 2002.
With retail open access, generation and the provision of retail
services will be competitive businesses, while transmission and
distribution operations will continue to be regulated.
The provisions of the new law: (1) require a rate freeze
through December 31, 2001; (2) require utilities to separate
(unbundle) their generation, transmission and distribution, and
retail electric provider ("REP") functions; (3) require operation
in a non-discriminatory manner of transmission and distribution
facilities by an entity independent of the generation and retail
operations by the time competition is implemented; (4) allow for
recovery of stranded costs incurred in purchasing power and
providing electric generation service if the costs are approved
by the PUCT; (5) allow securitization of regulatory assets and
stranded costs; (6) provide for the determination of and
mitigation measures for generation market power; and (7) require
utilities to file separated data and proposed transmission,
distribution, and competitive transition tariffs.
The PUCT and various participants in the industry are
currently in the process of implementing the legislation through
various rulemaking and other proceedings. In January 2000, as
required by the Texas restructuring legislation, the Company
filed a business separation plan with the PUCT and amended it in
June 2000. The PUCT has issued an order approving the business
separation plan, as amended.
(2) Louisiana Public Service Commission ("LPSC")
In August 2000, the Company filed with the LPSC testimony
relating to the business separation plan filed with the PUCT and
subsequently submitted additional testimony. The Company has
reached a settlement with various Louisiana parties with respect
to the structure of the Company and the treatment of assets and
debt and other long-term obligations (the "Louisiana
Settlement"), and the Louisiana Settlement was submitted to the
LPSC. As of June 20, 2001, the LPSC approved the Louisiana
Settlement.
(3) Plan for Separation of Assets
The proposed business separation plan of the Company
(reflecting both Texas and Louisiana components) (the "BSP"),
provides that, by January 1, 2002, the Company will be divided
into (i) (a) a company that owns distribution facilities located
in Texas (the "Texas Distribution Company");1 (b) one or more
companies purchasing and selling power at wholesale, or holding
companies for such companies (collectively, the "Texas Power
Company");2 3 (c) a holding company (the "Texas Holding
Company")4 with one or more direct or indirect subsidiary companies
owning an undivided interest in the Company's transmission assets
(collectively, the "Texas Transmission Company")5; (d) a retail
holding company (the "Retail Holding Company")6 with the
following direct or indirect subsidiary companies:7 various
Texas retail electric providers (the "Texas REPs") and various
retail management services providers (the "RMPs") and one or more
retail supply acquisition companies (collectively, the Texas
Distribution Company, the Texas Power Company, the Texas Holding
Company, the Texas Transmission Company, the Retail Holding
Company, the Texas REPs, the RMPs and the retail supply
acquisition companies are hereinafter referred to as the "New
Companies"); and (ii) a surviving company of a "merger by
division" pursuant to Texas law that will continue to own and
operate distribution facilities located in Louisiana, all of the
Company's generation assets,8 an undivided interest in the
Company's transmission assets, retail operations in Louisiana and
all of the Subsidiaries (the "Louisiana Company")9. After the
restructuring is completed, each of the Texas Distribution
Company, the Texas Power Company and the Retail Holding Company,
will be direct subsidiaries of Entergy Corp., and the Texas
Holding Company and the Texas Transmission Company will be direct
or indirect subsidiaries of Entergy Corp.10 Each of the Texas
Distribution Company and the Texas Transmission Company (each an
"Assumption Party, and together, the "Assumption Parties") would
be allocated pursuant to the Merger (as hereinafter defined) a
portion of the Company's liabilities and obligations, and would
assume, a portion of the Company's long-term debt obligations
pursuant to debt assumption agreements (each an Assumption
Agreement and collectively, the "Assumption Agreements").
Property allocated to the Assumption Parties would be released
from the lien of the Company's Indenture of Mortgage, dated
September 1, 1926, as amended (the "Indenture"). Each of the
Assumption Parties would also grant a lien on its properties so
released in favor of the Louisiana Company to secure its
respective obligations pursuant to its Assumption Agreement to
the Louisiana Company. These assumed obligations would remain as
debt on the Louisiana Company's books, but would be offset by an
assumption asset from the Assumption Parties. Entergy Corp. will
also enter into an indemnification agreement (the
"Indemnification Agreement") with the Louisiana Company under
which Entergy Corp. will support the Texas Transmission Company's
assumption of debt obligations if such obligations are not paid
by the later of (i) December 31, 2002 and (ii) one (1) year from
the date the related assets are allocated to the Texas
Transmission Company. In addition, under the plan as set forth
below, the assumed obligations will be refinanced or retired.
(4) Federal Energy Regulatory Commission ("FERC") Order No. 2000
In a separate filing with the Securities and Exchange
Commission (the "Commission") (Holding Co. Act File No. 70-9859),
Entergy has described a proposal to create an independent,
incentive-driven transmission company ("Transco") as a Delaware
limited liability company ("LLC") the assets of which will
consist initially of the Operating Companies', including the
Company's, and Entergy Services', transmission systems and
related assets and will ultimately include transmission assets of
other non-affiliated entities. Transco will be independent of,
and not affiliated with, the Entergy System. Reference is made
to File No. 70-9859 for the proposed allocation by merger or by
transfer of operation and/or ownership of the Louisiana Company's
and the Texas Transmission Company's transmission assets, and
related obligations, through new intermediate entities in the
Entergy System to Transco ("Transco U-1"). The Transco proposal
is subject to change depending upon developments at FERC.
(C) Overview of Requested Approvals
The applicants request authorization under the Act from the
Commission, to the extent not otherwise authorized or exempted
under the Act, for (i) the Company to effect one or more "merger
by division" transactions pursuant to Article 5.01 of the Texas
Business Corporation Act ("TBCA") (the "Merger") pursuant to a
merger agreement and a plan of merger (forms of which are
attached as Exhibits A-2 and A-3 hereto and collectively
hereinafter referred to as the "Merger Documents"), whereby
(a) the Company will survive the Merger as the Louisiana Company
which will continue to be a wholly-owned subsidiary of Entergy
Corp.; (b) Entergy Corp. will (initially or after intermediate
steps) hold interests in, and acquire equity securities of,
directly or indirectly, the following new entities - the Texas
Distribution Company, the Texas Power Company, the Texas Holding
Company, which, in turn will hold interests in or acquire equity
securities of the Texas Transmission Company (see footnotes 7 and
10), and the Retail Holding Company, which in turn will hold
interests in and acquire equity securities in the Texas REPs, the
RMPs and the retail supply acquisition company; (c) the Louisiana
Company will continue to hold interests in and/or own equity
securities of the Subsidiaries; and (d) ownership of the
Company's distribution facilities located in Texas will be
allocated to the Texas Distribution Company and an undivided
interest in the Company's transmission facilities will be
allocated to the Texas Transmission Company; (ii) each of the
surviving entities to be allocated its proportionate share of
liabilities and obligations of the Company as provided in the
Merger and for the Assumption Parties to assume their allocated
shares of the Company's long-term debt obligations and to enter
into Assumption Agreements and instruments of assumption to
effect the assumptions thereunder (each an "Instrument of
Assumption"); (iii) any assets allocated to the Assumption
Parties that were subject to the lien of the Indenture, to be
released from the lien thereof; (iv) all debt obligations of the
Company covered by the Assumption Agreements to remain on the
books of the Louisiana Company with offsetting assumption assets
from the Assumption Parties; (v) the New Companies and the
Louisiana Company to indemnify each other with respect to various
liabilities and claims arising prior to and after the Merger;
(vi) the Assumption Parties to grant first lien security
interests in those allocated assets they receive to the Louisiana
Company and to enter into mortgage, deed and security agreements
or mortgage, assignment of rents and leases and security
agreements (each, a "Security Agreement") to effect such grants;
(vii) Entergy Corp. to enter into the Indemnification Agreement
with the Louisiana Company under which Entergy Corp. will
support, under certain circumstances, the Texas Transmission
Company's assumption of debt obligations; (viii) the New
Companies and the Louisiana Company to effect financing,
including refinancing, through the period ending December 31,
2004; (ix) the Louisiana Company, the Texas Distribution Company
and the Texas Transmission Company to use the proceeds of such
financing to refinance assumed debt through the period ending
December 31, 2004; (x) the New Companies and the Louisiana
Company to pay dividends out of capital (which may include
distributions of stock and securities of one or more of the New
Companies and the Louisiana Company as a step in the
restructuring); (xi) (a) the New Companies and the Louisiana
Company to receive services from Entergy Services and EEI, and
its non-utility affiliates and subsidiary companies, as
appropriate, and for certain of the New Companies and the
Louisiana Company to provide services, other than services
otherwise regulated under federal or state utility laws, to each
other;11 (b) EOI to provide nuclear plant operation and
maintenance services to the Louisiana Company; and (c) GSG&T to
lease the Lewis Creek Plant to the Louisiana Company; and
(xii) the Louisiana Company, the Texas Transmission Company
and/or the Texas Distribution Company to provide services to EEI
in the same manner as the Company is currently authorized to do.
(D) Corporate Separation
(1) Asset Allocation
As part of the Merger, assets of the Company will be
allocated to, and owned by, the New Companies and the Louisiana
Company as described below.
(a) Distribution
The Texas Distribution Company will own, at their net book
value, the distribution assets of the Company located in Texas.
Distribution assets consist of all equipment and devices that
operate below 69 kV (for dual function substations that contain
transmission elements (i.e., facilities operating at 69 kV and
above) and distribution elements (i.e., facilities operating
below 69 kV), the dividing line between transmission and
distribution is at the high voltage side of the disconnect switch
of the distribution transformer) or function as part of the
distribution delivery system, including distribution lines, and
the switching stations and substations which serve to
interconnect only distribution lines. Subject to certain
exceptions for common use assets (i.e., land, structures and
equipment used to support both transmission and distribution
functions) located at dual function substations, these assets
will be considered distribution facilities for substations that
are connected to one or two transmission lines. The Louisiana
Company will own, at their net book value, the distribution
assets of the Company located in Louisiana.
(b) Transmission
The Texas Transmission Company and the Louisiana Company
will own their respective allocated undivided interests, at their
net book value, in all of the Company's transmission assets.
See above under Item 1(D)(1)(a) for the allocation of assets
between transmission and distribution.
The allocation of transmission facilities between the two
companies will be based on a demand factor, which is allocated
between Louisiana and Texas consumers. The Texas Transmission
Company will be the entity through which operation and/or
ownership of the Company's transmission assets will be
transferred to new intermediate entities in the Entergy System
and ultimately to Transco, as described in the Transco U-1. The
Transco proposal is subject to change depending upon developments
at FERC.
(c) Generation
The Louisiana Company will continue to own for up to three
(3) years the Company's current fossil generating plants and
River Bend nuclear generating station ("River Bend") , as well as
continue to lease the Lewis Creek Plant under the GSG&T Lease.
The Texas Power Company will purchase its allocated share of
capacity from the Louisiana Company under one or more power
purchase agreements to be filed with, and, if required, approved
by FERC. The Louisiana Company will continue to operate and
maintain the Company's fossil generating plants, while EOI will
continue to operate River Bend.
(2) Allocation and Assumption of Liabilities
(a) Allocation
As part of the Merger, liabilities and obligations of the
Company will be allocated to the New Companies and the Louisiana
Company as provided in the Merger documents. In general, they
will be allocated to the company receiving the assets to which
they relate.
(b) Assumption Agreements
The BSP provides for separate Assumption Agreements between
the Louisiana Company and each of the Texas Distribution Company
and the Texas Transmission Company with respect to long-term debt
of the Company. The Assumption Agreements will provide that each
such Texas entity assumes its allocated share of certain of the
Company's long-term debt obligations. The Assumption Agreement
of the Texas Distribution Company will provide that the assumed
debt shall be retired by the later of (i) December 31, 2002 and
(ii) one (1) year from the date the related assets are allocated
to the Texas Distribution Company. The Assumption Agreement of
the Texas Transmission Company will provide that the assumed debt
shall be retired by the later of (i) December 31, 2002 and (ii)
one (1) year from the date the related assets are allocated to
the Texas Transmission Company. The date for retirement of debt
assumed by the Texas Transmission Company may be extended to
December 31, 2004 with the execution of an Indemnification
Agreement by Entergy Corp.
The Assumption Agreements will allow for flexibility in
scheduling and prioritizing the retirement of the Company's
individual debt obligations. This flexibility will aid in
disposing of the Company's outstanding debt consistent with
prudent business practices. The Assumption Agreements also
provide that the Louisiana Company will have a first priority
lien on the Assumption Parties' assets released from the
Indenture. The Assumption Parties will grant such liens pursuant
to separate Security Agreements for assets located in Louisiana
and Texas, in each case, to be executed contemporaneously with
the Assumption Agreements.
Key features of the Assumption Agreements include the
following:
The Assumption Party in any given agreement will agree to
assume, by executing and delivering an Instrument of Assumption,
the obligations of the Louisiana Company to the extent of its
assigned portion of the Company's overall debt (including
pollution control bonds, the Company's debt relating to its
special purpose subsidiary trust's issuance of quarterly income
preferred securities ("QUIPs debt") and other debt), consistent
with the particular requirements of each outstanding series of
debt securities designated for assumption in the Assumption
Agreement. All series of the Company's debt outstanding and the
Assumption Party's share of that debt will be set forth in a
schedule attached to the relevant Assumption Agreement.
The Louisiana Company has a right of immediate reimbursement
from each Assumption Party if the Louisiana Company makes payment
on any debt obligation properly the responsibility of the
Assumption Party.
The Assumption Party may elect to purchase or redeem
outstanding debt under its Assumption Agreement prior to its
maturity and may direct the Louisiana Company to take steps
necessary to carry out this request. The redemption provisions
contained within the Assumption Agreement give the Louisiana
Company the flexibility to apply the funds to redemption of any
portion or series of the Company's overall debt at its choosing,
in a manner that is consistent with prudent business practices.
If the Louisiana Company takes such action, however, it must at
the same time ensure that the obligation of the Assumption Party
providing the funds for the redemption or repurchase is reduced
just as if the precise debt it had designated had been redeemed
or repurchased.
The Assumption Party and the Louisiana Company will grant
each other broad mutual indemnities, whereby they hold each other
harmless from any claim or expense arising from the breach of
their respective obligations under the respective Assumption
Agreement.
Each Assumption Agreement also includes an Instrument of
Assumption. This instrument is to be executed by the Assumption
Party and delivered to the trustee responsible for the related
assumed debt. Through the Instrument of Assumption, the
Assumption Party assumes the debt and authorizes such trustee to
enforce directly against it the debt payment obligation it has
assumed from the Louisiana Company. A form of Assumption
Agreement, including the Instrument of Assumption which is
Exhibit A thereto is attached hereto as Exhibit B-1.
(c) Security Agreements
The Louisiana Company will have a first priority lien on the
assets of the Texas Distribution Company and the Texas
Transmission Company, granted pursuant to a Security Agreement to
be executed contemporaneously with each Assumption Agreement.
Two forms of Security Agreement are attached hereto as Exhibits B-
2(a) and B-2(b). Since the Texas jurisdictional assets then held
by the Assumption Parties will have been released from the lien
of the Indenture, the Louisiana Company's lien on such assets
will be a first lien.
Upon any default by an Assumption Party pursuant to the
relevant Security Agreement, the Louisiana Company is authorized
to "exercise any rights and remedies available to it under the
Security Agreement," including the right to foreclose on the
assets securing the Assumption Agreement in order to satisfy the
debt. Each Assumption Party, however, will be responsible for
only its own obligations and is not liable for the default of any
other Assumption Party.
(d) Indemnification Agreement
Entergy Corp. will enter into the Indemnification Agreement
with the Louisiana Company if the Texas Transmission Company has
not extinguished its Assumption Agreement obligations by the
later of (i) December 31, 2002 and (ii) one (1) year from the
date the related assets are allocated to the Texas Transmission
Company. The Indemnification Agreement is intended to protect
the Louisiana Company in the event of a default by the Texas
Transmission Company on its Assumption Agreement. A form of the
Indemnification Agreement is attached hereto as Exhibit B-3.
(3) Description of Resulting Companies
The following describes the functioning of the several New
Companies and the Louisiana Company that will result from the
stages of disaggregation described above.
(a) Texas Distribution Company
The Texas Distribution Company will provide competitive
unaffiliated and affiliated REPs non-discriminatory access to the
Company's distribution system and services located in Texas. The
Texas Distribution Company will be regulated by the PUCT with its
primary function being to own, operate, maintain, and expand its
distribution system. The Texas Distribution Company will provide
the same types of distribution system services as the Company
currently provides - those essential to the delivery of
electricity from the point of interconnection with the
transmission grid to the interconnection with the customer. It
will also perform metering services until such time as those
services become competitive and handle certain customer account
inquiries directly related to the distribution system, including
those relating to outages.
The Texas Distribution Company may also perform certain
retail access related activities, such as: (1) developing
customer load profiles, (2) managing customer choice registration
information, and (3) aggregating data for the Transco settlement
process. Alternatively, an independent agent could perform all,
or a portion, of these activities.
All charges by the Texas Distribution Company for the above
services are subject to approval by the PUCT. The Texas
Distribution Company will bill REPs for distribution and non-
bypassable charges.
(b) Texas REPs
Currently, the Entergy System's retail service organization
supports the bundled, regulated operations of the Operating
Companies. The Texas REPs have been formed and may continue to
be formed to provide to Texas customers with energy and related
retail services, such as customer care services and competitive
energy services.
Three REP limited partnerships have been created to offer
and sell electricity at retail to customers in Texas. (See
footnote 11.) Entergy Solutions Ltd., either directly or
indirectly through one or more subsidiaries, will sell
electricity at retail to customers outside of the Company's Texas
service territory during a 2001 pilot project and, after January
1, 2002, may also serve non-price to beat customers in the
Company's Texas service territory as well as customers outside of
the Company's Texas service territory. These retail electric
providers (each, a "REP") may provide competitive energy services
to Texas customers and customers outside of Texas.
Entergy Solutions Select Ltd. (the "PTB REP"), either
directly or indirectly through one or more subsidiaries, will
service "price-to-beat" ("PTB") customers in the Company's Texas
service territory during the PTB period of approximately five (5)
years. The PTB REP is limited to providing standard service
packages that are defined by the terms and conditions that apply
to the PTB service; however, it may also serve non-price to beat
customers in the Company's Texas service territory.
A third Texas REP (the "POLR REP") has been created, Entergy
Solutions Essentials Ltd., to provide service, either directly or
indirectly through one or more subsidiaries, to those customers
requiring service subject to the PUCT's provider of last resort
("POLR") rules and regulations, in the event this REP is selected
by the PUCT to provide such POLR service.
(c) RMPs
Entergy Retail Louisiana Management Services LLC-A ("Retail
Management Services"), a Louisiana RMP, and Entergy Retail Texas,
Inc., a Delaware RMP, were established12 to house, either directly
or indirectly through one or more subsidiaries, the systems and
personnel for the provision of corporate support and management
services. Staffing of these organizations is underway such that
they will be operational as required for the start of the PUCT
pilot project and for the start of the retail open access on
January 1, 2002.
(d) Retail Supply Acquisition
Entergy Solutions Supply Ltd. ("Entergy Solutions Supply"),
which is authorized by FERC to engage in wholesale electric power
and energy transactions at market-based rates and is registered
with the PUCT to operate as a power marketer in Texas, will
provide, either directly or indirectly through one or more
subsidiaries, energy supply and supply acquisition services for
Entergy's non-regulated retail affiliates, including the REPs
listed above. (See footnote 11.)
(e) Transmission
The Texas Transmission Company will own an undivided
interest in the Company's transmission assets. The Company
intends for the Texas Transmission Company to allocate by merger,
or transfer ownership and operation of, its assets, and its
obligations, to Transco, indirectly through other entities in the
Entergy System, as described in the Transco U-1. The Transco
proposal is subject to change depending upon developments at
FERC.
(f) Generation13
The Louisiana Company will continue to own the Company's
generating assets14 and to lease the Lewis Creek Plant. The Texas
Power Company will purchase its allocated share of power from the
Louisiana Company pursuant to one or more power purchase
agreements to be filed with, and, if required, approved by FERC.
(g) Louisiana Company
The Louisiana Company will continue to provide electric
service to the Company's retail consumers located in Louisiana on
a vertically integrated basis. The LPSC will continue to be the
Louisiana Company's retail regulator.
(h) Generation and Transmission Operation and Maintenance
Arrangements
Under the BSP, EOI will continue to operate River Bend and
the Louisiana Company will operate the Company's fossil
generating plants. The Louisiana Company and the Texas
Transmission Company will provide each other with transmission
plant operation and maintenance services. A form of transmission
plant operation and maintenance service agreement is attached as
Exhibit J-1 hereto.
(E) Financing, Redemption, Retirement or Repurchase of
Securities, Extensions of Credit and Indemnification, Dividends
Out of Capital, Restructuring and Provision of Services
(1) Financing by the New Companies and the Louisiana Company
As described above, certain of the New Companies and the
Louisiana Company will issue debt and equity securities, will be
allocated liabilities and obligations of the Company, and will
assume a portion of the Company's existing debt, including
mortgage bonds, pollution control revenue bonds and QUIPs debt,
to implement the BSP.
(a) Assumption Parties
The Assumption Agreements entered into by the Assumption
Parties will require that the assumed debt be redeemed, retired
or repurchased with funds provided by the Assumption Party, (1)
in the case of the Texas Distribution Company, no later than the
later of (i) December 31, 2002 and (ii) one (1) year from the
date the related assets are allocated to the Texas Distribution
Company, and, (2) in the case of the Texas Transmission Company,
no later than the later of (i) December 31, 2002 and (ii) one (1)
year from the date the related assets are allocated to the Texas
Transmission Company, unless Entergy Corp. enters into an
Indemnification Agreement with the Louisiana Company, in which
case, no later than December 31, 2004. Thus, by December 31,
2004, the Louisiana Company's outstanding debt will be reduced by
the amount of such Assumption Agreement payments and the
remaining debt obligations will be the sole obligation of the
Louisiana Company. Correspondingly, each of the Assumption
Parties will need to issue its own securities to fulfill such
obligations under the Assumption Agreements.
Accordingly, to provide financing for the purpose of
refinancing all, or a portion, of the debt of the Company assumed
by the Assumption Parties under the Assumption Agreements, as
well as to provide financing for general corporate purposes and
to meet working capital requirements, Entergy Corp. and the
Company request authorization for the Assumption Parties to
issue, from time to time, through December 31, 2004, debt and
equity securities.
The Assumption Parties may issue short-term debt consisting
of borrowings under one or more credit agreements ("Facility"),
the issuance of commercial paper or other forms of short-term
financing. The maturity of such debt will not exceed one year.15
The Assumption Parties may sell commercial paper, from time
to time, in established domestic or European commercial paper
markets to dealers at the prevailing discount rate per annum, or
at the prevailing coupon rate per annum, at the date of issuance.
It is expected that the dealers acquiring commercial paper from
the Assumption Parties will re-offer such paper at a discount to
corporate, institutional and, with respect to European commercial
paper, to individual investors.
Such commercial paper issuances may be backed by bank lines
of credit for 100% of the outstanding amount of commercial paper,
if necessary, to assure the desired credit rating from the rating
agencies. Loans under the Facility will be at rates generally
available to borrowers of similar credit quality at the time the
Facility is established.
The Assumption Parties also may issue from time to time,
through December 31, 2004, long-term debt consisting of secured
bonds, unsecured debentures, medium-term notes, convertible debt,
subordinated debt, financing subsidiary preferred securities,
bank borrowings, other debt securities or other forms of long-
term financing, whether secured or unsecured. Any long-term debt
security would have a maturity ranging from one to 50 years.
Debentures, medium-term notes, convertible debt, subordinated
debt and secured bonds will be issued under an indenture, and
other debt securities may be issued under an indenture.
Any short-term or long-term debt security or Facility would
have such designation, aggregate principal amount, interest
rate(s) or methods of determining the same, terms of payment of
interest, redemption provisions, non-refunding provisions,
sinking fund terms, conversion or put terms and other terms and
conditions as the Assumption Parties may determine at the time of
issuance.
In addition, the Assumption Parties and the Texas Holding
Company may issue equity securities, capital shares, partnership
interests, limited liability company interests, member interests,
trust certificates or other forms of equity interests.
The Assumption Parties may also raise funds through
(1) capital contributions, (2) open account advances with or
without interest, or (3) sale of assets.
Entergy Corp. and the Company request authority, through
December 31, 2004, for the Assumption Parties to issue, assume,
or guaranty up to a maximum of $1.2 billion of securities or
other obligations. Until its assumed debt obligations are paid,
each Assumption Party will maintain, either on a corporate basis
or on a consolidated basis, as appropriate, through December 31,
2004, a capital structure comprised of no less than 30% common
equity. The Company has existing authorization under its
Commission Order, dated December 26, 2000 (the "December 2000
Order") (Holding Co. Act Release No. 27318) to issue long-term
securities from time to time through December 31, 2003.16 Entergy
Corp. and the Company also request that the December 2000 Order
be extended through the period ending December 31, 2004 and, to
the extent not requested above, that the Assumption Parties be
authorized to issue, through December 31, 2004, any type of
securities which the Company would otherwise be authorized to
issue pursuant to the December 2000 Order.
The Assumption Parties' debt and equity securities may be
issued and sold pursuant to purchase agreements or standard
underwriting agreements. Public distribution may be effected
through private negotiations with underwriters, dealers or
agents, or through competitive bidding among underwriters. In
addition, such securities may be issued and sold through private
placements or other non-public offerings to one or more persons.
All such debt instruments and stock sales will be at rates or
prices and under conditions negotiated, or based upon, or
otherwise determined by, competitive capital markets. In no
event, however, will the effective cost of money on short-term
debt exceed 500 basis points over the London Interbank Offered
Rate ("LIBOR") for the relevant interest rate period. The
interest rate on long-term debt will not exceed at the time of
issuance the greater of (a) 500 basis points over U.S. Treasury
securities having a remaining term comparable to the term of such
series, if issued at a fixed rate, or 500 basis points over LIBOR
for the relevant interest rate period, if issued at a floating
rate, and (b) a gross spread over U.S. Treasury securities that
is consistent with similar securities of comparable credit
quality and maturities issued by other companies.
Entergy Corp. and the Company also request authorization for
the Assumption Parties to enter into interest rate hedging
transactions with respect to existing indebtedness ("Interest
Rate Hedges"), subject to certain limitations and restrictions,
in order to reduce or manage interest rate cost. Interest Rate
Hedges would only be entered into with counterparties ("Approved
Counterparties") whose senior debt ratings, or the senior debt
ratings of the parent companies of the counterparties, as
published by Standard and Poor's Ratings Group, are equal to or
greater than BBB, or an equivalent rating from Moody's Investors
Service or Fitch.
Interest Rate Hedges will involve the use of financial
instruments commonly used in today's capital markets, such as
interest rate swaps, caps, collars, floors, and structured notes
(i.e., a debt instrument in which the principal and/or interest
payments are indirectly linked to the value of an underlying
asset or index), or transactions involving the purchase or sale,
including short sales, of U.S. Treasury obligations. The
transactions would be for fixed periods and stated notional
amounts. Fees, commissions and other amounts payable to the
counterparty or exchange (excluding, however, the swap or option
payments) in connection with an Interest Rate Hedge will not
exceed those generally obtainable in competitive markets for
parties of comparable credit quality.
In addition, Entergy Corp. and the Company request
authorization for the Assumption Parties to enter into interest
rate hedging transactions with respect to anticipated debt
offerings (the "Anticipatory Hedges"), subject to certain
limitations and restrictions. Such Anticipatory Hedges would
only be entered into with Approved Counterparties, and would be
utilized to fix and/or limit the interest rate risk associated
with any new issuance through (i) a forward sale of exchange-
traded U.S. Treasury futures contracts, U.S. Treasury obligations
and/or a forward swap (each a "Forward Sale"), (ii) the purchase
of put options on U.S. Treasury obligations (a "Put Options
Purchase"), (iii) a Put Options Purchase in combination with the
sale of call options on U.S. Treasury obligations (a "Zero Cost
Collar"), (iv) transactions involving the purchase or sale,
including short sales, of U.S. Treasury obligations, or (v) some
combination of a Forward Sale, Put Options Purchase, Zero Cost
Collar and/or other derivative or cash transactions, including,
but not limited to structured notes, caps and collars,
appropriate for the Anticipatory Hedges.
Anticipatory Hedges may be executed on-exchange ("On-
Exchange Trades") with brokers through the opening of futures
and/or options positions traded on the Chicago Board of Trade
("CBOT"), the opening of over-the-counter positions with one or
more counterparties ("Off-Exchange Trades"), or a combination of
On-Exchange Trades and Off-Exchange Trades. The Assumption
Parties will determine the optimal structure of each Anticipatory
Hedge transaction at the time of execution. The Assumption
Parties may decide to lock in interest rates and/or limit their
exposure to interest rate increases. All open positions under
Anticipatory Hedges will be closed on or prior to the date of the
new issuance and the Assumption Parties will not, at any time,
take possession or make delivery of the underlying U.S. Treasury
Securities.
Entergy Corp. and the Company represent that each Assumption
Party Interest Rate Hedge and Anticipatory Hedge will qualify for
hedge accounting treatment under generally accepted accounting
principles. The Assumption Parties will comply with existing and
future financial disclosure requirements of the Financial
Accounting Standards Board associated with hedging transactions.17
(b) Other New Companies and the Louisiana Company
In addition to the financing and refinancing by the
Assumption Parties, and, to the extent not otherwise authorized
or exempt under the Act and Rules 52 and 45, Entergy Corp., the
Company and EEI request authority for the New Companies, other
than the Assumption Parties, to issue, through December 31, 2004,
up to $1.0 billion of debt and equity securities from time to
time to provide financing for general corporate purposes and to
meet working capital requirements. Entergy Corp., the Company
and EEI expect that substantially all of the security issuances
by the Retail Holding Company, the Texas REPs, the RMPs, Entergy
Solutions Supply and the Texas Power Company (collectively
hereinafter referred to as the "New Non-Utility Companies") will
be exempt under Rule 52 or authorized pursuant to the EEI Order
through December 31, 2002.18
In addition, to the extent not otherwise authorized under
the Act, Entergy Corp. and the Company request authorization for
the New Non-Utility Companies to enter into Anticipatory Hedges
on the same terms and conditions as those described in subpart
(E)(1)(a) of this Item 1.
To the extent not previously authorized by the December 2000
Order or under the Short-term Orders, Entergy Corp. and the
Company request that the Louisiana Company be authorized through
December 31, 2004, to issue up to a maximum of $2.2 billion of
securities. The types of securities which the Louisiana Company
may issue through December 31, 2004 would be the types authorized
to be issued under the December 2000 Order and the Short-term
Orders. Entergy Corp. and the Company request authority for the
Louisiana Company to enter into Interest Rate Hedges and
Anticipatory Hedges on the same terms and conditions as those
described in subpart (E)(1)(a) of this Item 1.
(2) Redemption, Retirement and/or Repurchase of Securities
Entergy Corp. and the Company request Commission authority,
to the extent not otherwise exempt or authorized under the Act,
for the New Companies and the Louisiana Company, to retire,
redeem and/or repurchase securities issued, or assumed, by such
companies in accordance with the terms of the instruments under
which those securities were issued.
The Company may, prior to effecting the Merger, redeem or
repurchase outstanding preferred stock of the Company (the
"Preferred Stock"). Any Preferred Stock remaining outstanding
would remain with the Louisiana Company, as the survivor of the
Merger.
(3) Extensions of Credit and Indemnification
Under the Merger documents and Assumption Agreements, the
Louisiana Company and the Texas Distribution Company, the Texas
Power Company, the Texas Transmission Company, the Texas Holding
Company and the Texas Retail Holding Company, respectively, agree
to hold each other harmless from certain liabilities, debts,
claims and expenses, respectively, and Entergy Corp. and the
Company request authorization, to the extent not otherwise
authorized or exempt under the Act, from the Commission for such
arrangements.
Entergy Corp. requests authorization for its indemnification
arrangements in favor of the Louisiana Company under the
Indemnification Agreement and authorization to extend credit to
the Texas Power Company, the Texas Retail Holding Company, the
Texas REPs and the RMPs in an aggregate amount not to exceed $1.5
billion at any one time outstanding.
See also footnote 18.
(4) Dividends Out of Capital
The New Companies and the Louisiana Company may need to pay
dividends to their immediate parent companies out of capital.
Entergy Corp., the Company and EEI request authority, to the
extent not otherwise authorized under the Act, for the New
Companies and the Louisiana Company to pay such dividends out of
capital.
(5) Restructuring19
It may be necessary to reorganize and restructure the New
Companies and the Louisiana Company, from time to time, into
different entities or ownership structures. Entergy Corp., the
Company and EEI request authority, to the extent not otherwise
exempt or authorized under the Act, for such internal
reorganization and restructuring, including the allocation by
merger or assignment of the obligations of the New Companies and
the Louisiana Company.
(6) Provision of Services to, by, or among the New Companies and
the Louisiana Company
Under existing Commission authorization for the provision of
services among Entergy System companies (in the case of the
Company, EOI, certain subsidiaries and EEI (and its affiliates
and subsidiary companies), see Holding Co. Act Release Nos.
25952, 26812 and 27040, dated December 17, 1993, January 6,
1998 and June 22, 1999, respectively), or in a similar manner,
Entergy Services, EEI (and its affiliates and subsidiary
companies), EOI and certain Subsidiaries will provide the New
Companies and the Louisiana Company, as appropriate, depending
upon their utility or non-utility status, various
administrative, corporate, consulting, plant operation,
maintenance or leasing and fuel supply or fuel-related services
and the Louisiana Company, the Texas Transmission Company and
the Texas Distribution Company will provide shared services to
EEI (and its affiliates and subsidiary companies). Under
existing Commission authorization, the EEI Order, the New Non-
Utility Companies may provide each other services. The
Louisiana Company, the Texas Distribution Company and the Texas
Transmission Company will provide each other with distribution
and transmission plant operation and maintenance services. All
of such services, not otherwise regulated under federal or
state utility laws, will be provided, as appropriate, (1) "at
cost" in accordance with the requirements of Rules 87, 90 and
91 under the Act; or (2) in accordance with the transfer
pricing terms otherwise authorized by the Commission in its
June 22, 1999 order, Holding Co. Act Release No. 27040 or at
"fair market prices" in accordance with the EEI Order; or (3)
otherwise in accordance with any available exception under the
Act or rules thereunder and will be performed under service
agreements similar to service agreements previously entered
into by the Company and other Entergy System companies. The
forms of service agreements are filed as Exhibit J-2 hereto.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be
incurred in connection with the transactions proposed herein will
be filed by amendment.
Item 3. Applicable Statutory Provisions.
The following Sections of, or Rules under, the Act may apply
to the proposed transactions. To the extent that other Sections
or Rules are deemed to apply and to the extent not exempted under
the Act, the applicants also request authority under such
Sections and/or Rules. In addition, certain of the transactions
proposed have been carried out under the EEI Order or Rule 58.
Section and/or Rule Transaction
Sections 6 and 7 Issuance of securities by
certain New Companies and
the Louisiana Company and
assumption of securities
by the Texas Distribution
Company and the Texas
Transmission Company,
respectively, under
Assumption Agreements;
certain indemnification
obligations of Entergy
Corp. under the
Indemnification Agreement
Sections 9 and 10 Acquisition, directly or
indirectly, by Entergy
Corp. and various
affiliates, of securities
of, or interests in, the
Texas Distribution
Company, the Texas
Holding Company and the
Texas Transmission
Company; from time to
time
Section 12(b) and Rule 45 Entergy Corp.'s
indemnification
arrangements under the
Indemnification Agreement
and extensions of credit
to the Texas Power
Company, the Texas Retail
Holding Company, the
Texas REPs and the Texas
RMPs; extensions of
credit among the New Non-
Utility Companies;
assumption of the
obligations of the
Louisiana Company, by the
Texas Distribution
Company and the Texas
Transmission Company,
respectively, under the
Assumption Agreements,
from time to time; and
the allocation of
liabilities and
obligations of the
Company among the New
Companies and the
Louisiana Company under
the Merger Documents
Section 12(c) and Rule 46 Dividends out of capital
of the New Companies and
the Louisiana Company
Section 12(d) and Rules 43 or Redemption, retirement or
44 repurchase of securities
by the New Companies and
the Louisiana Company,
from time to time;
allocation of the
Company's Texas
distribution assets to
the Texas Distribution
Company; allocation of
portions of the Company's
assets to the Texas
Holding Company and the
Texas Transmission
Company
Section 13 and Rules 81, 87, Provision of services:
90 and 91 (i) to, by, or among the
New Non-Utility
Companies; (ii) from
certain New Companies and
the Louisiana Company to
EEI; (iii) by Entergy
Services, EEI (and its
affiliates and subsidiary
companies), EOI and
certain Subsidiaries to
the New Companies and the
Louisiana Company, as
appropriate; (iv) between
the Louisiana Company,
and the Texas
Transmission Company and
the Texas Distribution
Company, respectively; in
all cases, at cost or at
prices previously
authorized by the
Commission or in
accordance with the
Commission's rules,
including exemptions
Sections 32 and 33 and Rules Aggregate investments in
53 and 54 exempt wholesale
generators ("EWGs") and
foreign utility companies
("FUCOs")
(A) Section 10
Since Entergy Corp. and various affiliates of Entergy Corp.,
directly or indirectly, will be acquiring the securities of the
Texas Distribution Company, the Texas Holding Company, the
Louisiana Company and the Texas Transmission Company, among other
transactions, the proposed transactions will be subject to
Section 9(a) of the Act. Thus, the proposed transactions cannot
proceed without the approval of the Commission pursuant to
Section 10 of the Act. The relevant statutory standards to be
satisfied are set forth in Sections 10(b), 10(c) and 10(f) of the
Act.
(1) SECTION 10(b)
Section 10(b) of the Act provides that, if the requirements
of Section 10(f) are satisfied, the Commission shall approve an
acquisition under Section 9(a) unless the Commission finds that:
(1) such acquisition will tend towards interlocking
relations or the concentration of control of public-utility
companies, of a kind or to an extent detrimental to the
public interest or the interest of investors or consumers;
(2) in case of the acquisition of securities or utility
assets, the consideration, including all fees, commissions,
and other remuneration, to whomsoever paid, to be given,
directly or indirectly, in connection with such acquisition
is not reasonable or does not bear a fair relation to the
sums invested in or the earning capacity of the utility
assets to be acquired or the utility assets underlying the
securities to be acquired; or
(3) such acquisition will unduly complicate the capital
structure of the holding company system of the applicant or
will be detrimental to the public interest or the interest
of investors or consumers or the proper functioning of such
holding company system.
(a) Section 10(b)(1) |HiddenPara|
The proposed transactions will not tend towards interlocking
relations or the concentration of control of public-utility
companies, of a kind, or to an extent, detrimental to the public
interest or the interest of investors or consumers.
Since the ultimate result of the proposed transactions is to
separate the existing Company into its components in accordance
with state requirements, specifically, Texas S.B. 7, the proposed
transactions will not tend toward any "concentration of control
of public utility companies" that is detrimental to the public
interest or the interest of consumers or investors. The
deregulation of, and the introduction of competition in, Texas
electric markets have been enacted specifically to benefit the
public interest and the interests of investors and consumers. As
the transactions described herein are being effected to comply
with and to further such Texas and Federal legislative and
regulatory commission initiatives, they likewise should be of
benefit to the public interest and the interests of investors and
consumers.
(b) Section 10(b)(2) |HiddenPara|
(i) Fairness of Consideration. Section 10(b)(2) of the
Act requires the Commission to determine whether the
consideration in connection with a proposed acquisition of
securities is reasonable and whether it bears a fair relation to
the investment in and the earning capacity of the utility assets
underlying the securities being acquired. The applicants believe
that the consideration to be given in connection with the
transactions described herein is fair and reasonable. The PUCT,
the LPSC and FERC will approve various aspects of the
reallocation of assets as well as the arrangements among the New
Companies and the Louisiana Company, including the debt
assumptions.
(ii) Reasonableness of Fees. An estimate of the fees
and expenses to be paid in connection with the proposed
transactions will be set forth in Item 2 hereof. The estimated
amounts to be paid are fees required to be paid to governmental
bodies, fees for necessary professional services, and other
expenses incurred or to be incurred in connection with carrying
out the proposed transactions.
(c) Section 10(b)(3) |HiddenPara|
Capital Structure. Section 10(b)(3) requires that the
Commission determine whether the proposed transactions will
unduly complicate the capital structures of the New Companies and
the Louisiana Company or will be detrimental to the public
interest, the interests of investors or consumers or the proper
functioning of the New Companies and the Louisiana Company.
The corporate capital structures of the New Companies and
the Louisiana Company after the consummation of the proposed
transactions will not be unduly complicated. The securities to
be issued by the New Companies and the Louisiana Company are of
types comparable to those of other financing entities in
registered holding company systems. See the December 2000 Order,
the Short-term Orders and the EEI Order, supra.
(2) SECTION 10(c)
Section 10(c) of the Act provides that:
Notwithstanding the provisions of subsection (b), the
Commission shall not approve:
(1) an acquisition of securities or utility assets, or of
any other interest, which is unlawful under the provisions
of Section 8 or is detrimental to the carrying out of the
provisions of Section 11; or
(2) the acquisition of securities or utility assets of a
public utility or holding company unless the Commission
finds that such acquisition will serve the public interest
by tending towards the economical and efficient development
of an integrated public utility system . . . .
(a) Section 10(c)(1).
Consistent with the standards set forth in Section 10(c)(1)
of the Act, the proposed acquisition of securities will not be
unlawful under the provisions of Section 8 of the Act, or
detrimental to the carrying out of the provisions of Section 11
of the Act.
Section 8 prohibits a registered holding company or any of
its subsidiaries from acquiring, owning interests in or operating
both a gas utility company and an electric utility company
serving substantially the same area if prohibited by state law,
and is thus not applicable to the transactions contemplated
herein.
Section 11(a) of the Act requires the Commission to examine
the corporate structure of registered holding companies to
ensure, among other things, that unnecessary complexities are
eliminated and voting powers are fairly and equitably
distributed.
The use of one or more intermediate holding companies to
effect the restructuring of utility assets pursuant to state
requirements has been authorized by the Commission. See Exelon
Corporation, Holding Co. Act Release No. 27256 (October 19,
2000).
The various allocations of assets, allocations of
liabilities and obligations, assumptions of debt and the
formation of the New Companies described in Item 1 will not
result in the existence of any company in the holding company
system that would unduly or unnecessarily complicate the
structure, or unfairly or inequitably distribute voting power
among security holders, of the Entergy System. The creation of
the New Companies is necessary to adapt to competition in Texas
deregulated electric markets. As noted in Item 1, the
allocations, assumptions and the formation of the New Companies
(a) are a result of the BSP and S.B. 7, (b) will allow the
Company to continue to serve the needs of its regulated customers
while preparing the Company for competition in deregulated
markets, and (c) will increase the flexibility for financing
activities on cost-effective terms that reflect the costs of
capital for each area of business activity. For these reasons,
the resulting increased efficiency of operations significantly
offsets the added complexity. See Wisconsin's Environmental
Decade, Inc. v. SEC, 882 F.2d 523, 527 (D.C. Cir. 1989);
Northeast Utilities, Holding Co. Act Release No. 25221 (December
21, 1990); Entergy Corp., Holding Co. Act Release No. 25136
(August 27, 1990). Consequently, this structure and the voting
powers of the New Companies and the Louisiana Company should be
consistent with the requirements of Section 11(a).
(b) Section 10(c)(2).
The proposed transactions will serve the public interest by
tending towards the economical and efficient development of an
integrated public utility system, as required by Section 10(c)(2)
of the Act. These transactions are, in the context of
deregulation and competition in the Texas electric market and
maintenance of a fully regulated retail electric market in
Louisiana, "reasonably incidental, or economically necessary and
appropriate to" the operations of an operating company such as
the Company within a registered electric utility holding company
such as Entergy Corp. The Commission has previously authorized
similar restructurings, due to changes in state electric markets,
for two other registered electric holding company systems finding
that the standards of Sections 9 and 10 were satisfied.20 In
particular the Commission, in the context of utility asset
transfers among new affiliated companies in a registered system
resulting from state requirements, by approving the
restructurings, has found that the transactions tended "towards
the economical and efficient development of an integrated public-
utility system" within the meaning of Section 10(c)(2). See,
Allegheny, supra, Conectiv supra, and Alliant Energy Corporation,
Holding Co. Act Release No. 27331 (December 29, 2000).
Moreover, the Commission has previously taken notice of
developments that have occurred in the electric business in
recent years, and has interpreted the Act and analyzed proposed
transactions in light of these changed and changing
circumstances. See, e.g., American Electric Power Co., Holding
Co. Act Release No. 27186 (June 14, 2000) ("AEP Order").
(3) SECTION 10(f)
Section 10(f) provides that
The Commission shall not approve any acquisition as to
which an application is made under this Section unless it
appears to the satisfaction of the Commission that such
State laws as may apply in respect of such acquisition have
been complied with, except where the Commission finds that
compliance with such State laws would be detrimental to the
carrying out of the provisions of Section 11.
The Company is currently subject to the jurisdiction of both
the PUCT and the LPSC. The Louisiana Company will remain subject
to the jurisdiction of the LPSC, and the Texas Distribution
Company will be subject to the jurisdiction of the PUCT. In
addition, the BSP has been approved by the PUCT and certain
aspects of the transactions proposed herein are being approved by
the LPSC. Thus, the requirements of Section 10(f) are satisfied.
Rules 53 and 54. The proceeds to be received from the
proposed transactions will not be used to invest directly or
indirectly in an EWG or FUCO.
The transactions proposed herein are also subject to
Rule 54. In determining whether to approve the issue or sale of
a security by a registered holding company for purposes other
than the acquisition of an EWG or FUCO, or transactions by such
registered holding company or its subsidiaries other than with
respect to EWGs or FUCOs, the Commission shall not consider the
effect of the capitalization or earnings of any subsidiary which
is an EWG or FUCO upon the registered holding company system if
Rules 53(a), (b) and (c) are satisfied. In that regard, assuming
consummation of the transactions proposed in this
Application/Declaration, all of the conditions set forth in
Rule 53(a) are, and will be satisfied, and none of the conditions
set forth in Rule 53(b) exists or, as a result thereof, will
exist.
Entergy Corp. states that for purposes of Rule 53(a)(1) its
"aggregate investment" in all EWGs and FUCOs was approximately
$918.5 million, representing approximately 28.3% of Entergy
Corp.'s consolidated retained earnings as of March 31, 2001.
Furthermore, Entergy Corp. has complied with and will continue to
comply with the record keeping requirements of Rule 53(a)(2)
concerning affiliated EWGs and FUCOs. In addition, as required
by Rule 53(a)(3), no more than 2% of the employees of the
Operating Companies will render services to affiliated EWGs and
FUCOs. Finally, none of the conditions set forth in Rule 53(b),
under which the provisions of Rule 53 would not be available,
have been met.
Item 4. Regulatory Approvals.
In January 2000, the Company initially filed a business
separation plan with the PUCT and amended such plan in June 2000.
In July 2000, the PUCT issued an interim order approving certain
aspects of the amended plan. In April 2001, the PUCT approved
the amended plan. On June 20, 2001, the LPSC approved certain
aspects of the proposed transactions. The Company will make any
additional filings with the PUCT that are necessary. FERC must
approve certain aspects of the transactions contemplated herein.
No other state commission, and no other Federal commission, has
jurisdiction over the proposed transactions.
Item 5. Procedure.
The Commission is requested to publish a notice under
Rule 23 with respect to the filing of this
Application/Declaration as soon as practicable. The applicants
request that the Commission's Order be issued as soon as
practicable after the notice period and in any event not later
than November 16, 2001 in order to accommodate a closing before
December 20, 2001. This will facilitate meeting the January 1,
2002 deadline contemplated by Texas S.B. 7 for the separation of
the Company's business activities, personnel and assets.
The applicants further request that there should not be a 30-
day waiting period between issuance of the Commission's order and
the date on which the order is to become effective, hereby waive
a recommended decision by a hearing officer or any other
responsible officer of the Commission, and consent that the
Division of Investment Management may assist in the preparation
of the Commission's decision and/or order, unless the Division
opposes the matters proposed herein.
Item 6. Exhibits and Financial Statements.
(A) Exhibits.
A-1 Form of Articles of Merger.*
A-2 Form of Merger Agreement.*
A-3 Form of Plan of Merger.*
A-4 Form of Certificate of Incorporation of the Retail Holding
Company.*
A-5 Form of By-Laws of the Retail Holding Company.*
A-6 Form of Certificate of Incorporation of the Texas
Distribution Company.*
A-7 Form of By-Laws of the Texas Distribution Company.*
A-8 Form of Certificate of Incorporation of the Texas Power
Company.*
A-9 Form of By-Laws of the Texas Power Company.*
A-10 Form of Certificate of Incorporation of the Texas Holding
Company.*
A-11 Form of By-Laws of the Texas Holding Company.*
A-12 Form of Certificate of Incorporation of the Texas REPs.*
A-13 Form of By-Laws of the Texas REPs.*
A-14 Form of Certificate of Incorporation of the RMPs.*
A-15 Form of By-Laws of the RMPs.*
A-16 Form of Certificate of Incorporation of the Texas
Transmission Company.*
A-17 Form of By-Laws of the Texas Transmission Company.*
A-18 Corporate Structure of the Company, before, and after the
transactions proposed herein.*
B-1 Form of Assumption Agreement.*
B-2(a) - Forms of Security Agreement.*
B-2(b)
B-3 Form of Indemnification Agreement.*
C Not Applicable.
D-1 Business separation plan, as amended, filed by the Company
with the PUCT.*
D-2 Order of the PUCT regarding the Company's business
separation plan, as so amended.*
D-3 Application of the Company to the LPSC.*
D-4 Order of the LPSC regarding the Company.*
D-5 Application of the Company to FERC.*
D-6 Order of FERC regarding the Company.*
F Opinions of Counsel.*
G Not applicable.
H Form of Notice.*
J-1 Form of transmission plant operation and maintenance
services agreement.*
J-2 Forms of corporate, administrative, consulting and fuel
supply service agreements between a New Company, one or
more other New Companies, the Louisiana Company and/or one
or more other Entergy System Companies.*
* To be filed by amendment.
(B) Financial Statements.
1.1 Balance Sheet of Entergy Corp. Consolidated, as of December
31, 2000 (incorporated by reference to the Annual Report on
Form 10-K of Entergy Corp. and its consolidated
subsidiaries for the year ended December 31, 2001) (File
No. 1-11299).
1.2 Statement of Income of Entergy Corp. Consolidated, as of
December 31, 2000 (incorporated by reference to the Annual
Report on Form 10-K of Entergy Corp. and its consolidated
subsidiaries for the year ended December 31, 2000) (File
No. 1-11299).
1.3 Balance Sheet of Entergy Corp. Consolidated, as of March
31, 2001 (incorporated by reference to the Quarterly Report
on Form 10-Q of Entergy Corp. and its consolidated
subsidiaries for the quarter ended March 31, 2001) (File
No. 1-11299).
1.4 Statement of Income of Entergy Corp. Consolidated, as of
March 31, 2001 (incorporated by reference to the Quarterly
Report on Form 10-Q of Entergy Corp. and its consolidated
subsidiaries for the quarter ended March 31, 2001) (File
No. 1-11299).
1.5 Balance Sheet of the Company for the period ended December
31, 2000 (incorporated by reference to the Annual Report on
Form 10-K of the Company for the year ended December 31,
2000) (File No. 1-2703).
1.6 Statement of Income of the Company, as of December 31, 2000
(incorporated by reference to the Annual Report on Form 10-
K of the Company for the year ended December 31, 2000)
(File No. 1-2703).
1.7 Balance Sheet of the Company for the period ended March 31,
2001 (incorporated by reference to the Quarterly Report on
Form 10-Q of the Company for the quarter ended March 31,
2001) (File No. 1-2703).
1.8 Statement of Income of the Company, as of March 31, 2001
(incorporated by reference to the Quarterly Report on Form
10-Q of the Company for the quarter ended March 31, 2001)
(File No. 1-2703).
1.9 Balance Sheet of EEI for the period ended December 31, 2000
(incorporated by reference to the Entergy Corp. Annual
Report on Form U5S of EEI for the year ended December 31,
2000) (File No. 1-11299).
1.10 Statement of Income of EEI for the period ended December
31, 2000 (incorporated by reference to the Entergy Corp.
Annual Report on Form U5S for the year ended December 31,
2000) (File No. 1-11299).
1.11 Balance Sheet of EEI for the period ended March 31, 2001.
1.12 Statement of Income of EEI for the period ended March 31,
2001.
1.13 Balance Sheet of Entergy Services for the period ended
December 31, 2000 (incorporated by reference to the Entergy
Corp. Annual Report on Form U5S for the year ended December
31, 2000) (File No. 1-11299).
1.14 Statement of Income of Entergy Services for the period
ended December 31, 2000 (incorporated by reference to the
Entergy Corp. Annual Report on Form U5S for the year ended
December 31, 2000) (File No. 1-11299).
1.15 Balance Sheet of Entergy Services for the period ended
March 31, 2001.
1.16 Statement of Income of Entergy Services for the period
ended March 31, 2001.
1.17 Balance Sheet of EOI for the period ended December 31, 2000
(incorporated by reference to the Entergy Corp. Annual
Report on Form U5S for the year ended December 31, 2000)
(File No. 1-11299).
1.18 Statement of Income of EOI for the period ended December
31, 2000 (incorporated by reference to the Entergy Corp.
Annual Report on Form U5S for the year ended December 31,
2000) (File No. 1-11299).
1.19 Balance Sheet of EOI for the period ended March 31, 2001.
1.20 Statement of Income of EOI for the period ended March 31,
2001.
Item 7. Information as to Environmental Effects.
None of the matters that are the subject of this
Application/Declaration involve a "major federal action" nor do
they "significantly affect the quality of the human environment"
as those terms are used in Section 102(2)(C) of the National
Environmental Policy Act. The transaction that is the subject of
this Application/Declaration will not result in changes in the
operation of the applicants that will have an impact on the
environment. The applicants are not aware of any federal agency
that has prepared or is preparing an environmental impact
statement with respect to the transactions that are the subject
of this Application/Declaration.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have
duly caused this Application/Declaration filed herein to be
signed on their behalf by the undersigned thereunto duly
authorized.
Entergy Corporation
Entergy Enterprises, Inc.
Entergy Gulf States, Inc.
Entergy Operations, Inc.
Entergy Services, Inc.
By: /s/ Steven C. McNeal
Name: Steven C. McNeal
Title:Vice President and Treasurer
Date: August 8, 2001
_______________________________
1 The Texas Distribution Company is referred to as "Entergy
Texas Distribution" or "Entergy Texas Distribution Company" or
"TX Distco" in filings with the LPSC and as "EGSI-TX" or
"Entergy Texas Distribution" or "Entergy Texas Distribution
Company" or "TX-D" or "EGSI-TX(D)" in filings with the PUCT.
2 The Texas Power Company is referred to as "Entergy Texas
PGC" or "TX PGC" in filings with the LPSC.
3 This definition excludes Entergy Solutions Supply Ltd. which
is a power marketer and is described later in this
Application/Declaration in subpart D(3)(d) of this Item 1.
4 The Texas Holding Company is referred to as "EGSI-Texas
Holdco" or "TX Holdco" in filings with the LPSC and as "EGSI-TX
HOLDCO" in filings with the PUCT.
5 The Texas Transmission Company is referred to as "ETI" in
filings with the LPSC and as "ETI" or "TX-T" or
"Transco" in filings with the PUCT.
6 The Retail Holding Company is referred to as "Entergy Texas
Retail" or "TX Retail" in filings with the LPSC and as "TX-R"
in filings with the PUCT.
7 As an intermediate step, some or all of these subsidiary
companies may be direct or indirect companies of Entergy Corp.
8 Transfer of generation assets may be the subject of an
amendment in this file.
9 The Louisiana Company is referred to as "EGSI-Louisiana" or
"EGSI-LA" in filings with the LPSC and as "EGSI-LA" or "EGS-
Louisiana" in filings with the PUCT.
10 Under certain circumstances, the Texas Holding Company and
the Texas Transmission Company may be subsidiaries of the
Louisiana Company. As an intermediate step, some or all of the
New Companies may be subsidiaries of the Louisiana Company.
Some New Companies originally formed in Texas may subsequently
be converted into Delaware entities.
11 Entergy Corp. and EEI, directly or indirectly, are
authorized by the Commission, among other matters, to create,
form, finance and extend credit to, non-utility affiliates in
the Entergy System which in turn, together with EEI, may
provide services to non-utility affiliates and non-affiliated
parties. See, e.g., Entergy Corp. et al., Holding Co. Act
Release No. 27039 (June 22, 1999) (the "EEI Order"). Certain
of the New Companies have been or will be created pursuant to
this authorization or Rule 58 under the Act.
12 See footnote 11.
13 The arrangements described under this subsection (f)
Generation are to apply only for an interim time period.
14 Transfer of generation assets may be the subject of an
amendment in this file.
15 The Texas Distribution Company and the Texas Transmission
Company request authority to become parties to the Entergy
money pool for utility companies ("Utility Money Pool") with
limits of $100 million and $100 million, respectively, in
aggregate principal amount outstanding at any time and
otherwise in accordance with the terms of the order or orders
relating to utility subsidiary company participation in the
Utility Money Pool authorized in File No. 70-9893 (see also
footnote 16).
16 In addition, the Company has existing authorization under
its Commission Orders, dated November 27, 1996 and April 2,
2001 (Holding Co. Act Release Nos. 26617 and 27369,
respectively) to borrow through November 30, 2001, either
through the Utility Money Pool or through its issuance of
external short-term debt in the form of commercial paper or
drawings under bank lines, up to $340 million in aggregate
principal amount. The Company, as well as Entergy Corp.,
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, Entergy Operations, Inc., Entergy
Services, System Energy Resources, Inc. and System Fuels, Inc.,
filed an application on June 1, 2001 (Holding Co. Act File No.
70-9893) for a Commission order to extend such authority
through the period ending November 30, 2006 (collectively, the
"Short-term Orders").
17 The proposed terms and conditions of the Interest Rate
Hedges and Anticipatory Hedges are substantially the same as
the Commission has approved in other cases. See New Century
Energies, Inc., et al., Holding Co. Act Release No. 27000
(April 7, 1999); and SCANA Corporation., et al., Holding Co.
Act Release No. 27137 (February 14, 2000).
18 Unless otherwise exempt, the types of securities, including
guarantees or assumptions of liability on securities, to be
issued by the New Non-Utility Companies between January 1, 2003
and December 31, 2004 would be the same as those authorized in
the EEI Order. Under the EEI Order, the New Non-Utility
Companies are authorized to extend credit to other Entergy
System non-utility companies in the amount of up to $750
million through December 31, 2002. Entergy, the Company and
EEI request that this authorization be extended through
December 31, 2004.
19 In the event that certain restructuring of the Texas Holding
Company occurs, Entergy Corp. and the Company request authority
through December 31, 2004, for the Texas Holding Company to
issue, assume or guaranty up to a maximum of $260 million of
securities or other obligations for its general corporate
purposes and to meet its working capital requirements, such
securities and other obligations to be the same types and on the
same terms as the Assumption Parties will issue, assume or
guaranty as described above, including but not limited to those
securities the Company is currently authorized to issue pursuant
to the December 2000 Order, Interest Rate Hedges, Anticipatory
Hedges and guarantees. Under such circumstances, the Texas
Holding Company will maintain, on a consolidated basis, through
December 31, 2004, a capital structure comprised of no less than
30% common equity.
20 See Allegheny Energy, Inc., et. al., Holding Co. Act Release
No. 27101 (November 12, 1999) ("Allegheny") and Conectiv,
Holding Co. Act. No. 27192 (June 29, 2000) ("Conectiv").