Underwriters set for Entergy funds
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The state Bond Commission on Thursday chose underwriters for the $1 billion loan to repay Entergy Corp. for its cost to get the lights back on after the 2005 hurricanes.
“We’re now able to move forward,” said T. Michael Twomey, Entergy’s vice president of regulatory affairs in Louisiana.
The bonds likely will be sold in 45 to 60 days.
The $1 billion goes to repay Entergy for restoring power after hurricanes Katrina and Rita, plus to set up a reserve to fund repairs in future storms.
The bond would be repaid by a surcharge added to the monthly utility bill of the 1 million customers of Entergy Gulf States LCC, which includes the Baton Rouge area, and Entergy Louisiana LLC.
State Treasurer John Kennedy said that most typical homes could expect to see a $6 increase in their monthly bill. A typical residence uses about 1,400 kilowatt hours of electricity per month.
The Bond Commission chose three firms — Citi, Morgan Stanley and J.P. Morgan — to handle the sale of the bonds.
State Sen. Rob Marionneaux, D-Grosse Tete, said he was concerned that Morgan Stanley already has a relationship with Entergy. He asked that if Morgan Stanley handles this bond that it agree not do business with Entergy for 10 years.
The Bond Commission agreed.
Entergy proposed a quasi-government agency collect the surcharges and repay the investors who bought the bonds. That method could mean Entergy does not have to pay taxes — about $281 million — on the bond proceeds.
Entergy and the state Public Service Commission, which regulates utilities, say the tax-exempt structure lowers the cost Entergy customers have to repay.
The federal Internal Revenue Service has not yet ruled whether Entergy can realize those tax savings.
The company agreed to lower the amount owed by customers by $40 million. If the IRS agrees to the tax savings in the future, then Entergy will split those savings 60 percent for the customers and 40 percent for the company.
“We’re now able to move forward,” said T. Michael Twomey, Entergy’s vice president of regulatory affairs in Louisiana.
The bonds likely will be sold in 45 to 60 days.
The $1 billion goes to repay Entergy for restoring power after hurricanes Katrina and Rita, plus to set up a reserve to fund repairs in future storms.
The bond would be repaid by a surcharge added to the monthly utility bill of the 1 million customers of Entergy Gulf States LCC, which includes the Baton Rouge area, and Entergy Louisiana LLC.
State Treasurer John Kennedy said that most typical homes could expect to see a $6 increase in their monthly bill. A typical residence uses about 1,400 kilowatt hours of electricity per month.
The Bond Commission chose three firms — Citi, Morgan Stanley and J.P. Morgan — to handle the sale of the bonds.
State Sen. Rob Marionneaux, D-Grosse Tete, said he was concerned that Morgan Stanley already has a relationship with Entergy. He asked that if Morgan Stanley handles this bond that it agree not do business with Entergy for 10 years.
The Bond Commission agreed.
Entergy proposed a quasi-government agency collect the surcharges and repay the investors who bought the bonds. That method could mean Entergy does not have to pay taxes — about $281 million — on the bond proceeds.
Entergy and the state Public Service Commission, which regulates utilities, say the tax-exempt structure lowers the cost Entergy customers have to repay.
The federal Internal Revenue Service has not yet ruled whether Entergy can realize those tax savings.
The company agreed to lower the amount owed by customers by $40 million. If the IRS agrees to the tax savings in the future, then Entergy will split those savings 60 percent for the customers and 40 percent for the company.
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